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Pareto Ltd and Another v Coffee Junction CC (24773/2010) [2011] ZAWCHC 11 (24 February 2011)

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IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No: 24773/2010

In the matter between:

PARETO LIMITED …....................................................................First Applicant

METROPOLITAN LIFE LIMITED …...................................Second Applicant

and

COFFEE JUNCTION CC …............................................................Respondent

Court: Cloete, AJ

Heard: 21 February 2011

Delivered: 24 February 2011

JUDGMENT

CLOETE AJ: INTRODUCTION

[1] This is an urgent application in terms of which the applicants, as co-owners of the leased premises, seek an order that (a) the cancellation of an implied agreement of lease on a month-to-month basis, alternatively, a lease for an indefinite period, be confirmed; (b) the respondent and/or any person holding under respondent be ejected from the leased premises; and (c) costs against respondent on the scale as between attorney and client. A claim against respondent for payment of the sum of R98 214,33 was abandoned during the course of argument (for purposes of this application only).

[2] The leased premises are situated at Tyger Valley Centre, Bellville. It is common cause that (a) the applicants are the co-owners of Tyger Valley Centre; (b) the parties concluded a written agreement of lease for a period of five years commencing on 1 July 2005 and terminating on 30 June 2010 ("the written lease agreement"); (c) the written lease agreement did not contain an option to renew; (d) the written lease agreement expired through the effluxion of time; and (e) the respondent remains in occupation of the leased premises.

[3] The applicants contend that upon expiry of the written lease agreement, the respondent continued to occupy the leased premises on the basis of a tacit relocation with a month-to-month tenancy and that valid notice of termination of this tenancy was given on 27 September 2010, when the applicants' duly authorised representative, one Mouton, addressed a letter to the respondent in which he advised, inter alia, that "you are hereby informed that your monthly lease has been terminated. You are given 30 days notice to vacate the premises, taking effect 1 October 2010". Notwithstanding this notice the respondent remains in occupation of the premises, which occupation the applicants contend is unlawful.

[4] The respondent has advanced certain defences which can be crystallised as follows: (a) Mouton was not duly authorised to depose to the founding affidavit and to institute the proceedings; (b) upon expiration of the written lease agreement (as put by respondent's counsel in argument) the parties "commenced a phase of monthly rentals and negotiations regarding a future long term contract" which (in the words of Ms Mavridis who deposed to the answering affidavit) was subject to "an understanding that respondent would be given a decent and reasonable opportunity to hire the relevant premises for five (5) years on a reasonable basis"; (c) the applicants have breached this "understanding" which respondent contends is based on the dictates of the boni mores, public policy and the South African Constitution; and (d) therefore the lease has not been validly cancelled and the respondent is not in unlawful occupation.

[5] The respondent further contends that there are "a myriad of disputes" on the papers and that the matter must be referred for the hearing of oral evidence.

WHETHER THE MATTER SHOULD BE REFERRED FOR THE HEARING OF ORAL EVIDENCE

[6] The test adopted in motion proceedings as formulated in Plascon-Evans Paints Limited v Van Riebeeck Paints (Pty) Ltd 1984(3) SA 632 (A) at 634H, is that relief "may be granted if those facts averred in the applicant's affidavit which have been admitted by the respondent, together with the facts alleged by the respondent, justify such an order", I agree with applicants' counsel that what is clear from this test is that disputes raised by a respondent must be relevant to the relief sought by the applicant, and show legally valid reasons as to why such relief cannot be granted. A dispute of fact disentitling applicant to the relief sought is not created by respondent putting up a plethora of facts which are legal irrelevant to the relief sought.

[7] The Plascon-Evans rule also does not mean that respondent, merely by raising a welter of factual allegations, can deprive applicants of the relief which they seek on motion. In motion proceedings courts are just as in other proceedings required to analyse the facts put up in order to establish whether they are sufficient to fend off the relief sought. As was stated by the full bench of this division in South Peninsula Municipality v Evans and Others 2001(1) SA271 (C) at283G-H:

'...South African Courts have recognised that, in motion proceedings, disputes of fact cannot necessarily be accepted at face value and that, in each case, the Court should closely scrutinise the alleged issues of fact in order to decide whether there is indeed a dispute of fact that cannot satisfactorily be determined without the aid of oral evidence ... Thus, while the Court should be circumspect in its approach,

'(i)f, on the papers before the Court, the probabilities overwhelmingly favour a specific factual finding, the Court should take a robust approach and make that finding"

[8] In my view the so-called "myriad of disputes" of fact put up by respondent reveal, on closer examination, that they are legally irrelevant to the relief sought by applicant. It is common cause that the written lease agreement expired on 30 June 2010. Ordinarily, a tenant is required to vacate the premises leased by it on expiry of the lease, and that obligation is expressly embodied in clause 15.1 of the written lease agreement. There being no dispute that the written lease agreement has terminated, one must then examine the allegations raised by the respondent in the answering affidavit in order to ascertain whether they disclose facts (whether on the papers themselves or sufficient to be tested by way of referral to oral evidence) which can deprive the applicants of the relief sought.

[9] The respondent makes the following factual averments in its answering affidavit:

[a] That when it first took over the initial lease from a previous tenant in 2001, the then centre manager of the Tyger Valley Centre failed to reveal to the respondent that the latter had purchased a "failing business". Respondent however, did not, in 2001 or at any stage thereafter, seek to resile from the lease that was then concluded, or to claim damages from the then centre manager, the previous tenant or any other party. This issue cannot possibly be relevant to the question of whether in 2011 respondent is in unlawful occupation;

1. That it took various steps to improve the business and to generate customers, succeeding to the extent that Ms Mavridis was elected tenant of the year in 2004. Even if these allegations are accepted, they do not alter the fact that upon expiry of the written lease agreement the tenant (the respondent) is obliged to vacate the premises;

2. That it regards the rental paid by it as high and that applicants have "had more than their pound of flesh out of the Respondent", so much so that there were various discussions, albeit never embodied in any written agreement, that the landlord would reduced the rental payable in terms of the written lease agreement. It is common cause that the written lease agreement has expired and the respondent's views as to the reasonableness of the rental which it agreed to pay in relation to the now expired written lease are irrelevant;

3. That it decided approximately four years ago to expand the premises by attending to certain renovations. Although respondent's averments regarding these renovations are unclear, it seems that the respondent is aggrieved that certain of these renovations had to be financed by it from borrowed funds. I do not see how this averment can have any bearing on the applicants' entitlement to the relief sought by them. Clause 14.2 of the written lease agreement provides that the respondent "will not create or permit to be created or to remain, and will discharge, any lien, encumberance or charge upon fixtures, fittings or personal property located within the Leased Premises" and clause 14.5 specifically provides that any improvements not removed upon expiry of the lease will become the property of the applicants (as landlord);

4. Respondent relies on a report obtained from a social worker which expresses various opinions as to the effect which the closure of respondent's business would have, not only on the staff members but on their children and more distant relatives. That the closure of any business results in job losses is undoubtedly so, but neither respondent nor the social worker concerned advance any explanation as to why respondent cannot relocate its business to other premises so as to continue to retain the staff in its employ. This defence is similarly irrelevant to the relief sought by the applicants;

5. The respondent complains that Mouton did not "play open cards" with it regarding the applicants' negotiations with a proposed new tenant. The respondent does not rely on any authority (and I am not aware of any such authority) to the effect that when a lease is drawing to a conclusion the landlord is precluded from negotiating with prospective tenants or is obliged to keep the existing tenant fully aware of any negotiations with a prospective tenant. This averment is thus also irrelevant to the relief sought by the applicants;

6. Respondent also purports to have conducted a "survey" amongst its clients whom allegedly do not approve of the conduct of the applicants and Mouton. This allegation is probably the most irrelevant to the issues at hand;

[h] There is also an allegation by respondent that it has overpaid rentals,
but nothing turns on this in its defences to the applicants' claim for eviction,
and this would only be relevant to the applicants' money claim which has now
been abandoned for purposes of these proceedings.

[10] To my mind, it would be wholly inappropriate to refer this so-called "myriad of disputes" of fact to oral evidence since, even if the respondents prove each and every one, they remain irrelevant to the relief sought by the applicants. I accordingly decline the respondent's request for the referral of the matter for the hearing of oral evidence.

ISSUES TO BE DETERMINED

[11] The issues which fall to be determined are:

[a] Whether Mouton was duly authorised to institute the proceedings and to depose to the founding affidavit; and

[b] Whether there was a valid termination of respondent's tenancy, rendering the respondent to be unlawful occupation of the leased premises.

WHETHER MOUTON WAS DULY AUTHORISED

[12] Ms Mavridis denies that Mouton was duly authorised to depose to the founding affidavit "by reason of the facts, circumstances and reasons set out in paragraph 2.5.5 hereunder". Unfortunately no such paragraph is to be found in her answering affidavit. The relevant remaining sub-paragraphs appear to be directed at whether the facts deposed to by Mouton fall within his personal knowledge unless expressly stated by him to the contrary, and to my mind do not take the matter any further.

[13] The respondent advances certain grounds in support of its denial that Mouton was authorised to institute these proceedings. Each will be dealt with in turn.

[14] The first ground is that whilst it is admitted that the company Hermans and Roman Property Solutions (Pty) Ltd of which Mouton is general manager has been attending to "some of the management and administration of Tyger Valley Centre ..." it is denied that they have "been acting as applicants' duly authorised agents in attending to the day to day management and administration...".

[15] There can be no merit in this allegation. In a letter dated 27 September 2007 (annexed to the applicants' founding affidavit) the aforesaid company was specifically authorised "to collect all ... charges from tenants, negotiate lease agreements and carry out all such duties and responsibilities pursuant to the management of Tyger Valley Centre". In any event the respondent itself relies on representations allegedly made by Mouton on behalf of the applicants in respect of "the understanding" concerning the negotiation of a new five year lease. To my mind, the applicant cannot have it both ways and this allegation is thus rejected.

[16] The second ground is that the resolution annexed to the applicants' founding affidavit is defective, in that (a) the resolution "does not purport to be minutes of a meeting of the board of directors of either first or second applicant"; (b) the resolution was signed by two managers, one of first applicant and the other of second applicant; and (c) there is no suggestion that the signatories had any authority to sign the resolution or to delegate any authority to Hermans and Roman Property Solutions (Pty) Ltd. It was also argued by respondent's counsel that affidavits filed by the respective managing directors of first and second applicants in reply confirming the authorisation and delegation of authority to institute these proceedings do not cure this defect on the basis of the findings of the court in Griffiths & Inglis (Pty) Ltd v Southern Cape Blasters (Pty) Ltd 1972(4) SA (CPD) 249.

[17] In my view the facts in the Griffiths case are clearly distinguishable. In that case no resolution had been attached to the founding papers and the applicant contended that the authority of the managing director was implied as he was also the majority shareholder. Further, the respondent specifically objected to the filing of a replying affidavit on behalf of the applicant to introduce the source of the authority to institute the legal proceedings, in finding that there was no clear indication that the managing director had been authorised to institute the proceedings the court stated the following at 253F-H:

This affidavit is a somewhat curious document in that it creates more problems than it solves, and it generally leaves me with the impression that no formal resolution of the applicant's board of directors in regard to these proceedings was in fact taken. I say this because, if such a resolution was taken, then I cannot understand why this was not stated in so many words. Indeed, the very fact that the deponent tends to skirt around the issue and states that he and his fellow directors are all aware of the application, and the circumstances surrounding it, gives rise, in my view, to the possible inference that this is far as matters went. If, as seems possible, no formal resolution of the board of directors was taken, then in what way was this application authorised by the applicant's board? And, if the board did purport to authorise the application in some manner other than by formal resolution, was such manner of authorisation in accordance with the constitution of the applicant? These are questions which, on this affidavit, remain unanswered.'

[18] In the instant matter, I do not believe that the resolution is defective. Firstly, it does not purport to be "minutes of a meeting of the board of directors" of the applicants, as is alleged by the respondent. It clearly states that it is an extract from such minutes. Secondly, its terms are clear and unequivocal as to the authority granted to Mouton to launch the proceedings. Thirdly, it is clear from the resolution that the meeting took place prior to the institution of these proceedings (and thus prior to the signature by Mouton of his founding affidavit). Lastly, and to the extent relevant, any misconception that might have existed was clarified in the affidavits of the two managing directors filed in reply. The respondent had the opportunity to apply for the striking out of these affidavits, but did not do so.

[19] To my mind, the findings of the court in Tattersail and Another v Nedcor Bank Ltd 1995(3) SA 222 at 228J-229C are apposite, namely that:

This is a case in which the approach adopted in Mall's case (at 352B), namely that when the challenge to authority is a weak one, a minimum of evidence will suffice, applies. Weight must be given to the use by Spencer of the word 'duly' (authorised). It is an indication that the authority conferred on him was properly conferred (Mall's case at 352D). The papers show that Spencer had dealt with the grant of the loan and subsequently that he requested repayment. It being common cause that the partnership failed to comply, the probabilities are that the bank (regarding the amount as due) would wish to take steps to recover what is, after all, a large sum. And if this be so, Spencer would surely be the person who would act on behalf of the bank. Besides, there is independent confirmation that the bank authorised the proceedings. ...On all the evidence I am satisfied that the bank discharged the onus of showing that the application was properly authorised. To hold otherwise would be carrying formality too far.'

[20] I accordingly find that Mouton was indeed properly authorised to launch this application and to depose to the founding affidavit.

WHETHER THERE WAS A VALID TERMINATION OF RESPONDENT'S TENANCY, RENDERING THE RESPONDENT TO BE IN UNLAWFUL OCCUPATION OF THE LEASED PREMISES

[21] What needs to be examined here is the respondent's contention that upon expiry of the written lease agreement the parties commenced a "phase of monthly rentals and negotiations regarding a future long term contract" and that this was "subject to an understanding that respondent would be given a decent and reasonable opportunity to hire the relevant premises for five (5) years on a reasonable basis".

[22] Respondent's counsel argued that this "understanding" was a tacit term of the arrangement between the parties. I am deliberately referring to an "arrangement" as it is entirely unclear whether there was any contract at all which contained the alleged term, and respondent's counsel in fact submitted that the respondent "has not made any attempt to justify a contract as such".

[23] A tacit term is a term implied from the facts, which "derives from the common intention of the parties, as inferred by the court from the express terms of the contract and the surrounding circumstances" (my emphasis); see Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974(3) SA 506 at 531H.

[24] It is at this point that respondent's argument becomes more confusing, since on closer inspection its seems that in fact the respondent relies on an implied term, namely "an unexplained provision of the contract which the law imports therein, generally as a matter of course, without reference to the actual intention of the parties": see the Alfred McAlpine case at 531E. Not only do the applicants deny the existence of any common intention as alleged by respondent, the respondent specifically contends that this "understanding" which the applicants are alleged to have breached is a matter of law based on the dictates of the boni mores, public policy and the South African Constitution (i.e. the Constitution of the Republic of South Africa Act 108 of 1996). It is in this context that the respondent argues that the essence of its complaint is that applicant withdrew from the negotiations, gave a calendar month's notice to respondent to terminate the tenancy, and required respondent to vacate.

[25] In support of its contentions respondent relies on the following passage in Bredenkamp & Others v Standard Bank of South Africa Limited 2010(4) SA 468 at483B:

if a contract is prima facie contrary to constitutional values, questions of enforcement would not arise. However, enforcement of a prima facie innocent contract may implicate an identified constitutional value. If the value is unjustifiably affected, the term will not be enforced.'

[26] Respondent maintains that there has been a breach of a contractual term to negotiate and that, given the facts and circumstances of the instant matter, the consequences of that breach to respondent, its members and employees will be severe. It is thus necessary to establish whether the consequences referred to by respondent's counsel are an identified constitutional value which I must take into account in considering whether to grant the relief claimed by the applicants.

[27] The answer is conveniently found in the head note to the case of

Brisley v Drotsky 2002(4) SA 1 (SCA) at 3D-E and F-G:

The personal circumstances of the lessee and the availability of alternative accommodation are not without more relevant circumstances as intended in s26(3) of the Constitution. Section 26(3) requires that all relevant circumstances should be considered but does not itself provide that any circumstances will be relevant. For that the generally applicable law should be looked to. Circumstances can be relevant only if they are legally relevant. ... The section does not ... confer any discretion on the court to refuse to grant an ejectment order to an owner in certain circumstances where the owner would otherwise be entitled to such an ejectment order. An owner is in law entitled to possession of his property and to an ejectment order against a person who unlawfully occupies his property except if that right is limited by the Constitution, another statute, a contract or on some or other legal bais. Where the lessor is the owner of the leased property and has cancelled the lease, the lessee has no contractual right to occupy the property. In the absence of any statutory right to occupy the property, the court has no discretion to refuse to grant an ejectment order. Accordingly the personal circumstances of the lessee and the availability of alternative accommodation are not relevant circumstances which have to be considered in terms of s26(3).' (my emphasis).

[28] Counsel for respondent also referred me to the case of Barkhuizen v Napier 2007(5) SA 323(CC), specifically at pages 330 and 341, where the court dealt with the principle that the constitutional value of equality and dignity may prove to be decisive when the parties' relative bargaining positions is an issue. However, the court in Barkhuizen was considering this principle within the context of a contract already concluded and where there was certainty as to the precise terms thereof. In the instant matter, the "term" relied upon by the respondent boils down to nothing more than reliance on something other than an identified constitutional value. The respondent seeks to elevate a willingness to negotiate to the status of an obligation on the part of the applicants to provide the respondent with a reasonable opportunity to rent the premises for a further five years on reasonable basis. Since the respondent cannot (and therefore correctly does not) allege that the written lease agreement was varied whilst it was still in existence, the respondent must rely on events which took place subsequent to June 2010 when the written lease expired. There is nothing on the papers before me which took place subsequent to June 2010 which indicates that such a term exists. At best, respondent has demonstrated that the applicants indicated a willingness to negotiate. That does not translate into a binding contract to do so.

[29] As set out in Pitout v North Cape Livestock Co-operative Limited 1977(4) SA 842 (AD) at 851F-G:

'It seems to me that, in circumstances such as these, before the Court will conclude that a promise (such as the undertaking), made during the course of the aborted negotiations, is effective as an independent and substantive contract, it must be satisfied as a matter of probability that the parties - and especially the promissory -intended the promise to constitute a concluded bargain on those precise terms, that no additional material terms were intended to be agreed upon and that they were content to stand by that bargain irrespective of the course that further negotiations might take.'

[30] In any event, the fact that parties might have thought they were contracting, whereas in fact they failed to reach any agreement on vital terms of their proposed bargain, does not mean that the parties have in fact concluded a binding contract, nor does it entitle the court to make a contract for them: see Kenilworth Palace Investments (Pty) Ltd and Another v Nigala and Another 1984(2) SA 1 (CPD) at 12A-B.

[31] It is accordingly my view that respondent has failed to discharge the onus that such a "term" or "understanding" exists.

[32] Are the applicants correct in their submission that a tacit relocation came into existence upon termination of the written lease agreement? Applicants' counsel referred to the case of Tiopaizi v Bulawayo Municipality 1923(AD) 317 at 326 where the court stated that:

'From the various cases decided in our courts it may now be taken as settled that in the absence of agreement or custom to the contrary, a monthly contract of letting and hiring for an indefinite period requires a month's notice, to expire, in all cases ... at the end of a month:

[33] Apart from its argument relating to the "understanding" or "term" dealt with above I do not understand the respondent to contend that, subsequent to the expiration of the written lease agreement, anything other than a monthly tenancy came into existence. Respondent has also not alleged any "custom to the contrary". That this is a tacit relocation must thus surely be beyond doubt. In the circumstances, I find that the notice given by the applicants to respondent to vacate the premises by not later than 31 October 2010 was sufficient and that the respondent is accordingly in unlawful occupation of the leased premises.

COSTS

[34] It follows that since the applicants have been successful in the relief sought by them costs should be awarded against respondent. In their Notice of Motion the applicants sought an order for costs against respondent on the scale as between attorney and client. Whilst the written lease agreement made provision for payment of costs on this scale, the applicants do not rely on the written lease agreement in these proceedings. Accordingly, an award of party and party costs is appropriate in the circumstances.

[35] In the result, I make the following order:

[a] The cancellation of the implied agreement of lease is confirmed;

[b] The respondent and/or any person holding under respondent shall vacate the leased premises situated at Shop 615, Tyger Valley Centre, corner of Willie van Schoor- and Bill Bezuidenhout Avenue, Bellville, Western Cape, within seven (7) calendar days from date of this order, failing which they shall be ejected from such premises;

[c] The respondent shall pay the costs of this application on the scale as between party and party as taxed or agreed.

J I CLOETE