Bernadis-Larratt and Another v Custom Capital (Pty) Ltd (AR 368/16) [2017] ZAKZPHC 63 (27 June 2017)

Bernadis-Larratt and Another v Custom Capital (Pty) Ltd (AR 368/16) [2017] ZAKZPHC 63 (27 June 2017)

The court held that the respondent was obliged to take reasonable steps to mitigate its damages after the appellants returned the leased equipment. The respondent failed to take reasonable measures to lease out or sell the equipment in a timely manner, which could have reduced its damages. The acceleration clause, while enforceable, resulted in a disproportionate liability for the appellants given the equipment was returned after only 10 months of a 60-month lease. The court found that the respondent's recovery should be reduced by 50% of the accelerated rental, less the amount realised from the sale of the equipment. The appellants are liable for arrear rental and 50% of the future...

Citation
[2017] ZAKZPHC 63
Parties
Appellant: Bianca Bernadis-Larratt; Appellant: Lance Larratt; Respondent: Custom Capital (Pty) Ltd
Court
Kwazulu-Natal High Court, Pietermaritzburg
Jurisdiction
South Africa
Judgment Date
27 June 2017
Case Number
AR 368/16
Procedural Posture
Civil Appeal / Appeal From Magistrate's Court Judgment
Outcome
Appeal upheld; magistrate's court judgment set aside and replaced with reduced liability for future rentals and each party to pay their own costs.
Judges
Mngadi, Balton
Legal Topics
Lease Agreement, Mitigation of Damages, Acceleration Clause, Contractual Damages, Penalty Clause
Commercial and Corporate Civil Procedure Lease Agreement Mitigation of Damages Acceleration Clause Contractual Damages Penalty Clause

Case Brief

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Parties

Bianca Bernadis-Larratt

Appellant

Lance Larratt

Appellant

Custom Capital (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From Magistrate's Court Judgment

Legal Issues

  1. 1 Whether the respondent was obliged to mitigate its damages after breach of the lease agreement.
  2. 2 Whether the acceleration clause in the lease agreement constituted a penalty and was enforceable.
  3. 3 Whether the appellants are liable for the full amount of accelerated rentals after returning the equipment.

Ratio Decidendi

The court held that the respondent was obliged to take reasonable steps to mitigate its damages after the appellants returned the leased equipment. The respondent failed to take reasonable measures to lease out or sell the equipment in a timely manner, which could have reduced its damages. The acceleration clause, while enforceable, resulted in a disproportionate liability for the appellants given the equipment was returned after only 10 months of a 60-month lease. The court found that the respondent's recovery should be reduced by 50% of the accelerated rental, less the amount realised from the sale of the equipment. The appellants are liable for arrear rental and 50% of the future...

Court Disposition

Appeal upheld; magistrate's court judgment set aside and replaced with reduced liability for future rentals and each party to pay their own costs.

Orders

  • The appeal is upheld.
  • The judgment of the court a quo is set aside and replaced with the following: