Bedford Square Properties (Pty) Limited v Pakon Restaurants (Pty) Limited T/A Ciao Baby Cucina and Another (2013/27964) [2014] ZAGPJHC 180 (15 July 2014)

REPUBLIC OF SOUTH AFRICA

SOUTH GAUTENG LOCAL DIVISION,

JOHANNESBURG

CASE NO: 2013/27964

DATE: 15 JULY 2014

In the matter between:

BEDFORD SQUARE PROPERTIES (PTY) LIMITED......................................Applicant

And

PAKON RESTAURANTS (PTY) LIMITED t/a

CIAO BABY CUCINA...........................................................................First Respondent

DIONYSIOS ARVANITAKIS.............................................................Second Respondent

JUDGMENT

OPPERMAN AJ.

INTRODUCTION

[1] The applicant claims damages consisting of, inter alia, arrear rental, for holding over, in the sum of R1 378 489,14.

[2] The first respondent occupied commercial premises and conducted the business of a restaurant from Shop F11, Bedford Square, corner Van der Linde and Smith Road, Bedford Gardens, Bedfordview ("the premises").

[3] It had concluded a written lease with the applicant for a five year period commencing 1 April 2008 and terminating 31 March 2013.

[4] The first respondent fell into arrears and cancelled the lease agreement on 22 June 2011. After the applicant had instituted eviction proceedings, the first respondent's eviction from the premises was ordered on 28 November 2012.

[5] The first respondent vacated the premises on 31 March 2013.

[6] The applicant's claim for damages for holding over relates to the period 22 June 2011 (date of cancellation) to 31 March 2013 (date the first respondent vacated the premises).

[7] The applicant's cause of action against the second respondent arises out of a written deed of suretyship concluded on 12 February 2007 in terms of which the second respondent bound himself jointly and severally in favour of the applicant as surety and co-principal debtor in solidum with the first respondent for the due payment of every sum of money which would then or at any time thereafter be or become owing by the first respondent to the applicant from whatsoever cause or causes arising.

RIGHT OF APPLICANT TO PURSUE CLAIM

[8] After the filing of both the answering and the replying affidavits, and on the eve of the hearing, the respondents filed a supplementary affidavit in terms of which they essentially contended that the applicant had divested itself of the power to sue for the damages forming the subject matter of this application.

[9] The respondents contended that a mortgage bond was registered over the premises. Such covering mortgage bond B100303/2007, was registered by the applicant in favour of Nedbank Limited in the sum of R87 million.

[10] Clause 8 of the mortgage bond provides:

"8. Cession of rentals and revenues Should the Bank give its consent to the letting of the mortgaged property, the Mortgagor cedes, transfers and assigns to the Bank all the Mortgagor's rights, title and interest in and to all rentals and other revenues of whatsoever nature, which may accrue from the mortgaged property as additional security for the due repayment by the Mortgagor of all amounts owing to or claimable by the Bank at any time in terms of this bond, with the express right in favour of the Bank irrevocably and in rem suam -

8.1 to institute proceedings against lessees for the recovery of unpaid rentals, and/or eviction from the mortgaged property;

8.2 to let the mortgaged property or any part thereof, to cancel or renew and enter into leases in such manner as the Bank decides, to evict any trespasser or other person from the mortgaged property;

8.3 to collect on behalf of the Mortgagor any moneys payable in respect of the alienation by the Mortgagor of the mortgaged property or any portion thereof;

provided, however, that the cession, transfer, assignment and authorities and powers specified above shall not be acted upon by the Bank without the consent of the Mortgagor unless the Mortgagor has failed to comply with any term or condition of this bond or any loan secured thereby or has otherwise committed a breach thereof. The Bank is further entitled to charge a commission of five(5) percentum of the gross amount of all rentals and other revenues collected and to recover such commission under this bond."

[11] The first question which falls for determination is whether the respondents should be permitted to place this further affidavit before the court.

[12] In Erasmus: Superior Court Practice, B1-47, the factors that the Court should consider in allowing further affidavits are summarised as follows:

“ (a) The reason why the evidence was not produced timeously.

(b) The degree of materiality of the evidence.

(c) The possibility that it may have been shaped to ‘relieve the pinch of the shoe’.

(d) The balance of prejudice to the applicant if the application is refused and the prejudice to the respondent if it is granted.

(e) The state which the particular litigation has reached … .

(f) The ‘healing balm’ of an appropriate order as to costs.

(g) The general need for finality in judicial proceedings.

(h) The appropriateness, or otherwise, in all the circumstances, of visiting the fault of the attorney upon the head of his or her client."

[13] Essentially the reason for supplementing the papers boils down to the respondents' attorney of record and in preparation for the hearing had decided to explore a defence which he had not considered previously. Why he had not considered the possibility of such defence earlier, is not explained.

[14] The evidence sought to be introduced is material. Without a response, it would divest the applicant of the right to sue for the damages forming the subject matter of this application.

[15] I have considered this matter having regard to the content of both the supplementary affidavit and the response thereto. The reason why the evidence was not produced earlier and as part of the answering affidavit is inadequate at best. Be that as it may, by virtue of my findings in respect of the substance of the points raised by the respondents, I find it unnecessary to decide whether or not under these circumstances, the additional affidavit ought to have been allowed.

[16] In Picardi Hotels Limited v Thekwini Properties (Pty) Ltd [2008] ZASCA 128; 2009 (1) SA 493 (SCA) Boruchowitz AJA held, in respect of the exact same clause 8 the following:

"[14] I am of the view therefore that an effective and unconditional transfer of rights occurred when the cession in securitatem debiti was executed. The consequence is that the respondent was divested of the power to sue the appellant in respect of the unpaid rentals. In order to sue for the recovery of the ceded debts the respondent should have taken re-cession of them from the bank."

[17] The applicant, in response to the supplementary affidavit filed by the respondents, filed an affidavit annexing a document headed "Cession". It purports to be an agreement concluded between Nedbank Limited (‘Nedbank’) and the applicant dated 14 March 2014 (‘the re-cession agreement’). In terms of clause 1.4 thereof:

"The Lessor has instituted proceedings against the Defaulting Tenant (the first respondent) for the recovery of unpaid rentals and other outstanding amounts due by the Defaulting Tenant and/or the Defaulting Tenant's eviction from the Property and for this purpose the Lessor has requested that Nedbank re-cede to the Lessor the rights ceded to Nedbank in the Mortgage Bond in respect of the Defaulting Tenant (the ‘Ceded Claims’)."

[18] In terms of clause 2 of the re-cession agreement, Nedbank and the applicant agreed as follows:

"Nedbank hereby re-cedes, transfers and assigns all of its right, title and interest in and to the Ceded Claims to the Lessor with effect from the date on which the claim giving rise to the proceedings referred to in clause 1.4 above arose. The Lessor hereby accepts cession of the ceded claims on and subject to the terms and conditions of this agreement."

[19] It is evident that the re-cession took place after the application was launched.

[20] The general approach is that a cause of action should exist at the time of the institution of the action. See Philotex (Pty) Ltd and Others v Snyman and Others 1994 (2) SA 710 (T) at 715.

[21] Applicants are allowed to deviate from this principle in exceptional and unusual circumstances. See Pangbourne Properties Ltd and Others v Your Life (Pty) Ltd and others, [2013] 4 All SA 719 (GSJ) at paras [33]-[34].

[22] In Pangbourne (supra) Lamont J held as follows at para 36:

"[36] In this particular case there are special and unusual circumstances. The second plaintiff has had the right to (it) re-ceded with effect from a date prior to institution of action. The only prejudice the second defendant has if the second plaintiff is allowed to proceed is that a claim which always vested in someone will not be dismissed."

[23] Similarly in this case, the right was re-ceded to Applicant. I, too, find that special and unusual circumstances exist to permit the applicant to proceed on this basis i.e. to allow a cause of action to be introduced at the hearing of this matter. The re-cession has the effect of curing the absence of a cause of action from prior to the launching of this application.

[24] However, the enquiry does not stop there. I must exercise a discretion in making a decision whether or not to allow the applicant to proceed. See Du Toit v Vermeulen 1972 (3) SA 848 (A) at 857A. I exercise this discretion in favour of the applicant and find that it is entitled to proceed to seek judgment against the respondents even though at the time it initiated the application, the retrospective cession did not exist. In exercising the discretion I take into account:

24.1. the respondents suffer no prejudice;

24.2. the first respondent was indebted to someone at the time the application was launched, although it was not the applicant (it was Nedbank). The existence of the cession from the applicant to Nedbank, was not disclosed to either the first respondent or the second respondent and they accordingly must have believed that their creditor was the applicant and not Nedbank.

24.3. I share the view expressed by Lamont J in Pangbourne (supra) at para [37]:

" It appears to me that it is counterproductive, highly technical and a waste of costs to non-suit the second plaintiff at the present time in these circumstances."

[25] The respondents argued further that it is important to examine whether that which was initially ceded to Nedbank, was in fact subsequently re-ceded. It was argued, relying on the dictum of Boruchowitz J at 377G-H in Homes for South Africa (Pty) Ltd v Rand Building Contractors (Pty) Ltd, 2004 (6) SA 373 (WLD) that:

"… it is not competent in law to separate the ceded claim from the procedural right to enforce performance thereof by way of legal proceedings. The purported re-cession to the plaintiff is ineffective."

[26] It was contended that what was re-ceded was simply a temporary right and that the re-cession was thus ineffective.

[27] I disagree; what was ceded is contained in clause 2 of the re-cession agreement quoted hereinbefore. The re-cession agreement provides in addition that it will remain in force until the earliest of:

"5.1.1 the Lessor receiving payment in full of all amounts owed to the Lessor by the Defaulting Tenant, whether pursuant to a judgment or not;

5.1.2 the Lessor's legal proceedings instituted against the Defaulting Tenant in respect of the Ceded Claims being dismissed by a judgment in favour of the Defaulting Tenant against the Lessor;

5.1.3 the Defaulting Tenant no longer being in breach of its contractual obligations to the Lessor in terms of its lease with the Lessor; or

5.1.4 the occurrence of an event of default under the Loan Agreement."

[28] There is not one iota of evidence before this Court to suggest that any of the events stipulated in clause 5.1 have occurred. Indeed, the affidavit annexing the re-cession agreement provides unequivocally that the applicant is vested with all the rights relating to the premises including the locus standi injudicio to pursue the application.

[29] I accordingly find that the applicant is entitled to seek to recover the debt forming the subject matter of the application.

THE DEFENCES

[30] The applicant maintains that the respondents are indebted to it in the sum of R1 378 489,14 comprising arrear rental, other charges and damages for holding over between the period of cancellation, 22 June 2011, and the date that the first respondent vacated the premises, being 31 March 2013.

[31] The first respondent contends that ‘the Applicant has elected to unlawfully charge the first respondent with items that were not agreed to in writing.’ As an example of this it refers to charges for unblocking of drains and legal fees to name but a few.

[32] The respondents in the main, take issue with the amount claimed by the applicant.

[33] It is accordingly useful to deal with the defences under the different rubrics set out hereunder.

[34] But prior to doing so, something should be said about applicant’s cause of action as against the first respondent.

[35] The applicant is seeking liquidated damages arising out of the first respondent’s holding over of the leased premises. It appears that the applicant’s claim is not based on damages arising from cancellation of the lease due to first respondent’s breach of the obligation to pay rent and other charges. It appears to be a delictual claim in which applicant is contending that ‘due to the First Respondent unlawfully holding over the Applicant was unable to re-let the premises and obtain the equivalent in rental, and the payment of other charges stipulated in the lease agreement’.

[36] In this case, not much turns on this by virtue of the principles succinctly summarised in Hyprop Investments Ltd and another v NCS Carriers and Forwarding CC and another, 2013 (4) SA 607 (GSJ) at para

“[49] The question of whether a party must expressly plead the essential elements of a contractual or delictual cause of action in my respectful view is answered by reference to Lillicrap, Wassenaar and Partners v Pilkington Brothers 1985 (1) SA 475 (A) where, in drawing the distinction between a contractual and delictual claim (at 496I – 497C), the court remained hesitant to hold a litigant bound by the formulation of the cause of action relied upon. The court said at 496G that:

'(O)ur law also acknowledges that the same facts may give rise to a claim for damages ex delicto as well as one ex contractu, and allows the plaintiff to choose which he wishes to pursue . . . . The mere fact that the respondent might have framed his action in contract therefore does not debar him per se from claiming in delict. All that he need show is that the facts pleaded establish a cause of action in delict. That the relevant facts may have been pleaded in a different manner so as to raise a claim for contractual damages is, in principle, irrelevant.'"

[37] The ordinary measure of the amount payable for holding over is the ‘market rental value’ and not the rental that would be payable under the cancelled lease. See Sandown Park (Pty) Ltd v Hunter your Wine & Spirit Merchant (Pty) Ltd, 1985 (1) SA 248 (W) at 256I and 260A.

[38] Ordinarily, market related rental would be illiquid. In Sandown Park (supra), Nestadt J however held at 260A – B as follows:

"[I]t is not a factor against plaintiff that, as at January 1981, the rental payable in terms of the lease was at the rate of R2,74 per square metre. It is only in the absence of evidence to the contrary that the rental value of premises is assumed to be the rental paid under the lease. (Cooper (op cit at 208).) There is clear proof to the contrary. The rental in question was fixed in June 1975. As I have said, Balme did not dispute that since then there had been a surge in rentals (for the reasons given by Isaacs) and that, even after 1981, this had continued. (Hence the rental payable by Sandown Motors.)"

[39] In Hyprop (supra) Spilg J (with whom Borochowitz J and Coppin J concurred) held at [67] and [68] -

"[68] If there is no legally effective challenge to the landlord's allegations that the rental provided for in the lease is the market rental value, then the damages are readily ascertainable and therefore liquidated. This appears to be the most sensible approach because without countervailing evidence the agreement struck by the parties reflects the amount at which willing and able parties are prepared to conclude their transaction. It also enables a landlord to use the expedited processes of motion proceedings and summary judgment to pursue a damages claim based on holding over.

[69] Where, however, there is a legitimate challenge to the rental provided for in the lease being equivalent to the market rental value, then - on Sandown Park authority - the basis for relying on the lease to render the damages claim liquidated fails, thereby rendering the claim illiquid."

39.1. In the present case, there is no legally effective challenge that the rental provided for in the lease agreement is not the market rental value. The rental value of the premises for the holding over period may on the above authority be accepted to be the rent paid under the lease when there is no evidence to the contrary and every opportunity has been afforded to the first respondent to adduce such countervailing evidence. In the present case there is no evidence to the contrary. Thus, the market related rental for 22 June 2011 to 31 March 2012 is (as per the lease agreement) R80 495.60 and for 1 April 2012 to 31 March 2013, R 86 935.25 (as per the lease agreement).

[40] In respect of ancillary charges Spilg J in Hyprop (supra) holds at paras [103] to [104] as follows:

"[103] There is no reason to preclude ancillary charges from being claimed as damages simply because they are not a 'rental'. The right infringed entitles the landlord to claim damages, whatever its source, provided that the requirements for ordinary or special damages in contract are satisfied or that they are foreseeable and not too remote in delict (see Cooper at 234, cited above in para [55]).

[104] However, when claiming such charges on motion, they must at least be liquidated and actually have been incurred. I respectfully support Cane AJ's finding on this point, namely that on the paucity of facts presented by the appellants it is -

'difficult to accept without more, that they would represent the rental value of the premises during the holding over period. Further evidence would be required to establish the applicants' damages in such amounts. (See Van der Merwe v Erasmus and Another 1945 TPD 97 at 102 – 103). Even in relation to those items that are in the nature of rent, the rental value of the premises for the holding over period is only assumed to be the rent paid under the lease in cases where there is no evidence to the contrary. See Cooper The South African Law of Landlord and Tenant (2 ed) at 2334; and Sandown Park (Pty) Ltd v Hunter Your Wine and Spirit Merchant supra (1985 (1) SA 248) at 260A – B.'"

Legal fees

[41] The respondents contend that legal fees in an untaxed amount of R11 400 were debited by the applicant and these fees ought not to have been laid at their door.

[42] An analysis of the tenant transaction history reveals that the following amounts were raised on the following dates:

1 March 2012 R11 400,00

1 September 2012 R 1 504,80

1 November 2012 R 3 097,38

1 March 2013 R 255,36

1 March 2013 R 113,37

1 April 2013 R 2 520,54

1 April 2013 R 214,50

R19 105,96

[43] All of such legal fees were reversed on 22 May 2013. This too, appears from the tenant transaction history.

[44] It is thus clear from an analysis of the tenant transaction history, that the amount claimed by the applicant does not include an amount for legal fees.

Repairs and maintenance

[45] The tenant transaction history reflects that on 1 March 2012 an amount of R222,30 was raised in respect of the unblocking of a floor drain. The applicant has, in its replying affidavit annexed a tenant maintenance job card reflecting a signature of the tenant (the first respondent). The applicant's version is that a job card was raised on 17 January 2012 and that the work was completed on the same day. The respondents have not denied that this work was performed. On 1 December 2012, an amount of R111,15 was raised in respect of the unblocking of a toilet. Similarly that this work was performed, has not been disputed.

[46] The applicant in reply makes reference to only one specific instance where the floor drain was unblocked during March 2012 which is supported by an invoice. The problem with the approach adopted by the applicant is that there is not only one such repair and maintenance entry. The tenant transaction history refers to extraction cleaning and three instances of unblocking of a drain.

Interest

[47] The respondents state that the applicant was not entitled to raise interest in the sum of R1 728,38 on 1 March 2012. The first respondent failed to make full payment on the first working day of the month as required in terms of the lease agreement. The applicant was thus entitled to raise interest.

[48] However, no evidence has been placed before the court on the applicable interest rate nor is the identity of the applicant’s bankers revealed.

Outside seating

[49] The first respondent contends that the applicant has elected to invoice it for items that were never agreed upon, such as the outside seating. It appears to be clear from the e-mail attached dated 7 October 2008 that the first respondent agreed to such outside seating charges and that the applicant was entitled to charge for such outside seating.

Rates

[50] The first respondent contends that the rates are not due and payable and takes issue with how the rates are calculated, contending that they are not calculated in accordance with the lease agreement.

[51] Clause 3.7.3 of the lease agreement provides for rates and taxes at R3,27/m², and clause 3.8.2 provides that the amount due to the applicant by the first respondent in respect of rates and taxes is a pro rata contribution to the municipal rates and taxes payable from time to time based on the designated percentage. A preliminary estimate of the contribution as at the commencement date of the lease amounts to R3,27/m.

[52] There appears to be an increase exceeding 200% without any explanation for such increase.

Electricity, effluent and water, refuse

[53] The first respondent contends that it was not provided with proof of any of the readings relating to electricity, effluent and water or refuse. Applicant contends that the first respondent was provided with meter readings which were contained in a slip and which accompanied each and every monthly invoice which was hand-delivered to the first respondent. In addition, it contends that the meters were read by Motla.

[54] The pro-rata contribution towards electricity is dependent upon the extent of the total lettable arrears as provided for in clauses 2.19 and 2,22 of the lease agreement. Such evidence is absent. Accordingly, this portion of Applicant’s claim is illiquid.

Advertising promotions

[55] All tenants are charged and were charged in terms of the lease agreement for advertising promotions. Clause 3.19 contains provision for an amount expressed as a percentage, being 5% of the basic rental payable by each tenant. Respondents contend that amounts are claimed which are not in accordance with the lease agreement.

Parking tickets

[56] The respondents content that the applicant unlawfully charged them for items that were not payable, such as parking tickets. There were three incidents. They were:

1 August 2012 - R1 200,00;

1 November 2012 - R1 200,00;

1 February 2013 - R1 800,00;

Fixtures, fittings and USB key

[57] The parties agreed that in relation to the fixtures and fittings left on the premises, a sum of R250 000,00 would be set off against the respondents' indebtedness. The applicant, however, contended that only R200 000,00 was deducted because the first respondent removed a USB key valued at R50 000,00. In my view, the dispute relating to the USB key is illiquid.

CALCULATION OF AMOUNT TO WHICH APPLICANT IS ENTITLED

[58] The applicant claims the sum of R1 378 489,14.

[59] The applicant argued that the court should award the amount reflected in its tenant transaction history which as at 1 June 2013 was R1 350 699,59. This is accurate as all April and May 2013 charges have been reversed. Also, all legal fees for the period March 2012 to April 2013 amounting to R19 105,96 have been reversed. From this amount should be deducted R50 000,00 in respect of the USB key, thus leaving an amount owing to the applicant in the sum of R1 300 699,59. From this should be deducted all interest levied from 1 March 2012 to 1 May 2013. Such interest amounts are:

1 March 2012 R 1 728,38

1 April 2012 R 1 012,18

1 May 2012 R 1 257.18

1 June 2012 R 1 464,22

1 July 2012 R 1 272,63

1 August 2012 R 1 437,55

1 September 2012 R 1 859,15

1 October 2012 R 3 084,26

1 November 2012 R 4 482,68

1 December 2012 R 6 469,78

1 January 2013 R 8 103,79

1 February 2013 R 10 199,86

1 March 2013 R 12 086,63

1 May 2013 R 14 959,12

[60] I find that the applicant is entitled to the rental value of the premises for the holding over period. The market related rental for 22 June 2011 to 31 March 2012 is R80 495.60 (as per the lease agreement) and for 1 April 2012 to 31 March 2013, R 86 935.25 (as per the lease agreement).

[61] On 1 February 2012 the First Respondent made payment in respect of arrear rentals. The applicant is thus entitled to rentals from 1 March 2012 to 1 March 2013. The amount is R80 495.60 plus (R86 935.25 x 12 months) = R 1 123 718.60 x 14% (VAT) = R1 281 039.20. From this should be deducted R 250 000, being the undisputed proceeds of the sale of the assets and equipment left in the premises by the First Respondent. Thus, the amount owing to the Applicant is R 1031 039.20.

DISPUTES OF FACT RELATING TO LIQUIDITY AND ACCURACY OF CLAIM

[62] In Hyprop (supra) at para [75] to para [78] the court discussed the test as to what constitutes a real factual dispute.

[63] Applicant’s claim is that its entire claim is liquidated and accurate. In respect of all the damages claimed, save for the rental claim, I find that disputes of fact exist as to the liquidity and accuracy of the amounts claimed which require the hearing of oral evidence.

[64] In my view, these disputes will best be dealt with at a trial as this would also permit the respondents to institute a counterclaim should they be so advised.

COSTS

[65] I find that the Applicant has been substantially successful and accordingly intend ordering respondents to pay the costs of the application.

CONCLUSION

[66] I grant an order in the following terms:

1. The respondents are ordered, jointly and severally, the one paying the other to be absolved, to make payment to the applicant of:

(a) the sum of R 1 031 039.20.

(b) interest at 15,5% per annum on the aforesaid amount from date of judgment to date of final payment.

(c) costs of suit to date .

2. The issues relating to repairs and maintenance, interest on outstanding amounts, outside seating, rates, electricity, effluent, water and refuse, advertising promotions, parking tickets and the USB key (‘the referred issues’), are referred to trial.

3. The notice of motion in this application stands as a summons in the trial.

4. The notice of opposition herein stands as an appearance to defend.

5. The applicant is directed to file a declaration dealing with it’s claim in respect of the referred issues as well as any damages not included in the referred issues, within 30 days of the granting of this order.

6. The rules of court relating to actions shall thereafter govern the proceedings.

7. The further costs, other than those awarded in para 1(c) above, are to be costs in the action.

I Opperman

Acting Judge of the High Court

Heard: 18 March 2014

Judgment delivered: 15 July 2014

Appearances:

For Applicant: Adv C Georgiades

Attorneys: Vining Camerer Inc

For Respondents: Adv Swanepoel

Attorneys: KG Tserkezis Inc