Transnet Limited v National Pride Trading 39 (Pty) Limited (4208/2008) [2008] ZAKZHC 103 (26 September 2008)

IN

THE HIGH COURT OF SOUTH AFRICA

DURBAN

AND COAST LOCAL DIVISION

CASE NO: 4208/2008

In the matter between:

TRANSNET

LIMITED

Applicant

and

NATIONAL PRIDE TRADING 39 (PTY)

LIMITED

Respondent

JUDGMENT

MSIMANG, J:

The applicant is a public company duly registered and incorporated with limited liability and trading as Transnet National Ports Authority. During October 1998 and January 1999 the applicant concluded a lease agreement with J & I Container Depot CC (“J & I) in terms of which the applicant leased to J & I a certain property (“the property”). In terms of the said agreement the lease would commence on 1 August 1998 and would thereafter continue for a fixed period of ten (10) years terminating on 31 July 2008. Clause 18.1 of the agreement reads as follows :-

“18.1 The lessee shall not have the right to cede or assign, mortgage or sublet or otherwise dispose of or in any way hypothecate this lease or the premises or any portion thereof, without the prior written consent of the lessor.”

After initially taking occupation of the property, in due time J & I fell into dire financial straits and could not meet the demands placed on it in respect of its monthly rental obligations to the applicant. After having assured the respondent that all formalities had been complied with, J & I agreed to cede its right, title and interest in the agreement with the applicant to the respondent. After such purported cession, the respondent took occupation of the property and operated its business thereon involving the storage of containers. It avers that it had to conduct extensive earthworks in order to render the property suitable for the storage of containers and that, for that purpose, it was involved in an outlay of approximately R1 400 000.00

It would appear that, notwithstanding the assurances which J & I had given to the respondent, there had been non-compliance with the provisions of clause 18.1 during the said purported cession and that the applicant’s prior written consent contemplated in that clause had not been obtained. It was for that reason that, on 18 August 2005, the applicant despatched a letter to J & I placing it on record that such non-compliance amounted to a breach of the agreement, in terms of the provisions of clause 28.3 of the agreement, requiring J & I to remedy the said breach within a period of thirty (30) days and, in the event of failure by J & I to remedy the breach within the period, threatening to terminate the agreement and to proceed with eviction proceedings. Two further letters couched in similar terms were written to J & I by applicant’s attorneys, one dated 22 December 2005 and the other dated 12 July 2006. Notwithstanding this correspondence, J & I never remedied the breach neither did the applicant ever implement its threat to cancel the agreement.

According to the respondent, negotiations between the applicant and the respondent regarding the future use of the property then ensued resulting in what is described as follows in the respondent’s answering affidavit:-

“….an oral agreement whereby the respondent would continue to occupy the premises at 10 Toulan Road beyond 31st July 2008 and regard being had to the fact that the respondent had spent so much on settling the debt of J & I and in renovating the premises the applicant had agreed to offer a fresh lease to the respondent for a further period of ten (10) years so as to allow the respondent an opportunity of recouping its losses and for this purpose, the amounts spent would be set off against rental until such point as the respondent was on an even footing and had recovered its losses.”

In the respondent’s answering affidavit the following is also stated :-

“……it is apparent that the applicant is reneging on its contractual obligations as regards to the respondent and as further proof of such connivance, despite repeated requests for the written lease as promised, the applicant has failed, neglected and/or refused to reduce the terms of the agreement to writing which resulted in the impasse with respect of the rentals claimed.”

It is common cause that, despite its occupation of the property, for a considerable period, the respondent did not pay any rental to the applicant. It was for that reason that, on 7 May 2008, the applicant issued summons against the respondent under Case No. 5025/2008 claiming, inter alia, a sum of money allegedly representing the market rental of the property during the period of occupation of the same by the respondent and further sums in respect of municipal charges and occupational rental. The respondent is defending the said action and has filed a plea and a counter-claim. In its counter-claim the respondent seeks a declarator that the oral lease agreement it had concluded with the applicant be declared as valid or, in the alternative, an order directing the applicant to enter into a written agreement of lease with the respondent for a period of ten (10) years with an option of renewal, or further alternatively, an order directing the applicant to pay to the respondent a sum of R1 400 000.00, or such sum as the respondent may be able to prove in respect of the improvements effected upon the property. Applicant’s plea to this counter-claim is yet to be filed.

On 1 April 2008 the applicant launched the present application seeking an order of eviction against the respondent and alleging that it is the owner of the property and that the respondent is in possession thereof. The application is being opposed by the respondent which, in addition to raising a special plea of non-joinder, relied on the said oral agreement of lease as well as on a lien based on the improvements it had allegedly effected upon the property.

However, during argument Mr. Pillimer, who appeared for the respondent, did not appear to persist with the argument based on the special plea. Regarding the allegations of the oral agreement of lease and improvements effected upon the property, both are denied by the applicant. Mr. Pillimer submitted that these disputes are irresolvable on the papers and that they should be referred to oral evidence,

Dealing first with the allegation of an oral agreement of lease, Mr. Lopes, who appeared for the applicant, contended that referring that dispute to oral evidence would not make any difference.

The allegations made in the respondent’s answering affidavit relating to that issue are not sufficient to sustain a finding that

such an agreement had been concluded by the parties. Besides, so it was further argued, it was evident from the said affidavit that the parties had intended that the writing should embody the agreement and therefore that the legal validity thereof would be postponed until due execution of a written document. As no such document was ever executed, it followed that the agreement never came into being, the argument concluded.

The conclusion of the oral agreement by the parties was pleaded in sub paragraph 7.16 of respondent’s answering affidavit and the relevant part of the sub-clause has already been referred to in this judgment. Though in that clause the respondent states that an oral agreement had been concluded whereby it would continue to occupy the property beyond 31 July 2008, it is added that the applicant had agreed to offer a fresh lease to the respondent for a further period of ten (10) years and that the amounts spent by the respondent to effect improvements upon the property would be set off against rental until such point as the respondent was on an even footing and had recovered its losses. Nowhere in the respondent’s answering affidavit is it stated that such an offer was ever accepted by the respondent. Besides, it is evident from the contents of the sub-paragraph that the amount of rental payable and the amount of those improvements had not been agreed upon. Clearly therefore the contents of the respondent’s answering affidavit do not show that an agreement of lease was ever concluded by the parties.

Furthermore, the contents of respondent’s answering affidavit show that it had been the intention of the parties that their agreement be embodied in writing and that there would be no binding obligation until the terms thereof had been reduced to writing. According to the respondent, the agreement was never reduced to writing, resulting :-

“….in the impasse with respect of the rentals claimed.”

Mr. Lopes is accordingly correct in his submission that referring the issue for the hearing of oral evidence would not make any difference.

Different considerations, however, apply to the dispute relating to the improvements allegedly effected upon the property.

Clearly this dispute is not resolvable on the papers and I do not share Mr. Lopes’ view that the applicant’s denial that such improvements were effected is so far fetched or clearly untenable that this Court should be satisfied in merely rejecting it on the papers. In the exercise of my discretion I am accordingly satisfied that it would be proper for this dispute to be referred for the hearing of oral evidence.

Counsel has assured me that the dispute regarding those improvements will rear its head again during the trial of the matter between the parties in Case No: 5025/2008 and they have suggested that, should I decide that the dispute be referred for the hearing of oral evidence, such a dispute should be referred for determination during the trial in that matter.

The suggestion appears to me to be a sensible one and I fully endorse the same.

At the end of argument Mr. Pillimer made a tender that, should that dispute be referred for the hearing of oral evidence, the respondent would, with effect as from 29 July 2008, pay to the applicant monthly rental in the sum of R86361.00 plus charges in respect of municipal rates, refuse removal and sewerage rates which rental shall be subject to an annual escalation at the rate of 10%. This tender will be incorporated in the order to be made in this matter.

I accordingly make the following order :-

(a) The application be referred for the hearing of oral evidence as to whether the respondent has an enrichment lien arising out of the improvements it allegedly effected to the property situated at 10 Toulon Road, Bayhead, Durban (“the premises”).

(b) The hearing of oral evidence be set down together with the action under Case No. 5625/2008 on a date to be fixed by the Registrar.

(c) The deponents to the affidavits in the application be present at the hearing of oral evidence to testify and to be cross-examined.

(d) The provisions of rules 35, 36, 37 and 38 shall apply to the hearing of the said oral evidence.

(e) Pending the final determination of the hearing referred to in paragraph 1 above and for so long as the respondent remains in occupation of the premises the respondent shall pay in lieu of rental R86362.03 per month which shall increase annually on 1 August each year by 10% if the matter has not yet been resolved and the respondent shall in addition pay R33 435.00 per month as a payment in respect of municipal rates, refuse removal and sewerage rates until; 31 March 2009 and thereafter, if there is a change, monthly, one twelfth of the municipal assessment of these charges for each subsequent year.

(f) The said amounts shall be due and payable with effect from 1 October 2008 and payable monthly in advance on or before 1 October and each subsequent month.

(g) In addition the respondent shall pay R86 362.03 plus R33 435.00 retrospectively for the period from 1 August 2008 to 30 September 2008 within 14 days of the date of this order.

(h) The costs of the application are reserved for decision by the court hearing the oral evidence.

For the Applicant: Mr. G. Lopes SC with Mr. D W Finnigan (instructed by Siwendu & Partners Inc.)

For the Respondent: Mr. M Pillemer SC with Mr. R Mohamed (instructed by Shaukat Karim & Co.)

Matter argued:

6 September 2008

C A V

Judgment delivered: 26 September 2008.