---

FORM A

INFO FOR COURT FILE

Parties:

NEW LIFE COMMUNAL PROPERTY ASSOCIATION Applicant

and

DAIGRI BOERDERY BK Respondent

• Case Number: 1616/2007

• High Court: EASTERN CAPE DIVISION

DATE HEARD: 25 October 2007

DATE DELIVERED: 22 November 2007

JUDGE(S): Froneman J

LEGAL REPRESENTATIVES -

Appearances

• for the Applicant(s): Adv. De La Harpe

• for the Respondent(s): Adv. Dugmore

Instructing attorneys:

• for the Applicant(s): McCallum

• for the Respondent: Dullabh

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION Case No. 1616/2007

In the matter between

NEW LIFE COMMUNAL PROPERTY ASSOCIATION Applicant

and

DAIGRI BOERDERY BK Respondent

-------------------------------------------------------------------------------------------------------

JUDGMENT

-------------------------------------------------------------------------------------------------------

Perfection of landlord’s hypotec and eviction order granted where lessee in arrear with payment of rent and fixed period of lease agreement came to an end. Option to extend lease invalid where space for increased rental left blank.

Froneman J.

[1] The applicant seeks confirmation of a rule nisi in terms of which the respondent’s livestock and movable assets on the farm Rockwood, Cradock (‘the farm’) were attached in perfection of the applicant’s alleged landlord’s hypothec, as well as for the eviction of the respondent from the farm. The eviction order sought was narrowed down in argument to exclude from its ambit the actual eviction of individuals from their dwellings on the farm.

[2] The applicant is an association established in terms of the Communal Property Associations Act (‘the Act’).¹ Its main objective in terms of its constitution is to hold the farm, of which it is the owner, for the benefit of its individual members. After an initial unsuccessful attempt at communal farming the farm was let to the respondent in August 2005. Two of the members of the respondent, a close corporation, are also members of the applicant. One of them, Mr. Jas Barendse, is a founding member of the applicant and one of its oldest, in age. It is apparent that Mr. Barendse is the driving force behind the respondent’s existence and activities on the farm.

[3] Although there are two signed leases between the parties that fact is of no particular moment because there is no dispute between the parties that there was a lease between the parties and the essential terms were the same in each version of the lease.

[4] The lease was for a fixed period of five years, from 1 July 2002 to 30 June 2007. The rent consisted of the applicant’s annual obligations to the Land Bank, the Great Fish River Irrigation Board (‘the irrigation board’) and Eskom, including arrear amounts owing, as well as outstanding salaries and loans owing to the applicant’s employees. After eighteen months the rent would consist of the applicant’s annual obligations to the Land Bank and the irrigation board and, in addition, a cash payment of R2000,00 per month. With reference to the amounts owing to the Land Bank and irrigation board, clause 3 of the lease provided:

“Die Huurder sal self verantwoordelik wees om by die onderskeie instansies en persone vas te stel welke bedrae verskuldig en betaalbaar mag wees en sal die Huurders self die nodige reëlings met die onderskeie instansies en persone tref vir die betaling van die betrokke bedrae …. welke bedrae teenoor hierdie instansies betaal sal word soos deur die Huurder onderling met die betrokke instansies ooreengekom…”

[5] Clause 4 of the lease reads as follows:

“Die Verhuurder verleen hiermee aan die Huurder ’n opsie om die eiendom, by verstryking van hierdie huurooreenkoms, aan te koop soos onderhandel en ooreengekom. Indien die Huurder sou besluit om nie die opsie om die eiendom aan te koop, uit te oefen nie, dan verleen die Verhuurder hiermee aan die Huurder ’n opsie om die eiendom by verstryking van hierdie ooreenkoms, vir ’n verdere periode van 2 (twee) jaar te huur op dieselfde terme en voorwaaardes soos hierin uiteengesit, behalwe dat die maandelikse huurgeld van R2000,00 sal verhoog na R_______ per maand. Die Huurder sal verplig wees om indien hy die opsie sou uitoefen, die Verhuurder skriftelik daarvan in kennis stel voor of op 1 Maart 2007, by gebreke waarvan die opsie sal verval.”

[6] The applicant seeks the relief referred to above on the basis that the respondent is in breach of its obligation to pay rent in terms of the lease and that the lease has come to an end by effluxion of time. The arrear rent totalled R161710,72, made up of amounts owing to the Land Bank and the irrigation board. The respondent opposes the relief on a number of grounds, namely: (1) that the institution of these proceedings were not properly authorised in accordance with the provisions of the applicant’s own constitution; (2) that it was not in breach of the original lease for non-payment of rent and that applicant thus had no ground to seek perfection of its landlord’s hypothec; and (3) that eviction from the farm was unjustified because of the extension of the lease in terms of clause 4, quoted above. The respondent also relied, in the papers, on the exercise of an option to purchase the farm as a defence, but Mr. Dugmore, who appeared for the respondent, conceded that the exercise of the option, even if found to be so, would not grant the respondent occupational rights to the farm prior to registration of transfer, a concession which was in my judgment correctly and properly made.

Lack of authority

[7] The respondent argued that Mr. Smith, who deposed to the founding and replying affidavits delivered on applicant’s behalf, was not properly authorised to do so, and also that the decision to institute these proceedings was not properly authorised in accordance with the applicant’s constitution.

[8] The first aspect of the attack can be disposed of briefly. It was based on the assertion that Mr. Smith described himself as chairman of the applicant, whilst the minutes show him to be only the acting chairman, a position not provided for in the constitution. The resolution authorising Mr. Smith to depose to the affidavit does not, however, purport to authorise him to do so in any particular capacity, merely that he, as an individual, is authorised to do so. The fact that he may have described his position incorrectly is irrelevant.

[9] The more substantial attack is on the resolution taken to institute these proceedings. The resolution was taken at a meeting on 9 July 2007, described in the minutes as a special general meeting. The argument that the resolution was invalid was based, first, on the ground that the formalities for a special general meeting was not complied with; second, that there was no quorum at the meeting; and, third, that no proper notice was given to members of the meeting.

[10] The point about procedural irregularities in respect of a special general meeting appears to me to be without merit. The business conducted at the actual meeting does not constitute “special matters” under clause 11 of the constitution, nor can the possibility that the applicant may have wrongly thought it to be ‘special business’ convert it into such business.

[11] The allegation by Mr. Barendse in his opposing affidavit that the meeting did not have enough members to constitute a quorum is not supported by any factual basis. By his own admission he was not at the meeting. The minutes reveal that 14 members were present and Mr. Smith asserts that this constituted a quorum. There is no factual basis advanced in the papers that contradicts his statement to this effect. This ground of attack must also thus fail.

[12] The last ground of attack concerned notice of the meeting. The relevant clauses in this regard appears to be clauses 15 (b), 17(ii) and 18 of the constitution. They read as follows:

“15….

(b) A general meeting shall be conducted with three days prior notice, whereby a Committee member will visit each beneficiary household, where reasonably possible, to inform all members whose names appear on the membership list at any given time, of such a general meeting.

17 ….

(ii) The general meeting shall be conducted with three days prior notice, whereby a Committee member will visit each beneficiary household, where reasonably possible, to inform all members whose names appear on the membership list at any given time, of such a general meeting, with due regard that if the Chairperson of the Committee after having been duly requested omits to give notice that a meeting will be conducted the requester has the right to give notice of such meeting as mentioned above.

18 (i) Notice of general meetings is addressed to all members of the Association whose names are reflected on the membership list at any given time.

(ii) Notice of general meetings will be served at the last known address of a member by hand (visitation by a Committee member) and the bona fide omission to give notice of a general meeting will not cause the invalidity of the meeting.” (my underlining).

[13] In its opposing papers the respondent disputed that its members received notice of the meeting where it was resolved to institute the proceedings. In his replying affidavit Mr. Smith stated that two of the persons mentioned as not having received notice were no longer members of the applicant and that the other members did receive notice in terms of clauses 15(b) and 18(ii) of the constitution. He added that a resolution is not rendered invalid because one or other persons did not receive notice.

[14] Mr. Dugmore submitted that in matters such as the present one the real danger exists that the provisions of the constitution of an association like the applicant may be abused in order to exclude one faction in an internal dispute from having its proper constitutional say, and that this was the situation here as well. The effect of this argument was that the alleged failure to give notice under the terms of the applicant’s constitution was done in bad faith. There are a number of difficulties in the way of this contention. I will assume that notice was not given to the members of the respondent who are also members of the applicant, but, as with the allegations of a lack of a quorum and the alleged failure to keep minutes of meetings (all shown to be baseless assertions), there is no specific allegation that the failure to give notice formed part of a deliberate exclusion of certain members in an internal dispute. The dispute is not purely ‘internal’: the respondent is an independent legal person conducting commercial farming, and the legal issues between it and the applicant relate to the alleged breach of a commercial lease and its continued existence. On the face of it any attempt to use the provisions of the applicant’s constitution to prevent the legitimate enforcement of the applicant’s rights by members who seek to safeguard their own commercial interests in the respondent would be improper. In addition the dispute is not new and the resolution to go to court was only taken after extensive efforts to resolve matters by other means. There is no indication that there are other members of the applicant, who are not members of the respondent, who do not support the institution of these proceedings. If the respondent put up specific factual allegations to substantiate the argument that the resolution to institute these proceedings was an exercise in bad faith the applicant would have had the opportunity of meeting and answering those allegations. That has not been done and the mere fact of inadequate notice is not in itself, given the other considerations I have mentioned, to my mind sufficient ground for me to hold that the failure to give that notice was done in bad faith. Accordingly I consider that the applicant has sufficiently shown that a proper resolution in terms of its constitution was taken to institute these proceedings.

Perfection of the landlord’s hypothec

[15] The respondent opposed the application for perfection of the hypothec on the basis that the amounts owing to the Land Bank and the irrigation board did not constitute rent and that a landlord’s hypothec secures only arrear rent owing to the lessor. The better view of the law, according to Professor Kerr, is that the hypothec also extends to other matters such as the obligation to repair if the lessee is obliged to repair,² but for the purposes of this judgment I will assume, in the respondent’s favour, that the hypothec is only available for perfection at the instance of a lessor to secure outstanding rent.

[16] The respondent argues that what are outstanding are the amounts owing to the Land Bank and the irrigation board, and that these amounts are not part of the rent under the lease. In this regard the respondent relies on the provisions in the lease whereby the amount of the rental is equated to what is owed to the Land Bank and the irrigation board; that it is the respondent’s obligation to ascertain from these bodies what is owing to them; and the alleged fact that the respondent, albeit in arrears in respect of those amounts, has nevertheless made arrangements with these bodies for repayment of the arrears.

[17] The argument loses sight of the fact that the lease explicitly states that the rent (“huurgeld”) would be equal to (“ ’n bedrag gelykstaande aan”) the amounts owing to the Land Bank and the irrigation board. The payment of rent is an obligation of the lessee to the lessor. The respondent has no legal obligation to pay the Land Bank or the irrigation board: that obligation rests on the applicant as owner of the farm. It is a legal obligation that is confirmed on affidavit by the representatives of these institutions to the effect that the applicant was in arrears with the respective amounts.

[18] Nor does the arrangement for payment of the arrears owing to the Land Bank and the irrigation board by the respondent extinguish the applicant’s legal obligation to pay these institutions. The letters attached by the respondent in support of his allegation that arrangements for payments have been made, do not explicitly state that the respondent has been substituted as the debtor in place of the applicant in respect of those debts, only that the respondent is making monthly payments in respect of the arrears. It is difficult to see how such a substitution could in any event have been validly made unilaterally without the concurrence of the applicant, but these facts show that it is not necessary to extend the enquiry that far.

Eviction

[19] As noted earlier, the only remaining ground for opposing the eviction of the respondent in its farming activities from the farm was the alleged exercise of the option to renew the lease. Mr. Barendse alleges that the option was exercised in February 2007 by delivery of a written letter to a member of the applicant. This is denied by the person concerned. The probabilities favour the applicant, especially in view of the fact that prior to this the respondent had made a conditional offer to purchase the farm which the applicant had accepted on 10 March 2006. The condition was not fulfilled, but negotiations ensued to ensure the extension of time within which to obtain finance, the subject matter of the suspensive condition. On 1 March 2007 Mr. Barendse wrote to the applicant informing it that finance would be finalised and he purported to once again exercise the option to purchase. No mention was made of the alleged exercise of the lease option but a month earlier. The total lack of reference in the correspondence to the exercise of the option to renew the lease, so crucial to the respondent’s right of occupation, demonstrates the improbability of such an exercise. But there are many warnings in the case law against deciding disputes of fact on affidavit alone, so I will steer away from making a definitive finding in that regard.

[20] There is, however, another reason for rejecting the respondent’s defence to the application for eviction, namely that there was no valid option to renew the lease.

[21] Clause 4 of the lease, quoted in para. [5] above, provides for an option to renew the lease “op dieselfde terme en voorwaardes soos hierin uiteengesit, behalwe dat die maandelikse huurgeld van R2000,00 sal verhoog na R________ per maand”. Mr. Dugmore argued that because the space for an increase of the sum of R2000,00 had been left blank, the applicant had waived the benefit of an increase. For this submission he relied on the case of Blundell v Blom. ³ Blundell’s case concerned an agreement of sale of immovable property. In the offer to purchase the purchaser left blank the space for the amount of a deposit on the purchase price and the space for the time within which a guarantee was to be furnished. The seller accepted the offer in this form. Millin J found, on a construction of the document, that the seller had waived the benefit of a deposit and that the parties had agreed that no deposit was to be paid. A similar conclusion was reached with regard to the time within which the guarantee was to be furnished.

[22] The lease in this case is not in the form of an offer and acceptance, but in the form of a concluded agreement. It is headed “Memorandum van ooreenkoms aangegaan en gesluit deur en tussen…” It is the final record of agreement after negotiations between the parties. No waiver can be read, or deduced, from the contents of the document itself. Equally plausible, on its face, is that the parties failed to agree on the rent, an essential term of the lease. In order to find that there was a valid option, the clause would have to be interpreted as an agreement that the rent of R2000,00 would remain the same, in other words by disregarding the words “behalwe dat die maandelikse huurgeld van R2000,00 sal verhoog na …”. There is no explanation why these words were not deleted or taken out and in my view such an intention to disregard these words is not the only plausible or reasonable possibility that exists.⁴ The option is thus void for vagueness for not stipulating the rent for an extended lease.

[23] In the result none of the defences raised by the respondent can be upheld.

Order

[23] It is ordered that:

1. Paragraph 1.1 of the rule nisi issued on 16 August 2007 is confirmed.

2. The attachment of the respondent’s movable property under paragraph 1 above

shall remain in effect pending the finalisation of an action to be instituted by

applicant against the respondent for the payment of arrear rent under the lease

agreement within 20 days of delivery of this judgment, or until payment of the

arrear rent, whichever event occurs first.

3. The respondent is ordered to vacate the applicant’s property (portions 1 and 2

of the farm Rockwood, division of Inxuba Yethemba Municipality, Cradock)

within 14 days of service of this order.

4. In the event that the respondent fails to vacate the said property within 14

days of service of the order, the sheriff is authorised to evict the respondent

from the property.

5. The respondent is ordered to pay the costs of the application.

J.C.Froneman

Judge of the High Court.

---