Brick on Brick Property Investments 23 (Pty) Ltd v Chevron South Africa (Pty) Ltd (6412/2013) [2013] ZAGPPHC 400 (3 December 2013)

IN THE GAUTENG HIGH COURT. PRETORIA

(REPUBLIC OF SOUTH AFRICA)

CASE NO: 6412/2013

DATE: 3 DECEMBER 2013

REPORTABLE

OF INTEREST TO OTHER JUDGES

IN THE MATTER BETWEEN:

BRICK ON BRJCK PROPERTY

INVESTMENTS 23 (PTY) LTD APPLICANT

AND

CHEVRON SOUTH AFRICA (PTY) LTD

(Previously CALTEX OIL (S.A.) (PTY) LTD) FIRST RESPONDENT

PINE GLOW INVESTMENTS (PTY) LTD t/a

CALTEX MPUMALANGA NORTH BRANDED

MARKETER SECOND RESPONDENT

WILNIL (PTY) LTD t/a CALTEX NELSPRUIT THIRD RESPONDENT

REGISTRAR OF DEEDS, PRETORIA FOURTH RESPONDENT

REGISTRAR OF DEEDS, MPUMALANGA FIFTH RESPONDENT

JUDGMENT

KOllAPEN J

INTRODUCTION AND BACKGROUND:

1.In this application, the following relief is sought by the applicant:

i. An order confirming the cancellation of the notarial deed of lease registered under number K4505/93 (wthe notarial deed of lease') registered on 27 August 1993, registered against Erf 3008 Nelspruit Township. Registration Division JT Province of Mpumalanga ('the property') under Title Deed number 1020473 ('the deed of transfer'):

ii. An order directing the fourth respondent to endorse the cancellation of the notarial deed of lease, alternatively, to endorse the extinction of the registered rights against the deed of transfer;

iii. An order ejecting the first. second and third respondents from the property situated at corner Bell Street and Paul Kruger Street.

Nelspruit. Mpumalanga and any other party that may claim a right to occupation of the properly through the first, second or third

respondents within 14 (fourteen) days of the granting of this order; and

iv. Costs of the application against the first, second and third respondents, jointly and severally, the one paying, the others to be absolved.

2. The first, second and third respondents oppose the application, in addition the second respondent has instituted a conditional

counter-claim that in the event that the Court makes an order that the second respondent vacate the premises, that an order be made that it be allowed to remove its equipment from the premises, namely fuel dispensing pumps, underground storage tanks and related fuel dispensing equipment and signage.

3. The applicant does not oppose the conditional counter-claim except that it requires that in the event of the Court granting such a conditional counter­claim, it be made subject to the second respondent’s compliance with the provisions of the National Environmental Management Act 107 of 1998 and the impact assessment regulations promulgated in terms of the Act and also that the second respondent be required to reinstate the property after the removal of the equipment.

THE FACTS

4. The relevant facts underpinning the dispute are the following:

4.1. The applicant is the owner of E:rf 3008. Nclspruit Township, Registration Division JT, Province of Mpumalanga ('the property' );

4.2. On August 1993. a notarial lease was concluded between Street' en Wen (Nelspruit) (Eiendoms) Beperk and Caltex Oil SA (Ply) Ltd ('the lease'). The lease was registered against the title deed of the property on 27 August 1993:

4.3.The first respondent was previously known as Calte.x Oil SA (Tty) Limited and is the lessee in terms of the lease:

4.4. In terms of clause 2 of the lease, it commenced on the date upon which the first respondent’s petrol pumps were installed on the property and the sale of petrol commenced. This date was 22 March 1994:

4.5. On 17 August 2012. Tom le Roux representing the second respondent, addressed a letter to the applicant's attorneys in which he stated

that the lease had been assigned and ceded by the first respondent to the second respondent;

4.6. A lease assignment agreement was concluded between the first and second respondents, signed by the first respondent at Cape Town on 20 December 201 h and by the second respondent at Neispruit on 28 November 201 1:

5.The applicant contends that the cession and assignment of the lease without its consent constituted a breach of the lease and that it has cancelled the lease.

6.The first respondent disputes that the cancellation of the lease is valid for the following reasons:

6.1.It contends that the assignment of the lease was subject to the applicant granting its consent thereto. The language used is equivalent to saying the agreement was subject to a suspensive condition.

6.2. Although the first respondent denies the conclusion of the lease assignment agreement, this is obviously dependent on the proper interpretation of the lease assignment agreement which the first respondent admits having concluded.

6.3.The first respondent contends that should the Court find that it breached the terms of the lease, then such breach was not material and did not justify the cancellation of the lease.

6.4.In terms of clause 6.2 of the lease, the applicant was not entitled to cancel the lease without first giving the first respondent notice to remedy the breach. As no such notice was given, the applicant was not entitled to cancel the lease.

7. The second respondent opposes the application on the following grounds:

7.1 The purported breach of the lease was not a material breach as the rental had been paid in advance and prior to the commencement of the lease agreement. The applicant was therefore not entitled to cancel the lease:

7.2 The lease assignment agreement concluded between the first and second respondents was subject to a resolutive condition, that should the applicant's consent thereto not be obtained, the assignment agreement would be void:

7.3 The applicant failed to give notice to the first respondent to remedy the alleged breach and therefore the cancellation was not valid:

7.4 The applicant's withholding of its consent to the assignment of the lease is unreasonable;

7.5 The applicant consented to the assignment of the lease.

THE ISSUES TO BE DECIDED

8.The following issues in dispute require determination:

8.1. Whether the conclusion of an agreement between the first and second respondents to assign the lease to the second respondent amounts to a breach of the lease;

8.2. Whether notice to remedy the breach was required prior to cancellation

8.3. Whether there has been a valid cancellation:

8.4. Whether any right to remain in occupation of the property has been proved; and

8.5. Whether the conditional counterclaim should be granted subject to the provisos as required by the applicant.

ANALYSIS AND DISCUSSION:

- DID THE CONCLUSION OF THE AGREEMENT BETWEEN THE FIRST AND SECOND RESPONDENTS TO ASSIGN THE LEASE TO THE SECOND RESPONDENT, AMOUNT TO A BREACH OF THE LEASE?

9. In having regard to the agreement to assign, it may be useful to pause and consider the approach the Court should take in interpreting

the agreement in question.

In KWAZULU-NATAL JOINT LIAISON COMMITTEE v MEC EDUCATION; KWAZULU-NATAL AND OTHERS 2013 (4) SA 262 CC, the Constitutional Court endorsed the following approach taken by the Supreme Court of Appeal in NATAL JOINT MUNICIPAL PENSION FUND v ENDUMENI MUNICIPALITY 2012 (4) SA 593 SC A:

‘Over the last century there have been significant developments in the law relating to the interpretation of documents, both in this country and in others that follow similar rules to our own. . . The present state of the law can he expressed as follows: Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax: the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. . .The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinessmanlike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard, as reasonable, sensible or businesslike for the words actually used. . .The ‘inevitable point of departure is the language of the provision itself’, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document. '

(See also in this regard COOPERS & LYBRAND v BRYANT [1995] ZASCA 64; 1995 (3) SA 761 AD and ENGELBRECHT v SENWES LIMITED 2007 (3) SA 29 SCA)

10 When one has regard to the agreement between the first and second respondents styled as the ‘Lease Assignment Agreement’

then the following is evident:

10.1. In terms of Clause 3.1 the commencement date shall be the sale date. This is a reference to the sale agreement entered into between the first and second respondents in terms of which the first respondent sold its rights in the notarial lease relating to Erf 3008 Nelspruit to the second respondent.

10.2. If the sale and assignment agreement are to be considered in conjunction with each other, then it is clear that the assignment

agreement was concluded in order to give effect to the sale.

10.3. Clause 4.1 provides that '(T)his agreement shall operate to transfer to Marketer on the Sale Date all of Chevron’s rights and obligations in respect of the Leases.'

If one simply took a sensible and businesslike approach to the context, then it is apparent that having sold its rights in the notarial

lease, the first respondent was now through the assignment giving effect to the sale.

10.4.Clause 5.2 acknowledges that “...it is not necessary’ to obtain consents to the assignment of the Leases' but if it necessary, then the parties shall do so as soon as is practicable following the sale date.

10.5. Clause 5.4 provides that in the event of any consent to a lease not been obtained prior to the first anniversary of the sale date. Chevron may cancel the assignment of that Lease.

11.From the aforegoing it is clear that the ‘Lease Assignment Agreement' which was to commence on the date of sale, namely the 22nd of December 2011. was intended by the parties to come into effect immediately.

From the plain and ordinary language used by the parties, it was not subject to a suspensive condition and the first respondent’s

submission that the assignment only became valid once such consent was obtained is not supported by the clear and unambiguous language

of clauses 3.1, 4.1 and 5.2. to which reference has been made. If the parties had intended the assignment to be the subject of a suspensive condition, namely the securing of the consent of the applicant, then the commencement of the agreement should have been subject to the fulfillment of that condition. In my view the wording of the agreement militates against the suggestion that it wras to be subject to a suspensive condition.

12.The first respondent also contends that given that it is common cause that the assignment of the lease required the applicant’s

consent, the absence of such consent rendered any purported assignment to be a non-assignment. While it may be correct that the

purported assignment could not be effective without the applicant’s consent, a contract between the party purporting to step out of the original contract and the party purporting to step into the original contract is enforceable even in the absence of the necessary consent. That argument is also unsustainable in my view.

(See MTK SAAGMEULE (PTY) LTD v KILLYMAN ESTATES (PTY) LTD 1980 (3) SA 1 AD)

13. The second respondent takes the stance that the lease was subject to a resolutive condition contained in Clause 5.2 thereof, namely the obtaining of the consent of the applicant to the ceding and assignment of the notarial lease agreement. They contend that the resolutive condition has been fulfilled as a result of which the assignment of the lease pertaining to the premises became void ab initio.

14. A resolutive condition terminates all or some of the obligations flowing from the contract upon the occurrence of a future uncertain

event.

(See: Christie's Law of Contract in South Africa 6lh Edition at page 145)

15. When one has regard to Clauses 5.2 and 5.4 of the Lease Assignment Agreement then what is agreed and recorded expressly between the parties is that the failure to obtain any consent in relation to a lease, simply creates a right at the behest of the first respondent to cancel the assignment of the lease. This right to cancel is distinguishable from the lease becoming void ab initio and there is no provision in the Lease Assignment Agreement that the assignment becomes void ab initio upon the consent of the applicant not having been obtained.

16. Accordingly it can hardly be contended that the Lease Assignment Agreement was subject to a resolutive condition. It was argued on behalf of the second respondent that the wording of Clause 5.4 was unfortunate to the extent that it may not have stated that the consequence of the non­fulfillment of the condition would render the lease assignment void ab initio. My view is that the parties used the language they did to express the nature of the agreement they arrived at and the point of departure must be the language of the provision itself. It is indeed difficult, if not impossible, to see how the provision as it stands is capable of being given the interpretation the second respondent contends for. In any event it is not the case of the second respondent that the non-fulfillment of the condition led to the cancellation of the Lease Assignment Agreement.

17. In any event it is noteworthy that the first respondent, who was party to the Lease Assignment Agreement, does not take the stance that the agreement was subject to a resolutive condition, which should put to rest any suggestion that Clause 5.4 was somehow

intended to reflect a resolutive condition.

18. In my view the assignment wras subject to neither a suspensive condition nor a resolutive condition, but wfas unconditional in nature. It was a term of the notarial lease entered into between the applicant and the first respondent that the latter could not cede or assign the lease without the consent of the applicant first being obtained. It being common cause that such conscnt was neither sought nor obtained, the purported assignment took place in contravention of Clause 4.4 of the Notarial Lease entered into between the applicant and the first respondent and constituted a breach of the agreement.

- WAS NOTICE TO REMEDY THE BREACH REQUIRED PRIOR TO CANCELLATION

19. The stance of the respondents is that Clause 6.2 of the Notarial Lease creates a mandatory procedure in the event of a breach. It provides as follows:

‘The LESSOR may (without prejudice to any right in respect of any breach of any of the terms and conditions of this Lease by the TENANT) cancel this Lease:

If the TENANT shall commit any breach of any of the terms and conditions of this Lease and fail to remedy such breach within 14 (fourteen) days after the receipt of written notice from the LESSOR or should the period of 14 (fourteen) days not be a reasonably sufficient time for the remedying of the breach in question, within such time as is reasonably required therefore after the receipt of written notice from the LESSOR.’’

20. It is common cause that no notice as contemplated in Clause 6.2 was given by the applicant and the stance of the respondent is that in the absence of such a notice which it contends is peremptory, the applicant was precluded from canceling the lease. It relies on the dicta in HANO TRADING CC v JR 209 INVESTMENTS (PTY) LTD AND ANOTHER 2013 (1) SA 161 SCA, that the giving of the notice to remedy was peremptory and that non- compliance therewith prevents the applicant from canceling the lease.

21. The applicant contended that given that the breach occurred in December 2011 when the Lease Assignment Agreement was entered into and that it only became aware of this state of affairs in August 2012. it was impossible to cure the breach and the need for the notice as contemplated in Clause 6.2 was dispensed with.

22. In addition it makes the submission that the conduct of the first respondent in assigning the lease without the consent of the

applicant amounted to a repudiation of the Notarial Lease and that under such circumstances, it was entitled to cancel the contract

without giving the notice of breach contemplated in Clause 6.2.

23. With regard to the issue relevant to the giving of notice, our Courts, w'hile generally taking the stance that there has to be compliance with the procedural requirements the parties have agreed to in their agreement, also have expressed the view' that where there is evidence of a total inability to perform, then compliance with such notice to remedy may be said to have been waived, discharging the other party from the duty to give such notice.

(See EDENGEORGE LTD v CHAMOMU PROPERTY INVESTMENTS 1981 (3) 460 AD at 471C-E)

24.Given both the considerable passage of time from the breach to when the applicant could reasonably have expected to give notice to remedy the breach as well as the stance taken on the part of the first and second respondents when the breach was brought to its attention, I am of the view that the stance of the first respondent, evidenced in its attorneys letter of the 30th August 2012 in response to the letter of cancellation of the applicant, suggests an unwillingness in any event to comply.

25. In that letter it is stated on behalf of the first and second respondent as follows:

‘We accordingly place on record that the Lease Assignment Agreement entered into between Chevron (SA) (Pty) Ltd and Pine Glow Investments

(Pty) Ltd, due to the conditions and terms contained therein is not in breach of the Notarial Lease, and any attempt by your client to cancel the Notarial Deed of Lease will be disputed. '

26. Under such circumstances and given the stance the first and second respondents took with regard to the breach contended for by the applicant, any notice to remedy the breach which the respondents say they should have been given would surely have been met with a similar response. In the circumstances the notice to remedy would have been an exercise in futility had it been given. There w’as in my view no obligation to give such notice.

27. That being said however, the next question, in the event that I am wrong on the need to give notice, is whether it could be said that the conduct of the first respondent in assigning the Notarial Lease without the consent of the applicant amounted to a repudiation of the lease justifying its cancellation.

28. it is trite that in particular circumstances, conduct of a contracting party could constitute both a breach of contract in the

form of malperformance and repudiation.

(See SOUTH AFRICAN FORESTRY CO LTD v YORK TIMBERS LTD 2005 (3) SA325 SCA.)

29. In our law repudiation is looked at objectively and not subjectively and when faced by a clear repudiation, the party not in breach is entitled as of right to bring the contract to an end without delay.

(See TAGGARTv GREEN 1991 (4) SA 121 WLD).

30. In casu, the first respondent had unconditionally assigned its rights in the Notarial Lease to the second respondent without having obtained the consent of the applicant. In DATACOLOR INTERNATIONAL (PTY) LTD V I NT A MARKET (PTY) LTD [2000] ZASCA 82; 2001 (2) SA 284 SCA, the Court in emphasizing that the test for repudiation was objective, said that the matter had to be viewed from the vantage point of the innocent party. From the perspective of the applicant who is that innocent party, it must have been evident that the unconditional assignment of the lease in December 2011 by the first respondent was clear-cut and unequivocal evidence that the first respondent no longer considered itself bound by the Notarial Lease agreement. In my view the conduct of the first respondent constituted a repudiation of the Notarial Lease and the applicant was entitled to rely on it in canceling the Notarial Lease.

31.In DATACOLOR INTERNATIONAL (supra) the Court dealt with this right to cancel as follows:

'The so-called 'acceptance ' of the repudiation by the innocent party, although a convenient catchword, does not 'complete' the breach, hut is simply the exercise by the aggrieved parly of his right to terminate the agreement. The innocent party to a breach of contract

justifying cancellation exercises his right to cancel it fa) by words or conduct manifesting a clear election to do so (b) which is communicated to the guilty party. Except where the contract itself otherwise provides, no formalities are prescribed for either requirement. Any conduct complying with those conditions would therefore qualify as a valid

exercise of the election to rescind. ‘(at 285C)

32. Accordingly I must conclude that there has been a valid cancellation of the Notarial Lease for the reasons already given.

DO THE SECOND AND THIRD RESPONDENTS ENJOY ANY RIGHT TO REMAIN ON THE PROPERTY?

33.The notarial lease in Clause 4.4 thereof provides that no consent is required from the applicant in order for the first respondent to sub-let the premises or place any person in possession thereof. The first respondent in its answering affidavit correctly points out that nothing precluded it from entering into a sub-lease but stops short of alleging that any sub-lease was entered into and providing the details of any such sub-lease.

34.There is with respect simply no evidence before the Court of any sub-lease between the first respondent and the second respondent, nor of the second respondent being placed in possession of the property on any other basis than the assignment agreement

35. The second and third respondents have accordingly not established any right to remain on the property.

THE CONDITIONAL COUNTER-CLAIM

36.There is no opposition to this relief subject to the second respondent's compliance with the National Environmental Management Act 107 of 1998 which the second respondent accepts. There was a request that the period within which the removal of the equipment should take place should allow for the fact that the equipment includes underground tanks which may require time to remove. A time frame of 45 (fourty five) days was suggested which I believe is reasonable.

ORDER:

37. In the circumstances Í make the following order:

i. The cancellation of the notarial deed of lease registered under number K4505/93 on 27 August 1993 against Erf 3008 Nelspruit

Township, Registration Division JT Province of Mpumalanga) under Title Deed number T020473 (‘the deed of transfer') is confirmed;

ii. The fourth respondent is ordered to endorse the cancellation of the notarial deed of lease. Alternatively, the fourth respondent is ordered to endorse the extinction of the registered rights against the deed of transfer;

iii. An order of ejection from the property situated at corner Bell Street and Paul Kruger Street, Nelspruit, Mpumalanga is made against the first, second and third respondents and against any other party that may claim a right to occupation of the property through the first, second or third respondents within 45 (fourty five) days of the granting of this order;

iv. The second respondent is entitled to remove from the property all fuel dispensing pumps, underground storage tanks, all related fuel dispensing equipment and signage which removal is to be effected in terms of the National Environmental Management Act 107 of 1998 and the regulations promulgated thereunder and should reinstate the property after the removal of its equipment. All of the aforementioned is to be done within 45 (fourty five) days of the granting of this order; and

v.The first, second and third respondents are ordered to pay the costs of the application jointly and severally, the one paying, the others to be absolved; and

N KOLLAPEN

JUDGE OF THE NORTH GAUTENG HIGH COURT

6412/2013

HEARD ON: 14 NOVEMBER 2013

FOR THE APPLICANT: ADV J F ROOS SC

INSTRUCTED BY: EUGENE MARAIS ATTORNEYS (correspondents PAUL DU PLESSIS ATTORNEYS & GROVE DEYSEL & PARTNERS)

FOR THE FIRST RESPONDENT: ADV N BAWA

INSTRUCTED BY: NORTON ROSE SOUTH AFRICA (INCORPORATED AS DENEYS REITZ INC) (correspondents MACINTOSH CROSS & FARQUHARSON)

FOR THE SECOND & THIRD RESPONDENTS: ADV M C ERASMUS SC

INSTRUCTED BY: SWANEPOEL & PARTNERS (correspondents WEAVIND & WEAVIND ATTONEYS