Ensemble Hotel Holdings (Pty) Ltd v Identity Development Fund (Pty) Limited and Another; InRe: Identity Development Fund (Pty) Limited v Greennovate Counsulting And projects Primary Co-operative Limited (25501/2014) [2014] ZAGPJHC 312 (4 November 2014)

REPUBLIC OF SOUTH

AFRICA

SOUTH GAUTENG

HIGH COURT

JOHANNESBURG

CASE NO: 25501/2014

DATE: 04 NOVEMBER 2014

In the matter between:

ENSEMBLE HOTEL HOLDINGS (PTY) LTD)...............................Applicant/Intervening Party

And

IDENTITY DEVELOPMENT FUND (PTY) LIMITED.....................................First Respondent

GREENOVATE

CONSULTING AND PROJECTS

PRIMARY CO-OPERATIVE LIMITED......................................................Second Respondent

In re:

IDENTITY DEVELOPMENT FUND (PTY) LIMITED...............................................Applicant

PRIMARY CO-OPERATIVE LIMITED.................................................................Respondent

JUDGMENT

WEINER J:

1. The applicant (“Ensemble”) seeks leave to intervene in the application (“the perfection application”) which Identity Development Fund (“IDF”) launched against Greenovate Consulting and Projects Primary Co-operative Limited to obtain perfection of a notarial bond (“the bond”) over goods which were at the premises situated at Shop 2, 2nd floor, Laico Isle, corner of Rivonia Road and Daisy street in Sandton (“the premises”). In addition, it seeks rescission of the perfection order and that IDF be ordered to disclose the whereabouts of the goods that were removed and return all the goods that were removed by it to the premises.

2. In terms of the perfection application, IDF sought an order (“the perfection order”) which was granted, with the consent of Greenovate, that the notarial bond registered in favour of IDF over the assets of Greenovate, be perfected.

3. It is common cause that, in the perfection application, IDF was cited as the applicant, but the notarial bond was registered in favour of Identity Isivande Development Fund (Isivande) and not IDF.

4. Ensemble is the lessor of premises at which Greenovate conducted business.

Background to these proceedings

5. On the 30th of January 2013, Ensemble and Greenovate concluded a lease agreement.

6. On the 30th of October 2013 the notarial bond was registered in favour Isivande.

7. On the 22nd of February 2014, a letter was sent to Ensemble informing it that the movables belonging to Greenovate were subject to a notarial bond in favour of Isivande.

8. On or about the 8th of July 2014, Ensemble addressed a letter to Greenovate stating that Greenovate was in breach of its lease agreement as its rental was in arrears.

9. As a result thereof, Ensemble:

9.1. Caused its attorneys of record to deliver a letter of demand to the respondent on 8 July 2014, claiming payment of the outstanding amounts and placing Greenovate in mora.

9.2. On the 21st of July 2014, cancelled the lease as it was entitled to do;

10. IDF, upon hearing of the aforesaid, instructed its attorneys to apply for the perfection of the notarial bond which it had registered over the assets of Greenovate.

11. On the 16th of July 2014, the Sheriff Sandton accompanied by IDF’s attorney, Ezra Matlala, attended at the premises, introduced themselves, and advised that they were there to remove the contents of the premises. When Ensemble’s personnel enquired as to what was transpiring, the Sherriff handed them a copy of the perfection order and in due course continued with removing the contents of the shop.

12. On the 21st of July 2014, Ensemble’s attorneys issued a rent interdict summons, in the Randburg Magistrates court inter alia;

12.1. Claiming the outstanding amounts;

12.2. Giving notice of the cancellation of the lease;

12.3. Setting out its intention to rely on its “landlord’s tacit hypothec”.

13. Ensemble had no knowledge of the existence of the notarial bond and the application for perfection until the Sheriff arrived at the premises. Accordingly, Ensemble contends that it had no choice but to comply with the perfection order and allowed the goods to be removed.

The present rescission application

14. The rescission application of Ensemble is based upon the following:-

14.1. The incorrect party (IDF) was cited as the applicant in the perfection application and perfection order;

14.2. Ensemble has an interest in the proceedings in that it seeks to perfect its unperfected tacit hypothec.

15. IDF opposed the application on the basis, firstly, that the applicant has no locus standi in the matter on account of its unperfected hypothec and, secondly, that no case for rescission is made out.

16. IDF contends that Ensemble does not have locus standi, in that it does not have the necessary legal interest to intervene in the application for rescission. In terms of Rule 42(1)(a) of the Rules of Court, dealing with rescission of judgments, an intervening party must have “an interest in the subject-matter of the judgment or order sufficiently direct and substantial to entitle him or her to have intervened in the original application upon which the judgment was given or granted” and “a legal interest in the subject-matter of the action which could be prejudicially affected by the judgment of the court”. (Erasmus Superior Court Practice page B1-308)

17. The interest upon which Ensemble relies is its landlord tacit hypothec. IDF contends that Ensemble has no legal interest because, having not exercised its rights in terms of its landlord’s hypothec, it can no longer do so once the goods have been removed.

18. In Webster v Ellison 1911 AD 73, the removal of the goods from the landlord’s property was discussed in various scenarios. It is trite that a hypothec, before attachment, has no force against third parties. (Webster at page 88). In addition, the tacit hypothec “is a right, however, which is always subject to be defeated by the removal of the goods from the leased premises. From this point also, I think the law is clear that the hypothec is lost so soon as the goods are removed.” (Webster at 94).

19. There are, however, instances when this may not be so. For instance, if the lessee removes the goods from the leased premises with the object of defeating the landlord’s lien, a court would not hesitate to order the return of the goods, unless third parties had, in the meanwhile, obtained rights to them. (Webster at 105).

20. In terms of Rule 42 “(1) the court may, in addition to any power it may have, mero motu or upon the application of any party affected, rescind or vary an order or judgment erroneously sought, or erroneously granted, in the absence of any party affected thereby.”

21. The words “any party affected” refers to a party who has “an interest in the subject matter of the order sufficiently direct and substantial to entitle him or her to have intervened in the original application, upon which the judgment was given or granted” (emphasis added). (United Watch and Diamond Company Proprietary Limited and Others v Disa Hotels Limited and Another 1972 (4) SA 409 (C)).

22. It is clear that, based on the facts of this matter:-

22.1. Ensemble has the required interest – once the goods are returned, it may very well be entitled to perfect its hypothec if the goods were removed fraudulently, for example. It is not necessary for this court to decide this issue at this stage. The residual interest which Ensemble has in these goods and in its right to perfect its hypothec is sufficient.

22.2. The order was erroneously sought and granted (this appears to be common cause).

22.3. The IDF’s contention that the documents relating to the notarial bond refer both to IDF and Isivande, that therefore the citation was a mere error and that perfection order should simply be amended is untenable for various reasons. Inter alia, Isivande is not even a party to these proceedings.

22.4. It is quite clear that an order granted in favour of one party, which had no locus standi in the first place, cannot simply be amended to refer to the correct party, more particularly when third party interests are involved.

23. Once the court holds that an order or judgment was erroneously sought or granted, it must, without further enquiry, rescind or vary the order and it is not necessary for a party to show good cause for the sub-rule to apply. (Naidoo v Somai 2011 (1) SA 219 KZD at 220F-G).

24. It is clear that once a judgment has been rescinded, the consequences thereof (for example, the perfection of the notarial bond) falls to be set aside as well. (Naidoo v Somai (supra) at 221G-H).

25. For these reasons, an order is granted in terms of the draft order which is attached hereto and marked “X”.

WEINER J

Counsel for Ensemble: Adv AJ Venter

Ensemble’s Attorneys: Shapiro-Aarons Inc.

Counsel for IDF: Adv N Gama

IDF’s Attorneys: Ezra Matlala Attorneys

Date of Hearing: 7 October 2014

Date of Judgment: 4 November 2014

IN THE SOUTH

GAUTENG HIGH COURT

(JOHANNESBURG)

CASE NO: 25501/2014

ENSEMBLE HOTEL HOLDINGS (PTY) LTD.........................................................Applicant/Intervening party

IDENTITY DEVELOPMENT FUND (PTY) LIMITED............................................................First Respondent

PRIMARY CO-OPERATIVE LIMITED............................................................................Second Respondent

IDENTITY DEVELOPMENT FUND (PTY) LIMITED....................................................................Applicant

PRIMARY CO-OPERATIVE LIMITED.....................................................................................Respondent

DRAFT ORDER

Before the Honourable Judge Weiner on 4 November 2014.

Having heard counsel for the Intervening party (Ensemble Hotel Holdings (Pty) Ltd) and Identity Development Fund (Pty) Ltd. and having read the documentation filed of record, an order is granted in the following terms:

1. The intervening party (Ensemble Hotel Holdings (Pty) Ltd) is granted leave to intervene in the application.

2. The order granted by the Honourable Justice Wepener on the 15th of July 2014 is set aside and rescinded.

3. Identity Development Fund (Pty) Ltd. is ordered to:-

a. Disclose the whereabouts of the goods removed by it on the 16th day of July 2014 from Shop 2, 2nd floor, Laico Isle situated at the corner of Rivonia Road and Daisy Street (the premises).

b. Return all goods removed by it on the 16th day of July 2014 from the premises.

4. Should Identity Development Fund (Pty) Ltd. not do so within 24 hours of this order being served on it, the Sheriff is authorised to collect and return all goods removed by it on the 16th day of July 2014 from the premises.

5. Identity Development Fund (Pty) Ltd. is to pay Ensemble Hotel Holdings (Pty) Ltd.’s costs.

BY ORDER

REGISTRAR