Hospitality Industry Training and Consultants CC and Another v Meer N.O and Others (AR45/13) [2013] ZAKZPHC 67 (13 December 2013)

IN THE HIGH COURT OF SOUTH AFRICA KWAZULU-NATAL DIVISION, PIETERMARITZBURG

CASE NO: AR45/13

DATE: 13/12/2013

In the matter between:-

HOSPITALITY INDUSTRY TRAINING AND.........................................................FIRST APPELLANT

CONSULTANTS CC

DEIRDRE SCHOULTZ......................................................................................SECOND APPELLANT

And

DR. U A MEER N.O.............................................................................................FIRST RESPONDENT

FAROOQ MEER N.O.....................................................................................SECOND RESPONDENT

EBRAHIM KASSIM SEEDAT N.O...................................................................THIRD RESPONDENT

ABDOOL GAFFOOR SULIMAN OSMAN N.O..........................................FOURTH RESPONDENT

JUDGMENT

KOEN J:

INTRODUCTION:

[1] This is an appeal against a judgment of the magistrates’ court, Durban granted against the First and Second Appellants (the First and Second Defendants in the court a quo), the one paying the other to be absolved, for:

'...claim (a) for payment of R78 755,63.

Interest on the aforesaid amount at 15.5 Tempo Mora (sic).

In respect of claim (b) payment of R135 622;00.

Interest on the aforesaid amount at 15.5 Costs of suit - attorney and client scale.’ There was also a counterclaim by the Appellants but the judgment is silent on the outcome thereof. It was presumably dismissed.

[2] The parties will in this judgment be referred to as in the court a quo.

THE PLEADINGS:

[3] The following claims arose for adjudication on the pleadings:

(a) A claim for 'rental and related charges and interest', computed as set out in annexure ‘B’ to the particulars of claim, being 'rental amounts’ of R25 938,92 per month for June, July, August and September 2007, less an amount paid of R25 000,00 giving the total of R78 755,68. This claim was stated in prayer (a) to the prayer to the particulars of claim to be in respect of arrear rental and damages for holding over’.

(b) A claim for the ‘fair and reasonable costs of restoring the lease premises to the condition in which it was, fair wear and tear excepted, at the commencement of the agreement of lease, in the sum of R135 522,00,

(c) A counterclaim by the First Defendant for the return of the deposit which had been paid and was retained by the Plaintiffs, in the sum of R36 290,22,1

BACKGROUND:

[4] The First Appellant carries on business doing training and development. It previously conducted this business from the fourth

floor of Logtek House, 135 Smith Street, Durban. The premises on the fourth floor were not ideal for its business as the floor layout was more suitable for office accommodation. When the three year lease on that floor came to an end, the second floor, previously used for training and education by Cambridge College, which had been liquidated became available. That floor had been configured into classrooms with facilities such as desks bolted to the

' This amount was common cause between the parties.floor, blackboards and overhead projectors which were better suited to the First

Defendant.

[5] Following negotiations with Alliance Property Group ('Alliance’), the rental agent of the Plaintiffs, the written lease forming the subject of the present litigation was concluded. The lease would be for an initial period from 1 June 2004 to 31 May 2004 with an option of renewal. The Second Defendant signed as a guarantor for the proper performance of the First Defendant’s obligations in terms of the lease agreement. The deposit which had been paid in respect of the First Defendant's occupation of the fourth floor was retained but now in respect of its occupation of the second floor.

[6] The terms of the lease agreement material to the present action included inter alia the following:

(a) The First Defendant shall, within 7 days of the date of commencement of the lease, notify the Plaintiff in writing of the details of any defects in the condition of the leased premises and failing such notification, the First Defendant shall be deemed to have received the lease premises in a thoroughly good state of tenantable repair and condition (clause 8.4);

(b) The First Defendant was not entitled to sublet the leased premises or any part thereof without the prior written consent of the landlord which consent would not be unreasonably withheld (clause 8.21.1);

(c) If, on termination of the lease, repairs or renovations are necessary to the leased premises by virtue of the failure of the First Defendant to carry out the obligations imposed upon it in terms of the lease, the Plaintiff would be entitled to carry out such repairs or renovations as are necessary and to recover the costs from the First Defendant. The First Defendant would also be responsible for damages for loss of rental during the period the repairs and renovations are being carried out at not less than the basic monthly rental payable immediately prior to termination of the lease and reckoned until the end of the month in which the work is completed, (clause 9.4);

(d) If the lease expires or if the Plaintiff cancels the lease and the First Defendant disputes the Plaintiff’s right to evict and remains in occupation of the premises, then, pending settlement of the dispute, whether by negotiation, arbitration or litigation the First Defendant shall continue to pay an amount equivalent to the monthly rent provided for in the lease, monthly in advance on the first day of each month and shall pay the other charges which he would have been liable to pay in terms of the lease (clause 23.1).

[7] Towards the end of the lease, the First Defendant enquired from Alliance whether it could remain on in the premises on a month to month basis. This request was declined by the Plaintiffs. It is common cause that the lease accordingly terminated by effluxion of time on 31 May 2007. Save for having failed to return the keys to the premises it is also common cause that by 30 May 2007 the First Defendant had vacated the lease premises.

[8] The basic rental for the last year of the lease was an amount of R18 558,88 per month. Together with other charges for which the First Defendant became liable in respect of security and the like, an amount of R25 938,92 per month was paid. During its tenancy the First Defendant sublet portion of the leased premises to a sub¬tenant, Esiqongweni, without the written consent of the Plaintiffs. Esiqongweni continued to occupy that portion of the premises after 1 June 2007, was invoiced by the Plaintiffs for rental and other charges which became payable in respect of such tenancy, and paid these amounts directly to the Plaintiffs.

[9] An inspection of the premises was held on 10 May 2007 regarding the condition of the premises. A further meeting was to have been held on 30 of May 2007 at which the keys to the premises would be handed over. This meeting did not proceed and the Second Defendant on behalf of the First Defendant retained the keys, whether inadvertent or otherwise, until they were eventually returned, pursuant to a court order, on or about 6 September 2007,

THE ‘RENTAL’ CLAIM:

[10] The Plaintiffs' first claim for R78 755,63 is framed as one for rental for the period June 2007 to September 2007. The lease between the Plaintiffs and the First Defendant had however come to an end on 31 May 2007 and was no more after that date. The First Defendant had vacated the lease premises by 30 May 2007. In breach of its obligations in law, the First Defendant failed to return the keys and therefore did not restore vacant possession to the Plaintiffs. There was however no lease any longer in place for the period from June 2007 to September 2007 and in the absence of any contractual stipulation that rental would continue to be paid pending the return of the keys; a claim for rental cannot be sustained.

[11] At best for the Plaintiffs they might have a claim for damages for the failure on the part of the First and Second Defendants to restore undisturbed use and enjoyment of the premises to it because of the keys being retained. This claim was however not phrased as a damages claim and no evidence of any damages was adduced. Even if a benevolent interpretation of the particulars of claim was adopted, by construing the reference to 'and damages for holding over' in prayer (a) to the prayer to the particulars of claim as sufficiently alleging a damages claim, then the claim also falls to be dismissed for one or more or all of the following reasons:

(a) The claim for the payment of R78 755,63 during the period from June 2007 to September 2007 does not fall within the ambit of clause 14 of the lease agreement providing for ‘holding over’ as it does not arise from the Plaintiffs having 'cancelled' the lease and the First Defendant disputing the Plaintiff's right to do so and remaining in occupation. If it did fall within the ambit of that clause, then the First Defendant would have been required to continue to pay all amounts due by it in terms of the lease on the due dates. In casu the lease had already terminated.

(b) Similarly this is not an instance contemplated in clause 23 of the lease as the First Defendant did not dispute the Plaintiff's right ‘to evict’ and remained in occupation of the premises. In casu, the First Defendant had accepted that the lease had come to an end by effluxion of time and its default consisted only of its failure to return the keys. However, even if clause 23 properly found application on the basis that by failing to return the keys, the First Defendant was 'remaining in occupation of the premises’ for the purposes of that clause, thus giving rise to the obligation to continue paying an amount equivalent to the monthly rent provided for in the lease together with all other charges which it would have been liable to pay, it is clear from the wording of clause 23.1 that such amounts paid 'shall be deemed to be amounts paid by the TENANT on account of damages suffered by the LANDLORD by reason of the unlawful holding over of the premises by the TENANT’ (my underlining).

(c) Being damages, the Plaintiffs would be subject to the duty to take reasonable steps to mitigate their damages. Even leaving aside considerations of mitigation arising from contentions such as that the locks to the premises were accessible and could easily be changed, or padlocks cut, and that access was possible to the premises via the subtenant’s access, or that the caretaker and security had keys, that the Defendants had left a sign on the front door with their contact details and the Plaintiffs could have contacted them to collect the keys but that this was not done until August 2007 and then the keys returned2 the Plaintiff failed to discharge the onus of properly proving the extent of its damages, in one or more of the following respects:

(I) If clause 23 does find application, then the Plaintiff failed to lead any evidence of what a reasonable market rental would be. Assuming however clause 23 would relieve the Plaintiffs of that obligation, the Plaintiff nevertheless failed to properly prove its claim in the light of the following;

(ii) The Plaintiffs claimed the full rental amount for September 2007 in the sum of R25 938,92, when through the evidence of their agent it was accepted that a pro rata adjustment would have to be made for the period until 6 September 2007 only,

(iii) The subtenant Esiqongweni remained in occupation, was invoiced and made payments directly to the Plaintiffs in respect of portion of that portion of the leased premises from 1 June 2007 onwards. The amounts of such rental received clearly would have to be deducted from any damages claim. No

Most of these arguments don’t find favour with me as the common law obligation was always on the Defendants to ensure that the keys were returned at the end at the expiry of its tenancy. evidence was however led of the amounts that Esiqongweni paid to the Plaintiffs;

(iv) There was no suitable explanation advanced regarding the deductions for security services when Dennis, the cleaner, continued to act as a security guard after Ensure's contract was terminated.

[12] As much as the Plaintiff accordingly could have had a damages action available to it for the First Defendant's failure to return the keys on termination of the lease, that obligation being on the First Defendant and not capable of being avoided by contentions that it was the Plaintiff who failed to collect the keys, the Plaintiffs case fell short of proving the amount of such damages on a balance of probabilities.

THE CLAIM FOR COSTS OF REPAIR AND RENOVATIONS:

[13] Reliance was placed in this regard on the provisions of clause 9.4 of the lease agreement quoted in paragraph [6] above. That clause however contemplates not only the failure on the part of the First Defendant to carry out repairs or renovations necessary on termination of the lease, but contemplates that the Plaintiffs ‘...carry out such repairs or renovations as are necessary and to recover the costs from the tenant.’ It was common cause that the repairs allegedly required were not carried out by the Plaintiffs, and accordingly that the actual costs had not yet been incurred. The claim was in respect of prospective costs which the Plaintiffs maintained they would have to incur should the repairs or renovations be effected. No such repairs were ever undertaken when Cambridge College vacated the premises. That clause accordingly prima facie does not afford a cause of action to the Plaintiffs.

[14] However, even if the clause 9.4 was interpreted to include also costs which might be required to be incurred in the future to restore the premises, or alternatively such claim having been pursued at common law (which would appear to be clearly competent), the claim still falls to be dismissed on other grounds set out below.

[15] In terms of clause 8.5.4 the First Defendant was required at the termination of the lease to hand over and deliver the lease premises to the Plaintiff in the same good order and condition as they were in when the First Defendant first took occupation of the lease premises, but with due regard to the First Defendant’s obligation to maintain the lease premises in terms of the lease. The provisions of this clause must obviously be interpreted against the obligation at common law that a lessee is obliged to restore premises to the lessor at the termination of a lease in the same or substantially the same condition as they were in at the start of the lease, fair wear and tear excepted.3

[16] There was no evidence from the Plaintiffs as to the state of the property at the time of the commencement of the lease. The witnesses for the Defendants however led extensive evidence on the deplorable state of the premises upon commencement of the lease. The Plaintiffs' witness, Solly, who is the representative of the Plaintiffs’ managing agents, Solvista Investments (Pty) Limited which only became associated with the administration of the property during the currency of the lease, could not dispute the Defendants’ evidence regarding the state of the premises at the commencement of the lease.

[17] To overcome that problem, the Plaintiffs sought to place reliance on the deeming provision contained in clause 8.4 relating to the ‘CONDITION OF PREMISES', It provides that the First Defendant shall, within 7 days of the date of commencement of the lease, notify the Plaintiffs in writing of the details of any defects in the condition of the lease premises and, failing such notification, the First Defendant shall be deemed to have received the leased premises in a thoroughly good state of tenantable repair and condition.

[18] The Defendants witnesses contend that such a list of defects was furnished to Alliance, the Plaintiffs agent. Ms Kloke, testified that such a list had been typed up by her on about 1 June 2004 and was furnished as the First Defendant was under pressure to get the list out because it only had 7 days to advise Alliance about any defects. As far as she could recall she sent the list to Alliance. She said it was not possible that she had not sent the list, that it would, in all probability, have been sent AJ Kerr The Law of Sole and Lease (2004) 3ed at 414.

via fax or email, and that it was improbable that the letter had not been sent given the efficient manner in which the First Defendant

conducted business and adhered to deadlines. Ms Klewinghaus also explained that this list had already been provided to Daphne, the representative of Alliance at the time, prior to a meeting which it was common cause took place on 10 June 2004. Daphne attended the meeting, armed with this snag list and proceeded with a 'walkabout'. She never raised any objection that this list may have been delivered late. There was no evidence from Alliance to say that the letter was not received. Daphne was also not called as a witness to rebut the evidence of the Defendants1 witnesses in this regard. As a matter of probability the list would have been received by Alliance within the 7 days. If it was not received within the 7 days then the list would have been received by Alliance very shortly thereafter as it appears to be established that Daphne certainly had the list by the 10th June 2004 when they did the walkabout.

[19] The Plaintiffs also contended, albeit somewhat meekly, that the dispatch of the notice to Alliance did not constitute notification to the Plaintiffs as principal. This argument can safely be dismissed. Alliance was the Plaintiffs’ agent representing it in all interactions with the First Defendant as lessee. Solly, as the representative of the successor in title to Alliance, testified that notification of the defects ‘would obviously be with Alliance’. The knowledge acquired by Alliance as agent even if not in fact communicated to the Plaintiffs as its principal, is imputed to the latter by reason of the fact that the agent has acquired such knowledge in the course of the agent’s employment in circumstances where there was clearly a duty upon the agent to communicate information obtained. The list of defects related to a material issue which Alliance would have considered as such and which a reasonable person would be expected to impart to the Plaintiffs as the persons who had delegated to their agent the conduct and control of their affairs 4

[20] However, even if the snag list had not been notified to Alliance as the Plaintiffs agent within the 7 days, Mr Boulle, on behalf of the Defendants, in the alternative argued that the deeming provision is a provision capable of rebuttal.

Standard Bank of $ A Limited v Prinstoo and another (Prinsloo and another intervening) 2000 (3)

SA 576 (C) 589E.

Canadian Law recognises four types of deeming provisions, namely deeming rules that create a legal fiction, or declare the law, or declare certain facts as established, or confer a discretion.5 Clause 8.4 would be a deeming provision declaring certain facts established. In English Law it has been held that it would be ’quite wrong to carry the fiction beyond its originally intended purpose so as to deem a person in fact lawfully here not to be here at all’6 and that 'the intention of the deeming provision, in laying down a hypothesis, is that the hypothesis shall be carried as far as necessary to achieve the legislative purpose, but no further’.7 In English Law the approach appears to be that a deeming provision must not operate further than necessary and that in the realm of fact it cannot usurp proof of the actual facts where those are contrary to the deemed facts. This also appears consistent with the jurisprudence of our Constitutional Court, albeit in a statutory context, where it has been held that;

'One must endorse the objection to a deeming provision in a statute which has the effect of obliging a court to come to an unjust factual conclusion conflicting with that to which an objective evaluation would lead and which might also conflict with the provision of the Bill of Rights'.9

[21] The Supreme Court of Appeal has also held that one of the usual meanings of ‘deemed’, is merely prima facie or

rebuttable.9

[22]. Applied in that way, and assuming the deeming provision to apply, the Defendants had at least an evidentiary onus to adduce evidence that the premises were not in a good and proper state upon the commencement of the lease. That was done by the uncontradicted

evidence of the Defendants’ witnesses, which was not countered by evidence from Daphne, who conducted the ‘walkabout’ on 10 June 2004, or any other witness on behalf of the Plaintiffs. There was no suggestion that Daphne was not available to give evidence. The Plaintiffs’ failure to lead the evidence of Daphne accordingly gives rise to an adverse inference being drawn

6. MN Kandev & JJ Lennard 'Interpreting and applying deeming provisions of the Income Tax Act' (2012) 60(2) Canadian Tax Journal - Review Fiscale Canadienne 275-303.

Szoma u Secretary of State for the Department of Work and Pensions [2006] 1 Al! ER 1 para 25.

7. Szoma (supra) para 25.

8. S v Dlamini, S v Dladla and others; S v Joubert; S v Schietekat [1999] ZACC 8; 1999 (4) SA 623 (CC) at para 41.

9. S v Rosenthal 1980 (1) SA 65 A at 75F-76A and Ashersons v Panache World (Pty) Ltd 1992 (4) SA 611 (C) at 613A.

against the Plaintiffs, namely that the Defendants' evidence as to the state of the leased premises at the commencement of the lease was correct.

[23] Regardless however of the state of the premises at the commencement of the lease, there are also various other shortcomings in the evidence regarding the repairs, which can be summarised as set out below. I find these criticisms fully justified:

(a) No evidence was lead that the repairs allegedly required did not constitute or result from fair wear and tear;

(b) Many of the quotations relied upon in substantiation of the amount claimed constituted hearsay evidence, particularly that relating to air- conditioning, tiles and plumbing;

(c) Much of the repair work allegedly required seems to overlap with problems already identified in the June 2004 snag list. This was accepted by Solly;

(d) The witness Alley who testified as to the breakdown and quantum of the repair costs, did not give a separate break down of the material and labour components of his quotation. He had costed the restoration of rooms from classrooms back to offices in contradiction of Solly’s evidence. He did not have his notes on which he based his costings and accordingly could not respond fully or adequately to questions challenging his evidence. He also failed to include discounts he might get from suppliers.

[24] On considering all the evidence, the Plaintiffs failed to discharge the onus of proof upon them in regard to the cost of repair claim on a balance of probabilities.

THE CLAIM FOR THE RETURN OF THE DEPOSIT:

[25] It is common cause that the amount of the deposit was R36 290,22. The deposit had to be refunded on termination of the lease. Clause 22 created various situations in which the Plaintiffs as landlord would have the right to apply the whole or any portion of the deposit in respect of any amounts for which the First Defendant as tenant would remain liable. The Plaintiffs have failed to prove any claim which could be set off against the deposit.

[26] The deposit should have been refunded on the 1st June 2007. Solly could not advance any right the Plaintiffs would have to hold the deposit for any period after the 1st of June 2007. Obviously, they might initially have claimed to be entitled to do so on the basis of the claims for which judgment was granted in their favour by the court a quo. Those claims have however now fallen away.

[27] Accordingly the deposit should have been returned to the First Defendant on the 1st June 2007, that being the day on which it was due, owing and payable.

RESERVED COSTS;

[28] On the 2nd April 2009 the trial was adjourned at the instance of the Plaintiffs. We were advised that the Plaintiffs were ordered to pay the costs of the adjournment including the costs of the Defendants' counsel. However, the extent of counsel’s fees was reserved. The court a quo had not ruled on those costs. The Defendants have accordingly asked that counsel's reasonable fee on brief for that day be allowed.

[29] This contention was not opposed by the Plaintiffs. It seems reasonable in the circumstances that these fees be allowed, subject

to any discretion of the taxing master.

[30] The Defendants have been successful in this appeal both in respect of reversing the judgment granted against them and in succeeding with their counterclaim. They are accordingly entitled to the costs of this appeal.

ORDER:

The following order is granted:

(a) The appeal succeeds with costs.

(b) The order of the court a quo is set aside and substituted with the following:

(I) The Plaintiffs' claims are dismissed with costs, such costs to include Counsel’s reasonable fee on brief in respect of the adjournment on 2 April 2009;

(ii) Judgment is granted against the Plaintiffs in their representative capacity as trustees of the 135 Smith Street Trust in terms of the First Defendant’s counterclaim for:

(aa) Payment of the sum of R36 290,22;

(bb) Interest on the sum of R36 290,22 at the rate of 15,5% p.a. from 1 June 2007 to date of final payment;

(cc) Costs of suit.

MNGUNI J:

DATE OF HEARING: 29 November 2013.

DATE OF JUDGMENT DELIVERED: 13 December 2013.

APPELLANT’S COUNSEL: ADV A J BOULLE

APPELLANT’S ATTORNEYS: VOGEL VAN DER SANDT ATTORNEYS

Ref.: HOS2/0008 Tel: 031-5727574

RESONDENT'S COUNSEL: ADV. M S KHAN

RESPONDENT’S ATTORNEYS: LOCKHAT AND ASSOCIATES

Ref.: MrParuk Tel.: 031- 3013405