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[2015] ZACC 34
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Mighty Solutions CC t/a Orlando Service Station v Engen Petroleum Ltd and Another (CCT211/14) [2015] ZACC 34; 2016 (1) SA 621 (CC); 2016 (1) BCLR 28 (CC) (19 November 2015)
Links to summary
Heads of arguments
CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT
211/14
In the matter
between:
MIGHTY SOLUTIONS CC T/A
ORLANDO
SERVICE
STATION
Applicant
and
ENGEN PETROLEUM
LIMITED
First Respondent
CONTROLLER OF
PETROLEUM PRODUCTS
Second Respondent
Neutral
citation:
Mighty
Solutions CC t/a Orlando Service Station v Engen Petroleum Ltd and
Another
[2015] ZACC 34
Coram:
Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J,
Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Van der Westhuizen
J, Wallis AJ and
Zondo J
Judgment:
Van der Westhuizen J (unanimous)
Heard on:
11 August 2015
Decided on:
19 November 2015
Summary:
Common law — commercial eviction
— sub-lessee cannot raise sub-lessor’s lack of title as
defence
Section 39(2) of the
Constitution — circumstances when common law ought to be
developed — common law rule does not require
development
Rule 33 of the
Uniform Rules of Court — argument cannot be entertained if
court sitting as court of first and last instance
ORDER
On appeal from the Gauteng Local
Division of the High Court, Johannesburg:
1.
Condonation for the late filing of the
statement of facts and record is granted.
2.
Leave to appeal is refused.
3.
The applicant must pay costs, including
costs of two counsel.
JUDGMENT
VAN DER WESTHUIZEN J
(Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J Khampepe J, Madlanga J,
Matojane AJ, Nkabinde J, Wallis AJ and
Zondo J concurring):
Introduction
[1] The South African common law of
contract is as old as the ancient city of Rome. It developed
over centuries in Europe
and in the courts of bygone colonies and
provinces now making up the Republic of South Africa. Like
customary law that has
grown from the soil of our continent, it has
proven its value over time, but does not always meet the requirements
of a constitutional
democracy. Therefore it has to be developed
in accordance with the spirit, purport and objects of the Bill of
Rights.
[1]
[2] This application for leave to appeal
raises questions on the content of the law of lease. It
concerns an attempt by a
petrol wholesaler to evict a licensed
petroleum retailer from premises in Soweto where the retailer had
conducted business under
the wholesaler’s brand.
Facts
[3] The applicant, Mighty Solutions CC
trading as Orlando Service Station (Mighty Solutions), is a licensed
petroleum retailer in
terms of the Petroleum Products Act (Act).
[2]
The first respondent is Engen Petroleum Limited (Engen), a
licensed wholesaler and distributor of petroleum products.
The
second respondent is the Controller of Petroleum Products
(Controller), appointed pursuant to the Act. It was cited
insofar as it may have an interest, but did not participate in the
proceedings.
[4] Engen leased a property from its
registered owner on the corner of Soweto Highway and Mooki Street,
Orlando East, Soweto.
[3]
It developed the property into a branded service station, investing
its capital in installing the necessary equipment, including
underground tanks and pumps. In September 2005 Engen entered
into an operating lease with Mighty Solutions. Pursuant
to this
lease, which would be valid until the end of March 2008 and was
cancellable at a month’s notice by either party,
Mighty
Solutions operated a service station on the site. It used
Engen’s equipment, signage and trademarks.
[5] The operating lease between Engen
and Mighty Solutions expired at the end of March 2008. It
then continued on a month-to-month
basis until it was validly
cancelled in July 2009. Following the cancellation, Mighty
Solutions continued to occupy
the site. It continued using
Engen’s equipment, signage and trademarks without paying rent
to Engen or the registered
property owner.
Previous applications to this Court
[6] Mighty Solutions was one of several
fuel retailers that previously sought direct access to this Court in
Gundu Service Station
.
[4]
The parties sought to challenge the validity of the agreements that
major oil companies enter into with petrol station retailers.
They argued that the agreements infringe several of the retailers’
fundamental rights recognised in the Bill of Rights and
that the Act
had created a new dispensation in the industry, one based on the
allocation of manufacturing, site, wholesale and
retail licences, to
the exclusion of private contractual agreements. These private
agreements, it was argued, enforced and
perpetuated the dominant
position of oil companies in a way that was at odds with the purpose
of the Act. The application
was dismissed on the grounds that
it was not in the interests of justice to hear it at that stage.
[7] Mighty Solutions annexed the
Gundu
Service Station
application to its application for leave to
appeal to this Court, stating that its contents were incorporated by
reference.
High Court
[8] In 2013 Engen applied to the Gauteng
Local Division of the High Court, Johannesburg (High Court) for an
order to evict Mighty
Solutions. The parties filed a joint
practice note in which the issues to be determined were stated as (a)
“[w]hether
[Engen] has
locus standi
at common law to
move for an eviction order”; and (b) “[w]hether [Mighty
Solutions] may rely on possessory rights arising
from its fuel retail
licence as read with the Petroleum Products Act as amended”.
[5]
It was common cause that Mighty Solutions had no common law right to
continue occupying the premises, as both the operating
lease and any
subsequent lease arrangements had been validly terminated.
[9] Engen argued that the onus was on
Mighty Solutions to show why Engen was not entitled to evict it.
It cited several authorities
to show that a lessee has no right in
law to challenge the right of a lessor to occupy the property.
One authority was the
1990 Appellate Division decision in
Boompret
,
in which the following was said:
“
It
is, of course, true that in general a lessee is bound by the terms of
the lease even if the lessor has no title to the property.
It
is also clear that when sued for ejectment at the termination of the
lease it does not avail the lessee to show that the lessor
has no
right to occupy the property.”
[6]
[10] Mighty Solutions submitted that the
Act had effectively abolished Engen’s common law rights. It
argued that a retail
licence-holder in its position acquired
possessory rights under the Act and that these could only be
terminated after the licence
was revoked by the Controller. It
relied mainly on section 2A(5)(a) of the Act, which provides:
“
(5)
No person may make use of a business practice, method of trading
agreement, arrangement, scheme
or understanding which is aimed at or
would result in—
(a)
a licensed wholesaler holding a retail
licence except for training purposes as prescribed.”
[11] Mighty Solutions argued, as it did
in
Gundu Service Station
, that the contract between it and
Engen amounted to a scheme that resulted in a wholesaler effectively
holding a retail licence.
It further argued that, once a retail
licence had been granted to a party to sell petrol on a particular
piece of land, the landowner
or lessor could not evict that
licence holder. If a landowner or lessor wished to evict a
licensed retailer, they had
to apply to the Controller to have the
licence revoked.
[12] In a judgment by Matthee AJ, the
High Court found that Engen had a common law right to evict Mighty
Solutions and that this
right had not been superseded by the Act.
The Court found that the common cause facts did not disclose the sort
of business
arrangement contemplated by section 2A(5)(a).
Furthermore, it held that, given the rule in
Boompret
, it was
“unpersuaded that [Mighty Solutions was] able to question the
right of [Engen] to occupy the property”.
[7]
The Court found no support for an interpretation of the Act
that took away Engen’s common law rights and conferred
on
Mighty Solutions a possessory right that only the Controller could
terminate. Accepting Mighty Solutions’ argument
would
“create a new type of lessee, a sort of super lessee, with
rights far in excess of rights of other lessees”,
the Court
stated.
[8]
[13] The High Court noted that if, in
theory, there were some merit in Mighty Solutions’ argument,
“there would be more
appropriate methods and fora to test
[this]”.
[9]
The Act provides for arbitration when retailers allege unfair
or unreasonable contractual practices by wholesalers.
[10]
This would have been an appropriate way for Mighty Solutions to
challenge the terms of the contract, it stated.
[14] Thus the eviction of Mighty
Solutions was ordered. Mighty Solutions had to pay costs.
Supreme Court of Appeal
[15] Mighty Solutions applied for leave
to appeal to the Supreme Court of Appeal. The application was
dismissed with costs,
on the grounds that it had no reasonable
prospects of success.
[16] Mighty Solutions applied to this
Court for leave to appeal. During oral argument, its counsel
confirmed that it had now
been evicted.
Leave to appeal
[17] Mighty Solutions argues that this
matter raises important constitutional issues of public interest,
including the right to
freedom of trade, occupation and profession,
property rights and the principle of legality. It further
submits that it raises
this Court’s obligation to “develop
the common law to give effect to the rights of persons and entities
that hold retailers’
licences”.
[18] Mighty Solutions abandoned its
argument put forward in the dismissed
Gundu Service Station
application that its retail fuel licence gave it statutory
possessory rights. This argument was its central contention
before
the High Court. In this Court it persisted with its
submission that Engen lacked legal standing to evict it, because
Engen’s
head lease with the site owner had terminated before
eviction proceedings commenced. In its written and oral
submissions
Mighty Solutions argued for the first time that it had a
real right to the premises in the form of an enrichment lien.
[19] Engen argues that it is not in the
interests of justice to hear the appeal, because the application has
no prospects of success.
It submits that Mighty Solutions acted
in a brazenly unlawful fashion in that it had no common law right to
occupy the premises
after the termination of the lease agreement.
Further, it contends that Mighty Solutions used Engen’s
equipment and
branding for its own benefit for four to five years,
without paying rent, under the spurious premise that it had a retail
licence
to do so.
[20] To the extent that this case
requires us to consider whether the common law ought to be developed
so as to align it with the
Bill of Rights, it raises a constitutional
matter, which triggers this Court’s jurisdiction. After
dealing with the
prospects of success, I reach a conclusion later in
this judgment on whether leave to appeal should be granted.
Condonation
[21] Mighty Solutions applied for
condonation for the late filing of its statement of facts and the
record as it faced logistical
difficulties in filing its papers.
Engen opposed condonation on the basis that the filing was one day
late, and because Mighty
Solutions raised a new argument relating to
enrichment that would prejudice Engen.
[22] Since the short delay was
satisfactorily explained, condonation must be granted. To the
new argument and joint practice
note, I return later when the
prospects of success are considered.
Did Engen have standing to evict?
[23] According to Mighty Solutions,
Engen lacks legal standing to seek its eviction because Engen’s
head lease with the site
owner had terminated before the commencement
of the eviction proceedings. The High Court’s finding,
based on the common
law rule enunciated in
Boompret
,
[11]
that a lessee has no right in law to question the right of a lessor
to occupy a property, is correct only on a “superficial
reading” of the common law, Mighty Solutions argues.
[24] Mighty Solutions cites an
explanation of the principle provided in the 1910 Transvaal
Provincial Division decision of
Clarke
, in which the Court
stated:
“
It
seems to me that the rule [that the lessee cannot dispute the
lessor’s title] may be based upon one or other of two very
simple grounds. The first is, that the lessor having performed
his part of the contract, and having placed the lessee in
undisturbed
possession of the property, is entitled to claim that the lessee
should also perform his part of the contract and should
pay him the
rent which he agreed to pay for the use and enjoyment of the
premises. The second ground is, that the lessee
having had the
undisturbed enjoyment of the premises under the lease, and having
thus had all for which he contracted, it would
be against good faith
for him to set up the case that the lessor had no right to let him
the property.”
[12]
[25] Mighty Solutions claims that it had
agreed with Engen in the operating lease that Engen’s head
lease with the owner of
the premises – and hence Engen’s
possessory rights regarding the premises – would expire in
August 2011.
Unlike in
Clarke
, it was therefore not
contrary to good faith to challenge Engen’s possessory rights
after August 2011. On these facts,
the ratio for application of
the general contractual principle falls away and accordingly the
principle cannot find application.
Thus Mighty Solutions may
indeed challenge Engen’s right to occupy the property. As
Engen did not prove this right,
it has no standing to move for an
eviction order, so it is argued.
[26] Engen contends that it is
long-standing law that lessees cannot raise the defence that the
lessor has no right to occupy the
property when being sued for
ejectment at the termination of the lease. It points to the
underlying logic. First, one
of the natural incidents of the
contract of lease, imported into the contract unless the parties
agree otherwise, is that, at the
end of a lease, the lessee is
obliged to restore vacant possession of the property. Second,
the lessor has a contractual
right to demand the ejectment of the
lessee at the end of the contract, irrespective of whether the lessor
has any real or personal
rights entitling it to occupation.
[27] Engen argues that the position of a
sub-lessor would be untenable if it could not eject the sub-lessee at
the termination of
a lease without first demonstrating its title.
If the head lease and the sub-lease expired at the same time, the
sub-lessor
would be bound contractually to the lessor under the head
lease to restore vacant possession of the premises to it. If
the
sub-lessor did not do so because its sub-tenant remained in
occupation it would become liable to pay damages for holding over to
its lessor. At the same time, on Mighty Solutions’
argument, it would have no legal standing to seek an ejectment order
against the sub-tenant, which would be under no obligation to pay
rental for its occupation of the premises. It would be
unable
to fulfil its own contractual obligations and unable to compel the
sub-tenant to fulfil its obligations. That would
be an
untenable situation. It is no answer to say that the lessor
under the head lease would have standing. It might
choose to
confine itself to a claim for damages against its tenant.
[28] So, what is the common law
position? As noted in
Boompret
, it is an established
rule that when being sued for eviction at the termination of a lease,
a lessee cannot raise as a defence
that the lessor has no right to
occupy the property.
[13]
This flows naturally from the rule that a valid lease does not rest
on the lessor having any title. In
Frye’s
–
for example – it was stated that there “can be no doubt
that neither a sale nor a lease is void merely because
the seller or
lessor is not the owner of the property sold or leased”.
[14]
Unless expressly agreed, a lessor does not warrant that it is
entitled to let.
[15]
[29] As far back as the 1893 Supreme
Court of Transvaal decision in
Salisbury
,
[16]
one finds abundant reference in our common law to the rule mentioned
in
Boompret
. For example, in
Loxton
the Supreme
Court of the Cape of Good Hope held in 1905 that “it is not
competent to a lessee to dispute his landlord’s
title”.
[17]
It was prepared to apply this rule in the context of a lessee
attempting to resist eviction (though the summons in that case
claimed only damages). In
Loxton
the claim was brought
by the owners. In
Kala Singh
the Transvaal Provincial
Division in 1912 directly applied the rule in the context of a
sub-lessor seeking to evict a sub-lessee
after the termination of the
sub-lease.
[18]
In a manner analogous to Mighty Solutions’ defence in this
case, the sub-lessee attempted to resist ejectment on the
basis that
the sub-lessor’s head lease with the owner of the land was
invalid. The Court rejected this argument because
“as
between lessor and lessee it does not lie in the mouth of the lessee
to question the title of his landlord”.
[19]
[30] In
Boompret
the Court
considered whether a lessee can refuse to vacate a property upon
termination of a lease in circumstances where the lessor
does not
have title
and
where the lessee has acquired an independent
right to remain in occupation. The majority was sympathetic to
the possibility
that a lessee
can
rely on such a defence if
the lessor brought its eviction claim on the basis of the
actio
locati
,
[20]
but not if the lessor’s claim is based on a possessory
remedy.
[21]
The majority regarded it as unnecessary to decide this, because the
appellants were unable to establish that they had acquired
an
independent title.
[22]
The minority went further and found that the rule that a tenant
may not dispute a lessor’s title did not apply, where
a claim
for ejectment was based on the
actio locati
. The
lessee’s “alleged independent title, being susceptible of
relatively easy proof, may be raised as a defence”,
it
said.
[23]
[31]
Boompret
therefore left the
common law unchanged. The decision did not create a specific
Boompret
“rule” or “principle”.
The High Court applied the common law correctly. It was
unpersuaded
that Mighty Solutions was able to raise the defence that
Engen no longer has a right to occupy the premises. This would
be
true even on the assumption (which counsel for Engen conceded may
be made) that Engen no longer had title when it moved to evict
Mighty
Solutions.
[32] The facts of this case do not
require this Court to consider – as the Court did in
Boompret
–
whether a lessee can rely on a defence that the lessor
lacks valid title in circumstances where the lessee asserts its own
independent
title to the premises. Mighty Solutions did not
establish that it had acquired any independent title to the
premises.
It wisely abandoned its argument that its retail
licence gave it statutory possessory rights. And although
counsel for Mighty
Solutions submitted that the belatedly asserted
enrichment lien constituted “independent title” as
contemplated in
Boompret
, this argument is of little
assistance. In
Boompret
the Court considered a scenario
where the lessee might have obtained an “independent”
right to remain in occupation,
one “acquired
dehors
[outside
the scope of] the lease”.
[24]
The existence of an enrichment lien against Engen –
doubtful as this proposition may be – would anyway not give
rise to independent title. It would not be a right against the
owner and would thus fall outside the circumstances contemplated
in
Boompret
.
[33] Mighty Solutions’ submission
that the common law rule “falls away”, because its
rationale does not apply
in this case, is untenable. The rule
is clear: a lessee or sub lessee cannot rely on a defence that
its lessor or sub-lessor
lacks title in order to resist eviction upon
termination of the lease. Mighty Solutions is a sub-lessee
trying to do exactly
that. Under the common law Engen had
standing to evict Mighty Solutions. Questioning the rationale
for the rule takes
us rather to a separate question, namely whether
the law ought to be developed.
Does the common law have to be
developed?
[34] Counsel for Mighty Solutions
contended in oral argument that there is a need to develop the common
law. He submitted
that the present rule “conceals facts”
from courts and limits their ability to establish “the truth”,
to
the detriment of lessees. This is contrary to the values of
an open and democratic society, in which countervailing interests
need to be balanced. The post-1994 constitutional dispensation
calls for the truth to be uncovered, so it was submitted.
The
argument seems to rely on transparency as a constitutional value, or
on the right of access to courts.
[35] Section 39(2) of the Constitution
states that “when developing the common law or customary law,
every court, tribunal
or forum must promote the spirit, purport and
objects of the Bill of Rights”.
[25]
When is a court allowed or obliged to develop the common law in this
way?
[36] Our common law evolved from an
ancient society in which slavery was lawful, through centuries of
feudalism, colonialism, discrimination,
sexism and exploitation.
Furthermore, apartheid laws and practices permeated and to some
extent delegitimised much of the
pre-1994 South African legal
system. Courts have a duty to develop the common law –
like customary law – to accord
with the Bill of Rights.
[37] Caution is called for though.
It is tempting to regard precedents from the pre democratic era
with suspicion.
This may be more so when language is used,
which some may regard as archaic and reminiscent of a patriarchal
feudal era, as when
the Court in
Kala Singh
said that “it
does not lie in the mouth of a lessee to question the title of his
landlord”.
[26]
However, the mere fact that common law principles are sourced from
pre-constitutional case law is not always relevant. Age
is not
necessarily a reason to change. Some of the lessons gained from
human experience over the ages are timeless and have
passed the
logical and moral tests of time. The Constitution indeed
recognises the existing common law and customary law.
In
Zuma
Kentridge AJ said that it is not the case that under our
constitutional dispensation “all the principles of law which
have
hitherto governed our courts are to be ignored. Those
principles obviously contain much of lasting value.”
[27]
Furthermore, legal certainty is essential for the rule of law –
a constitutional value. It is also understandable
that
litigants who find themselves on the wrong side of the common law or
customary law will – often at a late stage in proceedings
–
seek what they would call its “development”.
[38] Before a court proceeds to develop
the common law, it must (a) determine exactly what the common law
position is; (b) then
consider the underlying reasons for it; and (c)
enquire whether the rule offends the spirit, purport and object of
the Bill of
Rights and thus requires development. Furthermore,
it must (d) consider precisely how the common law could be amended;
and
(e) take into account the wider consequences of the proposed
change on that area of law.
[39] In
Carmichele
Ackermann J
and Goldstone J stated that “where the common law deviates from
the spirit, purport and objects of the Bill of
Rights the courts have
an obligation to develop it by removing that deviation”.
[28]
The Court reminded us though that, when exercising their authority to
develop the common law, “[j]udges should be mindful
of the fact
that the major engine for law reform should be the Legislature and
not the Judiciary”.
[29]
The principle of separation of powers should thus be respected.
[40] This Court dealt with the scope of
the police’s common law duty to take steps to prevent
individuals from harm in
Carmichele
. The Court found
that the High Court had misdirected itself by failing to consider
whether this duty should be developed
in light of section 39(2) of
the Constitution.
[30]
The Supreme Court of Appeal had also failed to do so.
[31]
This Court remitted the matter to the High Court and both the
High Court and later the Supreme Court of Appeal held
that the
state’s delictual duties ought to be expanded.
[32]
In
K v Minister of Safety and Security
this Court
adapted the test for vicarious liability so as to render it compliant
with the Bill of Rights.
[33]
F v Minister of Safety and Security
further expanded
the scope of vicarious liability attached to the State.
[34]
In
Holomisa
, on the other hand, the Court declined to
find that the common law of defamation was inconsistent with the
provisions of the Constitution.
[35]
In
Everfresh
the majority of this Court refused to
develop the law of contract to require parties who undertake to
negotiate a new rent for
a renewed term of lease to do so reasonably
and in good faith. It held that there were no special
circumstances justifying
the Court to do so as a court of first and
last instance.
[36]
[41] The common law has also been
developed in the area of criminal law. In
Masiya
a
majority of this Court held that the common law definition of rape
should be expanded so as to promote the spirit, purport and
object of
the Bill of Rights.
[37]
It was developed to include anal penetration of a female, in addition
to vaginal penetration.
[38]
The minority held that the definition could be further extended to
include male victims,
[39]
but the majority declined to go that far.
[40]
[42] The importance of pleading the
development of the common law before reaching the apex court was
recognised in
Carmichele
.
[41]
In
Everfresh
Yacoob J found that if this Court is asked to
develop the common law as a court of first and last instance, it must
consider whether
it will be unfair or prejudicial to determine the
issue based on the pleaded and established facts. In some cases
courts
are obliged to raise the matter
mero motu
even though
it has not been raised by the parties, but such cases are rare.
[42]
[43] This Court has often indicated that
it benefits from the arguments and reasoning of the lower courts.
In
Fick
Jafta J noted that the Supreme Court of Appeal and the
High Courts were best suited for the development of the common law.
He stated:
“
[T]he views of
the other courts on the development of the common law are highly
valued by this Court; this Court defers to the Supreme
Court of
Appeal and the High Court to determine whether the common law needs
to be developed to meet the objects of section 39(2)
of the
Constitution and if so, the form that development should take.”
[43]
(Footnotes omitted.)
[44] In this case,
Mighty Solutions has not called for a minor development of the common
law. The changes made in
Carmichele
,
[44]
K v Minister of Safety and Security
[45]
and
F v Minister of Safety and Security
[46]
were part and parcel of the incremental development of the common law
of delict on a case-by-case basis. Under section 39(2)
of the
Constitution this development is guided by the spirit, purport and
objects of the Bill of Rights. Even radical changes
to the
common law might sometimes be required. As was held in
Carmichele
, if a common law rule fails to promote the section
39(2) objectives, our courts have no choice but to develop it.
This is
a “general obligation” and not a discretion.
[47]
But fundamental changes to the fabric of the common law and
customary law are often more appropriately made by way of
legislation.
[45] In the present case, Mighty
Solutions takes aim at the heart of the common law of lease.
The rule at stake is so entrenched
that it is a natural incident of
all contracts of lease. That is, it is implied by law unless
the parties expressly agree
otherwise.
[48]
For this reason, a development of the common law would itself not be
enough for Mighty Solutions’ success. Even
if this
settled common law rule were adjusted, the contract between Engen and
Mighty Solutions would still stand. Mighty
Solutions seeks to
escape the legal obligations it undertook when it concluded the
operating lease by asking that a basic principle
of the law of lease
be abolished with retrospective effect. It could succeed only
if this Court retrospectively altered the
contract. Mighty
Solutions would have needed to establish that the contractual term
was contrary to public policy. It
did not attempt to do so.
[46] This Court is sensitive to the fact
that to summarily change an implied term affects countless existing
contracts concluded
on the basis of the existing principle. The
parties to those contracts would not have thought it necessary to
provide expressly
for the specific eventualities covered by the
implied term. To alter the implied term changes the contractual
relationship
retrospectively and converts it to one on terms that the
parties might never have agreed to.
[47] This point is illustrated by the
facts of this case. The operating lease between
Mighty Solutions and Engen made
provision for what was to occur
if Engen was itself a lessee and its lease terminated. It said
that the sub-lease would automatically
terminate and the parties
would have no claim against one another flowing from the termination.
However, if the cause of
the termination of the head lease was
a breach by Engen of its obligations under that lease, Engen was
obliged to offer Mighty
Solutions similar premises elsewhere or would
have to pay compensation.
[48] There were other situations under
the operating lease where its termination was contemplated. Either
party would have
been entitled to terminate the lease on written
notice of not less than 180 days, within 90 days of resale price
maintenance of
petrol ceasing to be determined by legislation.
It could be cancelled on not less than 12 months’ notice if
Engen wished
to provide additional facilities or undertake a
conversion of any facility and Mighty Solutions was not
prepared, after an
assessment of the reasonableness of the additional
facilities or the conversion, to agree to the work being undertaken.
If
the whole of the premises were expropriated the lease would
terminate with effect from the date of expropriation. It would
also do so if changes in legislation, industry structure or
regulatory measures caused Engen to propose unacceptable amendments
to the lease. In that event Mighty Solutions would be entitled
to terminate the lease on 90 days’ notice.
[49] In none of these events was it
expressly provided in the operating lease that Mighty Solutions
would vacate the premises
and restore vacant possession to Engen. It
was unnecessary, because the implied terms of the contract obliged
Mighty Solutions
to do so and entitled Engen to enforce those terms
by way of eviction proceedings. If that had not been the law
when the
contract was concluded there can be little doubt that Engen
would have insisted on incorporating into the operating lease express
terms to that effect in order to protect its own position. And
such express terms could not in any case simply be struck
down by
this Court because, as already mentioned, Mighty Solutions did not
attack them on the basis that they were contrary to
public policy.
[50] Mighty Solutions asks for more than
simply a development of the law. But, in any case, there is no
basis for developing
it in the manner suggested.
[51] Contrary to the submission advanced
by Mighty Solutions, several of the justifications for the common law
rule are applicable
and indeed make good sense in this case. As
explained in
Clarke
,
[49]
having got what they bargained for in terms of a lease (undisturbed
enjoyment), it would be bad faith for a lessee then to try
to avoid a
term of the contract by disputing the lessor’s title. If
neither the lessor nor the lessee has title, why
should the lessee’s
interests prevail in a commercial context, in a manner that is
contrary to the agreement entered into?
Mighty Solutions had no
right to remain in occupation of the premises. Doing so, using
Engen’s branding and equipment
and without paying rent,
certainly seems in bad faith.
[52] Logic and the reality of commercial
practice support the rule. In the context of retail, commercial
and industrial leases,
the property-owning entity seldom leases the
property out. Frequently it is an operating arm or subsidiary
that does so.
A defence which allowed a lessee without title to
remain in rent-free occupation until the lessor proved its title
could
easily be exploited. A dispute over a lessor’s
title, regardless of its merits, could pave the way for prolonged
occupation
by lessees acting in bad faith. As counsel for Engen
emphasised, the position of sub-lessors could be even worse, as they
still have to meet their obligations in terms of the head lease
during the relevant periods. The argument made by
Mighty Solutions
that it always remains open to the original
title-holder to evict a recalcitrant sub lessee misses the
point: owners are often
reluctant to deal with sub-lessees and insist
that their lessee does so.
[50]
[53] The submission on behalf of Mighty
Solutions about the “truth” is deeply unconvincing.
The common law of
lease does not provide for secrecy. And it
does not protect untruths. It merely states that possible
defects in the
lessor’s title are not a valid defence in cases
like this.
[54]
Boompret
correctly states
that the common law rule applies “in general”.
[51]
The Court was open to finding that it did not apply in cases
where a lessee has obtained independent title and the lessor
no
longer has title, but did not have to. This question is still
open. There may well be other scenarios where the
rule should
not apply.
[55] The fundamental rights
considerations that might arise in the context of a residential
eviction are covered by the Prevention
of Illegal Eviction from and
Unlawful Occupation of Land Act.
[52]
These are not implicated in this type of commercial setting.
The eviction is not alleged to leave a poor family without
a roof
over their heads.
[56] There is no apparent reason to
develop the common law in this case. The rule does not offend
the spirit, purport and
objects of the Bill of Rights, or the values
of our constitutional democracy. Fuel retailers like Mighty
Solutions and the
numerous applicants preceding it in cases like
Gundu Service Station
[53]
may have justified grievances about the structure of the fuel
industry and the conduct of large oil companies in their dealings
with retailers. However, Mighty Solutions chose the wrong
avenue to prosecute these grievances. The High Court suggested
approaching the Competition Tribunal if anti-competitive practices
were alleged.
[54]
To relax the common law rule so as to allow Mighty Solutions to
remain in occupation until Engen proved valid title would
be unjust
and commercially reckless and might well have far reaching and
unnecessary implications for the law of lease and
of contract in
general.
Enrichment
[57] In its written argument, Mighty
Solutions introduces a new argument that it has a real right to the
premises in the form of
an enrichment lien. It referred to
clause 41 of schedule 2 of its contract with Engen, which allegedly
states that, if Mighty
Solutions’ tenure is prematurely
terminated, it will “not have the right to any compensation”
in respect of its
“loss of the business”. Mighty
Solutions first argued that the relevant sub clauses were
contrary to the
spirit of the Act and hence unlawful and invalid.
It then submitted that when the contract was cancelled, Engen became
unjustifiably
enriched at Mighty Solutions’ expense, because
the business – including its goodwill (an “intellectual
property
asset”) – contractually transferred to Engen
upon cancellation of the contract. This gave rise to an
enrichment
lien and a right of retention of possession.
[58] Engen argues that Mighty Solutions
impermissibly went beyond the common cause facts and issues agreed in
the joint practice
note before the High Court. Its submissions
in this Court contradict certain agreed common cause facts; and it
introduces
false and misleading allegations that did not form part of
the evidence in the High Court. Engen submits that all common
cause facts and factual disputes were settled by the joint practice
note agreed on by counsel for both sides. This note provided
the basis for adjudicating the matter.
[59] Mighty Solutions argues that the
joint practice note was nothing more than a guideline on facts that
were common cause. It
is not binding on this Court. It
submitted that in the High Court both parties were entitled to and
did in fact rely in addition
on the affidavits and documents before
that Court.
[60] Rule 33(1) of the Uniform Rules of
Court provides that parties to a dispute may agree upon a written
statement of facts in
the form of a special case for the adjudication
of points of law.
[55]
This statement sets out the facts agreed upon and the questions
of law in dispute between the parties, as well as their
contentions.
[56]
Rule 33(3) gives the court the discretion to draw any
inference of fact or law from the facts and documents as if proved
at
trial. In
Bane
it was said that rule 33(1) and (2) made
it clear that the resolution of a stated case proceeds on the basis
of a statement of agreed
facts.
[57]
It is, after all, seen as a means of disposing of a case without the
necessity of leading evidence.
[61] The Rules of this Court do not
speak of a practice note or statement of facts. Rule 29 does
not list rule 33 of the Uniform
Rules as applicable to this Court.
However, until recently it was for some time a practice of this
Court to issue directions
calling upon parties to submit an agreed
statement of facts. The reason for this mirrors that of the
Uniform Rules of Court
in that it negates the need for evidence and
informs this Court as to what the facts of the case are about.
[62] The joint practice note in the High
Court was not only an agreement on facts. It was an agreement on the
issues to be decided
by the High Court. The High Court regarded
itself as bound by the note. It confined itself to the two
issues in it.
The judgment dealt with the issues of standing
and possessory rights under the Act. If this Court were to
entertain anything
beyond those two issues it would prejudice Engen,
as it had no opportunity to rebut the claim, whether on the facts or
the law.
Furthermore, it would make this Court a court of first
and last instance. An application for leave to appeal must be
adjudicated on whether and how the court below erred. This
Court can do so on the two issues only. It would hardly
be in
the interests of justice for an appeal court to overturn the judgment
of a lower court on the basis of an issue that Court
was never asked
to decide. As lawyers often say, “on this basis alone”
this Court should not entertain the enrichment
argument.
[63] Furthermore, Mighty Solutions did
not raise enrichment in its notice of motion.
[58]
It did so in its written and oral submissions. In
Barkhuizen
Ngcobo J noted that this Court may consider a point
of law that is raised for the first time on appeal if the point is
covered
by the pleadings and its consideration on appeal involves no
unfairness to the other parties.
[59]
Khumalo
supports
this.
[60]
In
Lagoonbay
this Court stated that
it must be in the interests of justice, which takes into account the
public interest and whether the matter
has been fully and fairly
aired, to hear a new argument for the first time.
[61]
In this case the issue was not properly raised on either the
facts or the law.
[64] Even if the enrichment point were
to be entertained, the prospects of success are slim. Mighty
Solutions relies on the
British Columbia Court of Appeal case of
Haigh v Kent
as authority that goodwill is a form of
enrichment.
[62]
The import of Mighty Solutions’ reliance on this case was
not altogether clear. Engen correctly argues that the
submission regarding goodwill is novel in South African law and it
would require the ears and attention of lower courts to ventilate
this issue. A glance at the unjustified enrichment landscape
indicates that this area has yet to be developed.
[63]
[65] Factual strings on the goodwill
issue are in any event still untied. There is no evidence
speaking to the profitability
of the business. The amount of
R2 000 000, which Mighty Solutions values the goodwill at, is
hotly disputed. In
considering the goodwill, we would need to
pay attention to factors like whether Engen’s potential benefit
from Mighty Solutions’
goodwill is outweighed by the benefit
Mighty Solutions received from Engen’s goodwill in using its
branding for several years.
[64]
[66] This Court may not entertain the
enrichment claim. It did not appear in the practice note that
guided and bound the High
Court; was raised in argument before this
Court for the first time; and depends on evidence that is not
available.
Conclusion
[67] Under the common law of lease
Mighty Solutions may not question Engen’s title as a defence in
eviction proceedings after
the valid termination of the lease
agreement between it and Engen. The common law position does
not call for development
on the facts of this case. The
enrichment argument cannot be entertained. Engen has standing
to evict Mighty Solutions.
[68] This application bears no prospects
of success. Leave to appeal has to be dismissed.
Costs
[69] In a commercial dispute between two
private parties costs should follow the result. Mighty
Solutions’ conduct in
bringing in a completely new argument to
this Court does not mitigate its circumstances.
Order
[70] The following order is made:
1.
Condonation for the late filing of the
statement of facts and record is granted.
2.
Leave to appeal is refused.
3.
The applicant must pay costs, including the
costs of two counsel.
For the Applicant:
C Woodrow and D Jordaan instructed by Venn & Muller Attorneys
For the First Respondent:
M Chaskalson SC and C van der Spuy instructed by A D Hertzberg
Attorneys
[1]
Section 39(2) of the Constitution states:
“
When
interpreting any legislation, and when developing the common law or
customary law, every court, tribunal or forum must promote
the
spirit, purport and objects of the Bill of Rights.”
[2]
120 of 1977.
[3]
The property is now part of a deceased estate.
[4]
CCT 134/13
Gundu
Service Station CC and Others v Engen Petroleum Limited
(
Gundu Service Station
).
The first applicant in this matter, Gundu Service Station CC,
again approached this Court in July 2014 (CCT 123/14
Gundu
Service Station CC and Others v Engen Petroleum Limited and
Others
). This latter application
was dismissed with costs for lack of prospects of success.
[5]
Engen Petroleum Ltd v
Mighty Solutions CC t/a Orlando Service Station
[2014] ZAGPJHC 426
(
High Court judgment) at 2.
[6]
Boompret Investments (Pty) Ltd and Another v
Paardekraal Concession Store (Pty)
Ltd
1990 (1) SA 347
(A) (
Boompret
)
at 351.
[7]
High Court judgment above n 5 at 7.
[8]
Id at 9.
[9]
Id at 10.
[10]
Section 12B(1).
[11]
Boompret
above n
6.
[12]
Clarke v Nourse Mines Ltd
1910
TS 512
(
Clarke
)
at 520-1. In its written argument, Mighty Solutions mistakenly
attributed this quote to
Hillock and
Another v Hilsage Investments (Pty) Ltd
1975
(1) SA 508 (A).
[13]
Boompret
above n
6.
[14]
Frye’s (Pty) Ltd v Ries
1957
(3) SA 575
(A) (
Frye’s
)
at 581A.
[15]
See the various cases cited in Cooper
Landlord
and Tenant
2 ed (Juta & Co Ltd,
Cape Town 1994) at 27.
[16]
The Salisbury Gold Mining Company v The
Klipriviersberg Estate
(1893) Hertzog
186
(
Salisbury
)
at 190.
[17]
Loxton v Le Hanie
(1905)
22 SC 577
(
Loxton
)
at 578.
[18]
Kala Singh v Germiston Municipality
1912 TPD 155
(
Kala Singh
).
[19]
Id at 159-60. Dating back to
Clarke
,
above n 12 at 520-1, the rule has also been applied in cases where a
lessee, after having used and enjoyed the property, challenged
the
validity of the lease in a bid to avoid paying rent.
[20]
This is the action to recover possession on
termination of a lease.
[21]
Boompret
above n
6 at 352H-J.
[22]
Id at 353G-358D.
[23]
Id at 358F-I.
[24]
Boompret
above n
6 at 351I.
[25]
Section 39(2) above n 1.
[26]
Kala Singh
above
n 18 at 160.
[27]
S v Zuma and Others
[1995]
ZACC 1
;
1995 (2) SA 642
(CC);
1995 (4) BCLR 401
(SA) (
Zuma
)
at para 17.
[28]
Carmichele v Minister of Safety and Security
and Another (Centre for Applied Legal
Studies Intervening)
[2001] ZACC 22
;
2001 (4) SA 938
(CC);
2001 (10) BCLR 995
(CC) (
Carmichele
)
at para 33. See also
Phumelela
Gaming and Leisure Ltd v Gr
ündlingh
and Others [2006] ZACC 6; 2006 (8) BCLR 883 (CC).
[29]
Carmichele
id at
para 36.
[30]
Id at paras 37 and 60.
[31]
Id at para 37.
[32]
See
Carmichele v
Minister of Safety and Security and Another
2003
(2) SA 656
(C) at para 32 and
Minister
of Safety and Security and Another v Carmichele
[2000]
ZASCA 149
;
2004 (3) SA 305
(SCA) at para 36.
[33]
K v Minister of Safety and Security
[2005]
ZACC 8
;
2005 (6) SA 419
(CC);
2005 (9) BCLR 835
(CC) at para 44.
[34]
F v Minister of Safety and Security and Others
[2011] ZACC 37
;
2012 (1) SA 536
(CC);
2012 (3) BCLR 244
(CC) (
F v Minister of
Safety and Security
) at paras 79-82.
[35]
Khumalo and Others v Holomisa
[2002]
ZACC 12
;
2002 (5) SA 401
(CC);
2002 (8) BCLR 771
(CC) (
Holomisa
)
at para 45.
[36]
Everfresh Market Virginia (Pty) Ltd v Shoprite
Checkers (Pty) Ltd
[2011] ZACC
30
;
2012 (1) SA 256
(CC);
2012 (3) BCLR 219
(CC) (
Everfresh
)
at para 64.
[37]
Masiya v Director of Public Prosecutions,
Pretoria and Another (Centre for Applied Legal Studies and Another,
Amici Curiae)
[2007] ZACC 9
;
2007 (5)
SA 30
(CC);
2007 (8) BCLR 827
(CC) (
Masiya
)
at para 32.
[38]
Id at para 74.
[39]
Id at paras 84-8.
[40]
Id at para 46.
[41]
Carmichele
above
n 28 at para 41.
[42]
Everfresh
above
n 36 at paras 27 and 31. In
Minister
of Local Government, Western Cape v Lagoonbay Lifestyle Estate (Pty)
Ltd and Others
[2013] ZACC 39
;
2014
(1) SA 521
(CC);
2014 (2) BCLR 182
(CC) (
Lagoonbay
)
this Court reviewed the principles laid down in
Director
of Public Prosecutions, Transvaal v Minister of Justice and
Constitutional Development, and Others
[2009]
ZACC 8
;
2009 (4) SA 222
(CC);
2009 (7) BCLR 637
(CC). At para
39 of
Lagoonbay
,
it summed these up as follows:
“
(a)
A court may, of its own accord, raise the unconstitutionality of a
law that
it is called upon to enforce. This ensures the
supremacy of the Constitution and further ensures that we have a
coherent
system of law based on the Constitution as a foundational
document.
(b)
In an instance where a point of law is apparent on the papers, but
the common approach of the parties proceeds on a wrong perception of
what the law actually is, then a court should, of its own
accord,
raise the point of law and require the relevant parties to deal
therewith.
(c)
‘Courts should observe the limits of their powers. They
should not constitute themselves as the overseers of laws made by
the Legislature. Ordinarily, therefore, they should raise
and
consider the constitutionality of laws that are properly engaged
before them and where this is necessary for the proper resolution
of
the dispute before them.’
(d)
A court may, of its own accord, decide a constitutional issue if
‘it
is necessary for the purpose of disposing of the matter before it’.
(e)
A court may also, of its own accord, decide a constitutional issue
if it is in the interests of justice to do so. Determining the
interests of justice entails, inter alia, considerations
of public
interest and whether the matter has already been fully and fairly
aired.” (Footnotes omitted.)
[43]
Government of the Republic of Zimbabwe v Fick
and Others
[2013] ZACC 22
;
2013 (5) SA
325
(CC);
2013 (10) BCLR 1103
(CC) (
Fick
)
at para 104.
[44]
Carmichele
above
n 28.
[45]
K v Minister of Safety and Security
above
n 33.
[46]
F v Minister of Safety and Security
above
n 34.
[47]
Carmichele
above
n 28 at para 39.
[48]
Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
1974 (3) SA 506
(A) at 531D-532G. See also
South African Maritime Safety Authority v McKenzie
[2010]
ZASCA 2
;
2010 (3) SA 601
(SCA) at para 11.
[49]
Clarke
above n
12 at 520-1.
[50]
If a head lease has expired, but the property is
still occupied, the lessor will generally bring ejectment
proceedings against
the lessee, not the sub-lessee, and the latter
does not have the right to be joined or to intervene. See
United Watch & Diamond Co (Pty) Ltd
and Others v Disa Hotels Ltd and Another
1972
(4) SA 409
(C) at 417B-C where the Court held that “[t]he
subtenants’ right to, or interest in, the continued occupancy
of the
premises sub-leased is inherently a derivative one depending
vitally upon the validity and continued existence of the right of
the tenant to such occupation”.
[51]
Boompret
above n
6 at 351H-J.
[52]
19 of 1998 (popularly known as “PIE”).
[53]
Gundu Service Station
above
n 4.
[54]
The High Court judgment also suggested that
Mighty Solutions could approach the Department of Energy with its
grievances “with
a view to the Minister [of Minerals and
Energy] making the appropriate regulations”. See High
Court judgment above
n 5 at 11.
[55]
Rule 33 states in relevant part:
“
(1)
The parties to any dispute may, after institution of proceedings,
agree upon
a written statement of facts in the form of a special
case for the adjudication of the court.
(2)
(a)
Such
statement shall set forth the facts agreed upon, the questions of
law in dispute between the parties and their contentions
thereon.
Such statement shall be divided into consecutively numbered
paragraphs and there shall be annexed thereto copies
of documents
necessary to enable the court to decide upon such questions. It
shall be signed by an advocate and an attorney
on behalf of each
party or, where a party sues or defends personally, by such party.
(b)
Such special case shall be set down for hearing in the manner
provided for trials.
. . .
(3)
At the hearing thereof the court and the parties may refer to the
whole of the contents of such documents and the court may draw any
inference of fact or of law from the facts and documents as
if
proved at a trial.”
[56]
Id rule 33(2).
[57]
Bane and Others v D’Ambrosi
[2009]
ZASCA 98
;
2010 (2) SA 539
(SCA) (
Bane
)
at para 7. See also
National
Union of Mineworkers and Others v Hartebeestfontein Gold Mining Co
Ltd
1986 (3) SA 53
(A) at 56G–57E
and
Minister of Police v Mboweni and
Another
[2014] ZASCA 107
;
2014 (6) SA
256
(SCA) at paras 7-8.
[58]
Mighty Solutions’ notice of motion
indicated:
“
1.
That the appellant be granted leave to appeal against the whole of
the order and judgment of the South Gauteng High Court delivered and
handed down on 28 March 2014 by His Lordship Mr Justice
Matthee
(AJ), leave to appeal having been made in due course and refused by
the Supreme Court of Appeal on 19 November 2014;
2.
That the aforesaid order be replaced with an order that
the
application is dismissed with costs”.
[59]
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC);
2007 (7) BCLR 691
(CC)
(
Barkhuizen
)
at para 39.
[60]
Khumalo and Another v MEC for Education,
KwaZulu-Natal
[2013] ZACC 49
;
2014 (5)
SA 579
(CC);
2014 (3) BCLR 333
(CC) (
Khumalo
)
at para 90:
“
The MEC must
stand or fall on the pleaded cause of action. As illustrated
above, it is evident that she deliberately chose
to institute a
claim founded in administrative justice. Her disavowal of
reliance on the [Labour Relations Act 66 of 1995]
precludes any
court from adjudicating a claim based on the [Labour Relations Act
66 of 1995], even if the facts pleaded were
capable of sustaining
such a claim. In [
Gcaba v
Minister for Safety and Security and Others
],
this Court rejected the notion that, if pleaded facts sustain a
claim not relied on by an applicant, a court may adjudicate
such
claim. The Court said:
‘
While
the pleadings – including in motion proceedings, not only the
formal terminology of the notice of motion, but also
the contents of
the supporting affidavits – must be interpreted to establish
what the legal basis of the applicant’s
claim is, it is not
for the court to say that the facts asserted by the applicant would
also sustain another claim, cognisable
only in another court.’”
(Footnotes omitted.)
[61]
Lagoonbay
above
n 42 at para 39.
[62]
Haigh v Kent
2013 BCCA 380.
[63]
See Visser
Unjustified
Enrichment
(Juta & Co, Cape Town
2008) at 10-27 in general. Visser discusses the development of
enrichment in South Africa, but
does not speak about goodwill being
part of this landscape.
[64]
In
Rail Commuters
Action Group and Others v Transnet Ltd t/a Metrorail and Others
[2004] ZACC 20
;
2005 (2) SA 359
(CC);
2005 (4) BCLR 301
(CC) at paras 41-3, this Court stated:
“
The SCA has
similarly held that new evidence should be admitted on appeal under
this section only in exceptional circumstances.
This is
because on appeal, a court is ordinarily determining the correctness
or otherwise of an order made by another court,
and the record from
the lower court should determine the answer to that question.
It is accepted however that exceptional
circumstances may warrant
the variation of the rule. Important criteria relevant to
determining whether evidence on appeal
should be admitted were
identified in
Colman v Dunbar
.
Relevant criteria include the need for finality, the undesirability
of permitting a litigant who has been remiss in bringing
forth
evidence to produce it late in the day, and the need to avoid
prejudice.
. . .
The Court should exercise
[these] powers . . . ‘sparingly’ and further
evidence on appeal (which does not fall
within the terms of Rule 31)
should only be admitted in exceptional circumstances. . . .
The existence of a substantial
dispute of fact in relation to it
will militate against its being admitted.” (Footnotes
omitted.)