Engen Petroleum Limited v Magalieskruin Motors (Pty) Limited and Another (19150/05) [2005] ZAGPHC 119 (17 November 2005)

IN THE HIGH COURT OFSOUTH AFRICA(TRANSVAALPROVINCIAL DIVISION)CASE NO: 19150/2005REPORTABLEDATE: 17/11/2005In the matter between:-ENGEN PETROLEUM LIMITEDAPPLICANTandMAGALIESKRUIN MOTORS (PTY) LIMITEDFIRSTRESPONDENTANNLIA INVESTMENTS (Pty) Ltd SECOND RESPONDENTContract – terms clearly stated – assurances as to renewal,in conflict with contract and amountedto nothing more than opinion.JUDGMENTVan Rooyen AJ

IN THE HIGH COURT OF

SOUTH AFRICA

(

TRANSVAAL

PROVINCIAL DIVISION)

CASE NO: 19150/2005

REPORTABLE

ENGEN PETROLEUM LIMITED

APPLICANT

MAGALIESKRUIN MOTORS (PTY) LIMITED

FIRST

RESPONDENT

ANNLIA INVESTMENTS (Pty) Ltd SECOND RESPONDENT

Contract – terms clearly stated – assurances as to renewal

,

in conflict with contract and amounted

to nothing more than opinion.

JUDGMENT

Van Rooyen AJ

[1] This is an application for the eviction of the respondent (“Magalieskruin”) from a petrol filling station, which it has sub-leased from Engen Petroleum Ltd (“Engen”). The dispute revolves around the question whether the lease to Magalieskruin has expired.

[2] Engen is the lessee of a petrol filling station in terms of a Head Lease concluded with Annlia Investments (Pty) Ltd ("Annlia"), the owner of the property on which the filling station is situated. In December 1999 Engen and Magalieskruin (“Magalieskruin”) concluded an agreement entitled "Agreement of Lease and Operation of Service Station" (the “Operating Lease”). In termsthereof: (1)the commencement date of the lease was 1 October 1999 and it was to endure for an initial period of 5 years; (2) the parties could, by mutual agreement, extend the term of the operating lease for a further period, provided that such agreement would not be binding on them unless reduced to writing and signed by both parties; (3) the initial lease period (5 years) terminated by effluxion of time on 30 September 2004;(4) in the event of the parties not agreeing on a further period of lease, the operating lease would continue on a month-to-month basis subject to one calendar month's written notice of termination by either party.

[3]The parties have not agreed on a further period of lease and on 21 April 2005 Engen gave Magalieskruin one calendar month's notice of termination of the Operating Lease. Notwithstanding that the month’s notice expired on 31 May 2005, Magalieskruin refused to vacate the premises and on 2 June 2005 Engen launched the present application for the ejectment of Magalieskruin. The application was initially brought as a matter of urgency, but has subsequently proceeded as an ordinary application and has been set down for hearing on the ordinary roll.[4]All the required sets of affidavits have been filed. Magalieskruin has launched a counter-application which is also ripe for hearing.

THE MAIN APPLICATION

The non-joinder of Annlia

[5] Magalieskruin contends that Annlia has a direct and substantial interest in this application and therefore the failure by Engen to have joined it as a party renders the application materially defective. Annlia does not have a legal interest in these proceedings of the kind that would have required it to be joined as a party.Amalgamated Engineering Union v Minister of Labour1949 (3) SA 637(A);Henri Viljoen (Pty)Ltd v Awerbuch Brothers1953 (2) SA 151(O);United Watch & Diamond Co (Pty) Ltd and OthersvDisa Hotels Ltd and Another1972 (4) SA 409(C) at 415E – H;Rosebank Mall (Pty) Ltd and Another v Cradock Heights (Pty) Ltd2004 (2) SA 353(W).Magalieskruin is a sub-lessee, i.e. a tenant of Engen and none of the rights of Annlia, the owner, is at issue in this application. In any event there was an application by Annlia to be joined as a party with the result that non-joinder was no longer an issue.

Amalgamated Engineering Union v Minister of Labour

1949 (3) SA 637(A);

1949 (3) SA 637

Henri Viljoen (Pty)

Ltd v Awerbuch Brothers

1953 (2) SA 151(O);

1953 (2) SA 151

United Watch & Diamond Co (Pty) Ltd and Others

v

Disa Hotels Ltd and Another

1972 (4) SA 409(C) at 415E – H;

1972 (4) SA 409

Rosebank Mall (Pty) Ltd and Another v Cradock Heights (Pty) Ltd

2004 (2) SA 353(W)

2004 (2) SA 353

.

Authority

[6] In the answering affidavit Magalieskruin challenged the authority of Tootla, the deponent to the founding affidavit, to have represented Engen. In its replying affidavit Engen annexed a resolution by Engen’s board of directors and ancillary documents in proof of Tootla’s authority. In Annlia’s replying affidavit filed in the counter-application the said resolution is scrutinised and Annlia and Magalieskruin submit that Engen has not properly authorised the proceedings in the main application, nor has it authorised the opposition to the counter-application.[7] Magalieskruin’s approach is not in accordance with the current practice. Where a party in the position of Magalieskruin fears that an application has not been authorised, its real concern is that the other party may deny that it authorised the litigation carried on in its name and, for example, disavow liability for any adverse costs order. The proper procedure, in such circumstances, is to make use Rule 7(1) of the Uniform Rules of Court. If it is established that the attorney concerned is authorised to bring an application on behalf of Engen, the application necessarily is that of Engen. It is sufficient to know whether or not the attorney acts with authority, and there is no need for any other person to be additionally authorised.Eskom v Soweto City Council1992 (2) SA 703(W) 705 C – J;Ganes and Another v TelecomNamibia Ltd2004 (3) SA 615(SCA) para [19] at 624G/H - 625A

Eskom v Soweto City Council

1992 (2) SA 703(W) 705 C – J;

1992 (2) SA 703

Ganes and Another v Telecom

Namibia Ltd

2004 (3) SA 615(SCA) para [19] at 624G/H - 625A

2004 (3) SA 615

[8] Furthermore, Magalieskruin’s analysis of the resolution is not valid. Tootla was clothed with the necessary authority to have instructed Engen’s attorney to launch the application and thereafter to oppose the counter-application. The issue becomes clear if one considers whether, in the light of the resolution, Engen could ever successfully avoid liability for an adverse costs order on the basis that the proceedings were not authorised. In any event,Engen has passed a fresh resolution clarifying the authority of Tootla to represent it and confirming the authority of Tootla and Engen’s attorney to have represented it in these proceedings. Engen handed the short affidavit up, and I noted the authority.Eagles Landing Body Corporate v Molewa NO and Others2003 (1) SA 412(T)para [18] at 419I/J - 420A.

Eagles Landing Body Corporate v Molewa NO and Others

2003 (1) SA 412(T)

2003 (1) SA 412

para [18] at 419I/J - 420A.

The Merits

[9] Magalieskruin opposes the relief sought on several bases, and raises several defences. Before dealing with each specific defence it will be convenient to deal first with the main allegations of fact upon which Magalieskruin’s defences are based.

[10] Magalieskruin's contention is that the deponent to the Magalieskruin’s answering affidavit (“Van Dyk”) was only prepared to conclude an agreement with Engen on behalf of Annlia to grant Engen a Head Lease, if his family was granted the right to operate the petrol filling station which was to be erected on the property (although nowhere does Van Dyk say that this was communicated to Engen). It was as a result of this that Engen wrote its letter dated 23 July 1998 to Annlia, in which, according to the Magalieskruin, Engen bound itself to the aforesaid proviso.

[11] The said letter is signed by the parties (the so called “letter agreement”).The relevant portion of the “letter agreement” is quoted by Magalieskruin. As appears therefrom, contrary to what Magalieskruin claims, the letter agreement merely records that Van Dyk or a family member “maywant to operate the business at the property” and that Engen “will be willing toconsiderthis request” subject to certain conditions therein stated. [Emphasis added]

may

consider

[12] Van Dyk duly signed the letter agreement, thereby accepting its terms. Van Dyk then states that he received a draft of the transaction agreement and noticed that the dealer’s appointment would be for a period not exceeding five years. He prepared a document which he faxed to Engen, from which it is clear that Van Dyk had perused the draft, and in which document he proposed several changes, andinteraliarequested that the above provision be changed to provide that the appointed dealer would be the sub-tenant for a period not exceeding the period of the head lease.

inter

alia

[13] A meeting wasconvenedto discuss this. Van Dyk says that during the meeting he was assured by Engen’s representatives that: he should not be worried, because Engen was in possession of its letter (the signed “letter agreement”) where Magalieskruin's rights are safeguarded; and the aforesaid rights (i.e. the terms in the signed letter agreement) are incorporated in the transaction agreement. It is important to note that Magalieskruin produced no evidence other than the aforementioned of any further assurances given to them or any other representations that were made. All the remaining "assurances" referred to in subsequent paragraphs of the answering affidavit were derived from the assurances referred to above. For example: he states that “due to the assurances given” to him he was “thereforeassured” of the above mentioned matters; a little later Van Dyk returns to the subject of what transpired at the meeting. He deals with other factual matters that were mentioned, for example that the operating lease is a standard agreement and the Engen’s representatives may not alter it. Significantly there is no further evidence about any additional assurances given to him, nor further details of the content of the assurances already mentioned, simply a repeat of the conclusions drawn from the assurances set out before.[14] Seen in that light Magalieskruin’s contentions, especially the allegations about the period of the Operating Lease being linked to the period of the Head Lease, and the contention that it, the operating lease, could not be cancelled, are unsubstantiated. The assurances cannot be regarded as more than obvious informal assurances based on opinion, which Magalieskruin had to live with if they did not materialize. It was clear to all concerned that the standard agreement could not be departed from.

convened

due to the assurances given

therefore

assured

[15] Van Dyk claims he was misled into believing that because of the so-called “letter agreement” Engen could not cancel the operating lease before the head lease expired.The “letter agreement” cannot, however, be read as having the effect Van Dyk contends for, more particularly when it is read in the context of the transaction agreement into which it was incorporated, as well as in the light of the provisions of the Operating Lease.

[16] Van Dyk states that due to the assurances which he received and to which he has referred, he signed the agreements. He contends that due to the assurances he did not insist that the agreements be amended to reflect the true intention of the parties. This is important because it constitutes an admission by Van Dyk that he knew that what he was signing did not correctly reflect his alleged version – with the result that he cannot obtain rectification.See below under the heading “Rectification”

See below under the heading “Rectification”

Magalieskruin’s Defences

Magalieskruin

’s Defences

[17] As a result of the aforegoing Magalieskruin contends:it is entitled to raise an estoppel against the Engen’s claim for eviction; Magalieskruin is entitled to cancel the head lease because of the misrepresentation; Magalieskruin and Annlia are entitled to rectification of the agreements.

[18] The version of the facts relied on by Magalieskruin, and which is disputed by Engen, is clearly incompatible with the lease agreement. Moreover, Magalieskruin's version appears at several places in the papers and with each repetition thereof, such version varies whether slightly or substantially, and its various versions cannot be reconciled. By way of example: in Magalieskruin’s answering affidavit Magalieskruin’s version is that Engen assured Van Dyk,whobelieved, that Engen may not cancel the operating lease before the head lease expires. In contradiction thereto, in the replying affidavit in the counter-application, Van Dyk denies that the parties did not agree on a further period of lease, and states that, when Engen did not exercise its right in terms of the lease to give Magalieskruin 12 months’ notice that it does not intend offering it a further opportunity to lease the premises, he was entitled to assume,ashedid,that the lease had been extended for another period of 5 years. Magalieskruin contended that there was therefore a tacit renewal of the lease because Engen did not exercise its right to cancel. However, this too is contradicted by the fact that when the draft new 5 year lease was received by Van Dyk, he did not respond thereto by saying that the operating lease could not be terminated prior to the termination of the head lease in accordance with the assurances that he claims he believed were true, and acted on, nor did he contend that the parties had already tacitly concluded a new 5 year lease, but he sent the draft to Magalieskruin’s attorney for analysis and concluded on the basis thereof that the draft lease being offered was not acceptable.[19] Still another version appears in a Magalieskruin’s letter, which was written in response to the notice to vacate. There Magalieskruin contended that it was entitled to “carry on operating the business on the premises whilst negotiating the terms of the new lease agreement and until a new lease agreement has been agreed upon by both parties.”Implicit therein is an acknowledgment that the initial period of the lease was five years, coupled with a contention that Magalieskruin is entitled to remain on in the premises without a lease until a new lease agreement has been agreed upon. No terms are alleged to have been agreed which govern the Magalieskruin’s interim stay, nor are there any terms which govern the new lease agreement that the parties are obliged to conclude.[20] A further version of what the terms of the agreement/s arising from the alleged assurances were, is that Annlia would also have the right to cancel the agreement (the agreement is not identified, but is either the operating lease or the head lease) in the event that it wished to sell the property. This right is also said to derive from the same representations which Van Dyk avers. This version arose for the first time in the reply to the counter application and is not referred to in the rectification grounds alluded to below.

who

believed

a

s

he

did

carry on operating the business on the premises whilst negotiating the terms of the new lease agreement and until a new lease agreement has been agreed upon by both parties.”

[21] In the absence of clear credible consistent evidence, I am of the view that Magalieskruin has failed to establish a defence based on misrepresentation made to Van Dyk. The allegations were also so vague as to be legally irrelevant.

It was argued by MrRipfor Magalieskruin that I should allow oral evidence to be led so as to substantiate the claims which are made as to representation. MrJoubertconvincingly argued that if one has regard to the obviously meticulous manner in which Van Dyk had dealt with the transaction and negotiations, he could hardly be heard to say that he was brought under the belief by misrepresentation that the operating lease would be for twenty years. I accordingly do not accede to the request to lead evidence as to misrepresentation.

Rip

Joubert

Rectification

[22] Magalieskruin claims rectification of the Operating Lease based on the above facts (which Engen disputes). It is clear on Magalieskruin’s own version that the operating lease was signed on behalf of Magalieskruin with full knowledge of what its terms were. There was accordingly no error on the part of Annlia / Van Dyk, and not even a suggestion of a mutual error, also involving Engen, which is an essential requirement for rectification.Meyer v Merchants' Trust Ltd.1942 AD 244at 253-4;National Industrial Credit Corporation(Rhodesia) Ltd v Kluckow1970 (3) SA 31(R)at 36C-E.Although a party claiming rectification need not formulate the terms of the common intention clearly,Akasia Surfacing (Pty) Ltd en `n Ander v Shoredits Holdings Ltd en Andere 2002(3) SA346(SCA)at para [16].Magalieskruin’s version of what was allegedly agreed differs almost each time it is repeated. The case for rectification must also fail. There is no prospect that Magalieskruin would be able to prove a common intention even if it were permitted to lead oral evidence on this aspect. Finality was not reached on the alleged extraneous mutual intention. There was some form of negotiation, but no mutual understanding was reached,Estoppel[23] In order to ground an estoppel, there has to be a representation which the party seeking to establish the estoppel reasonably believed and acted on to his detriment/prejudice. What has been said above with regard to the misrepresentation applies equally here too, and accordingly a defence of estoppel cannot succeed.

Meyer v Merchants' Trust Ltd

.1942 AD 244at 253-4;

1942 AD 244

National Industrial Credit Corporation

Rhodesia

) Ltd v Kluckow

1970 (3) SA 31(R)

1970 (3) SA 31

at 36C-E.

Akasia Surfacing (Pty) Ltd en `n Ander v Shoredits Holdings Ltd en Andere 2002(3) SA346(SCA)

at para [16]

Estoppel

THE COUNTER-APPLICATION

T

HE COUNTER-APPLICATION

[24] There is a counter-application by Annlia in which it seeks to cancel the head lease because of the misrepresentation that induced Van Dyk to sign it. What has been said above with regard to the misrepresentation also applies here. Annlia’s counter application is dismissed with costs.[25] I should, in closing, refer to MrRip’sinteresting argument that given the fundamental rightSection 34 of the Constitution of the RSA.of the Respondents to have their dispute decided by a Court of Law, it is in the interest of justice that they be granted the opportunity to testify personally as to the alleged misrepresentation and rectification. In this manner they would have the matter fully ventilated before a Court, I have sympathy for the respondents, who are lay persons as to law and their hopes as to what Engen would abide by. On the other hand the contracts involved were clear and there is no reason why the “golden rule” of interpretation of contracts, as summarized by Joubert JA inCoopers & Lybrand & Others v Bryant,1995(3) SA 761(A) at 768.should not be applied in favour of Engen:

Rip’s

Section 34 of the Constitution of the RSA.

Coopers & Lybrand & Others v Bryant

1995(3) SA 761(A) at 768.

“The correct approach to the application of the 'golden rule' of interpretation after having ascertained the literal meaning of the word or phrase in question is, broadly speaking, to have regard:

(1)to the context in which the word or phrase is used with its interrelation to the contract as a whole, including the nature and purpose of the contract, as stated by Rumpff CJ supra;

(1)

to the context in which the word or phrase is used with its interrelation to the contract as a whole, including the nature and purpose of the contract, as stated by Rumpff CJ supra;

(2)to the background circumstances which explain the genesis and purpose of the contract, ie to matters probably present to the minds of the parties when they contracted.Delmas Milling Co Ltd v Du Plessis1955 (3) SA 447(A) {dicta at 454G-H & 455A-C appl} at 454G-H;Van Rensburg en Andere v Taute en Andere1975 (1) SA 279(A) {dicta at 303A-C & 305C-E appl} at 305C-E;Swart'scasesupraat 200E-201A & 202C;ShopriteCheckers Ltd v Blue Route Property Managers (Pty) Ltd and Others1994 (2) SA 172(C) {dictum at 180I-J appl} at 180I-J;

(2)

to the background circumstances which explain the genesis and purpose of the contract, ie to matters probably present to the minds of the parties when they contracted.

Delmas Milling Co Ltd v Du Plessis

1955 (3) SA 447(A) {dicta at 454G-H & 455A-C appl} at 454G-H;

1955 (3) SA 447

Van Rensburg en Andere v Taute en Andere

1975 (1) SA 279(A) {dicta at 303A-C & 305C-E appl} at 305C-E;

1975 (1) SA 279

Swart's

c

ase

supra

at 200E-201A & 202C;

Shoprite

Checkers Ltd v Blue Route Property Managers (Pty) Ltd and Others

1994 (2) SA 172(C) {dictum at 180I-J appl} at 180I-J;

1994 (2) SA 172

(3)to apply extrinsic evidence regarding the surrounding circumstances when the language of the document is on the face of it ambiguous, by considering previous negotiations and correspondence between the parties, subsequent conduct of the parties showing the sense in which they acted on the document, save direct evidence of their own intentions.Delmas Millingcase at 455A-C,Van Rensburg'scase at 303A-C,Swart'scase at 201B,Total South Africa (Pty) Ltd v Bekker NO[1991] ZASCA 183;1992 (1) SA 617(A) E {dictum at 624G appl} at 624G,Pritchard Properties (Pty) Ltd v Koulis1986 (2) SA 1(A) {dictum at 10C-D appl} at 10C-D.”(emphasis added)

(3)

to apply extrinsic evidence regarding the surrounding circumstances when the language of the document is on the face of it ambiguous, by considering previous negotiations and correspondence between the parties, subsequent conduct of the parties showing the sense in which they acted on the document, save direct evidence of their own intentions.

Delmas Milling

case at 455A-C,

Van Rensburg's

case at 303A-C,

case at 201B,

Total South Africa (Pty) Ltd v Bekker NO

[1991] ZASCA 183;1992 (1) SA 617(A) E {dictum at 624G appl} at 624G,

[1991] ZASCA 183

1992 (1) SA 617

Pritchard Properties (Pty) Ltd v Koulis

1986 (2) SA 1(A) {dictum at 10C-D appl} at 10C-D.

1986 (2) SA 1

”

(emphasis added)

Applying the third rule, there is nothing ambiguous in the lease agreement. The exact term of five years for the “initial term” is clearly written in by hand in Schedule 1. The commencement date is written in to be 1 October 1999 and the initial period as 5 years to 30 September 2004. The manner in which it may be extended by mutual agreement is clearly stated in clause 2.2-3. The said clauses are on the first page of the text of the agreement and not hidden away in fine print. The papers show that Magalieskruin knew about these conditions and attempted to have them amended. The result of its attempts were, however, not successful. This was the standard contract and Engen would not depart there from. The “assurances” could, in the circumstances, amount to nothing more than opinion expressed by the agents of Engen and the personal, unfounded belief or assumption of Magalieskruin and Annlia.

Ultimately, an age old rule applies, contracts must be abided by - pactasunt servanda,which finds its roots in Roman law,Digesta2.14.7.7was developed by the medieval canonists,See C Visser1984SALJ641at 646; D JoubertGeneral Principles of the Law ofContract (1987) 144.and accepted in Roman DutchVisser,ibid.and South African law.SeeJuglal NO and Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division2004(5)SA 248(SCA) at para [10];Brisley v Drotsky2002(4) SA 1(SCA) at para [24].That there are exceptions to this rule is, of course, well known. As indicated above, the exceptions do not apply in the present matter.I hold that the dispute has been ventilated as far as it reasonably can be ventilated and that it would serve no purpose to refer the dispute to oral evidence.

acta

sunt servanda

Digesta

2.14.7.7

See C Visser1984

1984

SALJ

641at 646; D Joubert

General Principles of the Law ofContract (

1987) 144.

Visser,

ibid

See

Juglal NO and Another v Shoprite Checkers (Pty

) Ltd t/a OK Franchise Division

2004(5)SA 248(SCA) at para [10];

Brisley v Drotsky

2002(4) SA 1(SCA) at para [24].

Order:(1)

That the first respondent be evicted from the premises situate at 581 Braam Pretorius Street, Magalieskruin, however, not before 28 November 2005.(2)That first respondent pay the costs of the main application.(3)That the counter-application by second respondent is dismissed with costs.

JCW van Rooyen

……………………Acting Judge of the High Court