REPORTABLE
REPUBLIC
OF NAMIBIA
HIGH
COURT OF NAMIBIA MAIN DIVISION, WINDHOEK
REASONS FOR JUDGMENT
Case No. I
2425/2010
In the matter between:
LIDA MARIE CC
PLAINTIFF
and
O’PORTUGA
RESTAURANT CC DEFENDANT
Neutral
citation: Lida Marie CC v O’Portuga Restaurant CC (I
2425-2010) [2013] NAHCMD 109 (23 April 2013)
Coram: VAN NIEKERK J
Heard: 29 and 30
November 2012
Delivered: 30
November 2012
Reasons: 23
April 2013
Flynote: Contract – Clause providing for consent to be
given in writing – This provision entrenched by general
non-variation clause – Landlord and tenant – Lease –
Alleged oral consent given for substitution of tenant - Effect
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REASONS
FOR JUDGMENT
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VAN NIEKERK J:
[1] These
are reasons for an order made on 30 November 2012 in which I granted
judgment for the plaintiff in the following terms:
‘AD CLAIM 1
An
order confirming the cancellation of the agreement between the
parties.
An
order ejecting defendant from the premises at Erf 1318, 312 Sam
Nujoma Avenue, Klein Windhoek, Windhoek.
AD CLAIM 2
Payment
of 359 965.64, as agreed.
Interest
on the aforesaid amount at the prescribed rate of 20% per annum from
date of judgment to date of payment.
5. Costs of suit, such
costs to include the costs of one instructing and two instructed
counsel.’
[2] The
plaintiff is the owner of immovable property situate at Erf 1318, 312
Sam Nujoma Avenue, Klein Windhoek (‘the premises’). In
an action instituted against the defendant, the plaintiff alleges
that on 3 March 2006 the plaintiff as landlord entered into a written
lease agreement (Annexure “A” to the particulars of
claim) with Higgs Seven CC as tenant; that the tenant, who conducted
business on the premises under the name and style of El Gaucho
Argentine Grill, alternatively Argentine Grill, ceased to do business
as such and vacated the premises during about December 2008; that the
defendant then took possession of the premises and commenced to do
business as a restaurant under the name and style of O’Portuga;
that from the time of its occupation the defendant paid a monthly
rental to the plaintiff, which the latter accepted; and that a tacit
lease agreement between the parties came into being. It is further
alleged that on or about 9 June 2009 the plaintiff gave the defendant
notice of cancellation of the tacit lease agreement and notice to
vacate the premises in terms of section 32(1)(a) of the Rent
Ordinance, 1977 (Ordinance 13 of 1977), on or before 30 June 2010,
but that the defendant failed or refused to vacate the premises by
the due date and remains in possession thereof.
[3] The
plaintiff’s first claim is for an order confirming the
cancellation of the lease agreement and for an order ejecting the
defendant from the premises. The plaintiff’s second claim is
for damages, plus interest, arising from the defendant’s
continued occupation of the premises, being the difference between
the rental paid by the defendant and the market related rental for
the premises.
[4] In
its amended plea and amended counterclaim the defendant raises an
issue regarding the identity of the tenant with whom the plaintiff
concluded Annexure “A”, alleging that the tenant was
actually Higgs Eight CC, but that the parties, as a result of a
common error, wrongly described the tenant as Higgs Seven CC. In its
counterclaim the defendant claims rectification of Annexure “A”
to reflect the correct name of the tenant. The plaintiff admits that
the tenant is incorrectly described and that it should actually be
Higgs Eight CC, but raises a special plea to the counterclaim,
alleging that the defendant does not have locus standi to
claim rectification.
[5] At
the start of the trial, Mr Frank, assisted by Mr Dicks,
applied on behalf of the plaintiff that legal argument be heard on a
point, which, if upheld, would determine the outcome of plaintiff’s
first claim without the need for evidence. The defendant agreed to
the application, which was granted in the interests of shortening the
proceedings. The application was heard on the basis that the tenant
with which the plaintiff first concluded annexure “A” was
indeed Higgs Eight CC. Counsel referred to the summary
judgment application brought by the plaintiff in respect of the first
claim earlier in the litigation between the parties. He drew
attention to paragraph 4.1 of the opposing affidavit deposed to on
behalf of the defendant by its managing member, Mr Pinguinhas, in
which the latter states that Annexure “A” at all times
prevailed in respect of the premises. In paragraphs 4.4 – 4.6
of the opposing affidavit he states, inter alia, that he since
purchased the full membership in Higgs Eight CC and became its sole
member; that prior to the membership sale the premises were used as a
restaurant under the name and style of El Gaucho Restaurant; that
since the sale of membership this restaurant ceased to operate and
was replaced with the O’Portuga Restaurant; that the name of
Higgs Eight CC was later changed to O’Portuga CC; that the
defendant is in fact the same entity, albeit with a different name,
as the entity mentioned as the tenant in Annexure “A”;
that a tacit lease agreement did not come into being as alleged by
the plaintiff; and that the lease is in fact still governed by
Annexure “A”. (I note, however, that the defendant is
actually O’Portuga Restaurant CC and not O’Portuga CC).
[6] Mr
Frank pointed out that essentially the defendant’s
defence was that only a name change had occurred. This defence was
echoed in paragraphs 5.2(a), (b) and (c) of the defendant’s
plea where it is alleged that the name of the tenant under Annexure
“A”, Higgs Eight CC, was later changed to O’Portuga
Restaurant CC, the defendant. However, after discovery took place,
the defendant amended its defence as pleaded. The defence no longer
amounted to a mere name change. Instead, the defendant alleges in
paragraphs 5.2(a), (b) and (c) of its amended plea that, during the
currency of Annexure “A” the membership of Higgs Eight CC
was sold to Mr Pinguinhas, who then substituted the tenant, Higgs
Eight CC, with the defendant; that the substitution was done with the
prior knowledge, consent and cooperation of the plaintiff; that the
aforesaid sale and substitution were effective from close of business
on 1 June 2008 and that the defendant opened its doors to the public
on 18 June 2008.
[7] The
defendant also amended its counterclaim to reflect the allegation
that a substitution as aforesaid occurred. In response to a request
for further particulars by the plaintiff, defendant inter alia
pleaded that the word ‘substituted’ is used to mean that
the defendant took the place of and replaced Higgs Eight CC in
Annexure “A”; that the substitution was oral; that the
substitution was done with the oral authorization and consent of the
plaintiff and Higgs Eight CC; and that the terms of the substitution
were that the defendant took the place of and replaced Higgs Eight CC
in Annexure “A”.
[8] Mr
Frank submitted that the alleged substitution in this case,
whereby the defendant took the place of and replaced the former
tenant, in fact amounts to an assignment. In this regard he relies
on the following extract from A J Kerr, The Law of Sale and Lease,
(2004) at p. 453, where the learned author states:
‘ “[A]n assignee”,
in the words of Wessels J in Rolfes Nebel & Co v Zweigenhaft
[1903 TS 185 at 189], “is a person who enjoys the benefits and
takes over the obligations of the lessee.” On a later page [at
p190] the learned judge explained the position more fully:
If the lessee parts with all his
rights to the lease, and the [assignee] undertakes to perform all the
obligations, and if the lessor consents to accept the [assignee] in
the place of the lessee, then there is a complete delegation and the
[assignee] steps into the shoes of the lessee.’
[9] Mr
Frank pointed to paragraph 2a of the Schedule of Conditions to
Annexure “A” which stipulates, inter alia, that
the tenant shall not cede or assign the lease or place anyone else in
occupation of the premises without the written consent of the
landlord (the plaintiff) first being had and obtained. As the
defendant’s case, as pleaded, is that the plaintiff gave oral
authorization and consent for the assignment/substitution, the latter
therefore falls foul of the express terms of the lease agreement.
[10]
Counsel further referred to paragraph 9a of the Schedule of
Conditions to Annexure “A”, which provides that no
alteration or variation of the lease shall be of any force or effect
unless it is recorded in writing and signed by both the landlord and
the tenant, and to paragraph 9c of the Schedule of Conditions to
Annexure “A”, which provides that the lease sets out the
entire agreement. He referred to the following passage from
Christie’s The law of contract in South Africa (6th
ed), p. 464 where the following is stated:
‘When a non-variation
clause appears in a contract it creates a situation in which the same
argument of freedom of contract or pacta sunt servanda can
lead to two opposite conclusions. It can be argued that the original
contract must be respected and a subsequent agreement that is not in
writing must be ignored. Or it can be argued that the subsequent
agreement, made animo contrahendi, must be respected and the
non-variation clause ignored. After some controversy the Appellate
Division chose the former of these two irreconcilable views in SA
Sentrale Ko-op Graanmpy Bpk v Shifren 1964 4 SA 760 (A), and
Shifren was confirmed after full argument in Brisley v
Drotsky 2002 4 SA 1 (SCA). Any attempt to agree informally on a
topic covered by a non-variation clause (including cancellation, and
an extension of time for payment, if covered by such a clause) or to
vary informally a contract containing a non-variation clause must
therefore fail.’
(The
Shifren matter was followed in Namibia Beverages v Amupolo
1999 NR 303 (HC) at 305E-F and Brisley v Drotsky was applied
in Mushimba v Autogas Namibia (Pty) Ltd 2008 (1) NR 253 (HC)
at 260G-H).
[11]
Counsel submitted that, therefore, any oral substitution of the
tenant would be invalid. In fact, if evidence were presented of oral
substitution, same would be inadmissible on the basis of the parol
evidence rule. It would also be no use for the defendant to allege
that the plaintiff orally amended the lease agreement to allow for
the oral consent to the substitution because the non-variation
provision in paragraph 2a is entrenched by the non-variation clause
in paragraph 9a.
[12] In
conclusion counsel submitted that the defendant’s defence to
claim 1 must fail and moved for judgment.
[13] Mr
Corbett, who appeared for the defendant with Mr Wylie,
submitted firstly that the parol evidence rule has no application to
the substitution of the defendant for Higgs Eight CC in Annexure “A”.
The reason is, he submitted, that the rule does not apply to
evidence tendered to identify the parties to the contract because
such evidence does not contradict or vary the terms of the contract.
In this regard he relies on the following extract from S J Cornelius,
Principles of the Interpretation of Contracts in South Africa:
‘It has also been said
that evidence to identify the parties or things concerned or referred
to in the contract, is admissible and is not affected by the
parol-evidence rule. Again, the reason is that such evidence does
not contradict or vary the terms of the contract. The evidence
concerned is only presented to apply the terms of the contract to the
facts of a particular case and not to determine the extent or meaning
of the terms. As a result, this is also not a true exception to the
parol-evidence rule.’
[14] Mr
Corbett submitted that defendant is not seeking to lead
evidence to establish a variation of a term of the contract, but
simply to say that the party who is the tenant has been substituted
by another party. However, I agree with Mr Frank that the
evidence about the substitution will not be evidence to identify the
party with whom the plaintiff contracted. Clearly it will be
evidence about the variation of an essential term of the contract,
namely the identity of the tenant. Therefore the parol evidence rule
applies.
[15] As
far as the non-variation clause is concerned, it was submitted on
behalf of the defendant that the following statement by the author,
Christie (op.cit, at p465), applies to this case:
‘It is inherent in
non-variation clauses that one party may feel aggrieved when the
other party agrees to an informal variation of the contract but then
relies on a non-variation clause to nullify the informal variation.’
[16] In
Brisley v Drotsky the majority observed that the courts have
often in the past rescued a party from the grip of a non-variation
clause, sometimes on doubtful grounds. One of the recognized grounds
is fraud (per Cameron J in Brisley v Drotsky supra at
34F; see also the majority judgment at 14C). However, counsel for
the defendant made it clear that the defendant’s case is not
based on fraud. Instead he submitted that the plaintiff’s
reliance on the non-variation clause is unconscionable and against
public policy and in such circumstances the Court may and should
allow a departure from the principle in Shifren’s case.
In support of this submission he relied, inter alia, on Gray
v Waterfront Auctioneers (Pty) Ltd and Another 1996 (2) SA 662
(WLD) at 668H-J where the following is stated:
‘Even if the non-variation
clause had been relevant because the parties' conduct amounted to a
variation of the lease, the applicant may well have been precluded
from praying it in aid because, as it is put by Christie in The
Law of Contract in South Africa 2nd ed at 535, 'a party whose
conduct is "fraudulent, or unconscionable, or a manifestation of
bad faith"' (referring to Resisto Dairy (Pty) Ltd v Auto
Protection Insurance Co Ltd 1962 (3) SA 565 (C) at 571F, per
Rosenow J) 'will not be permitted to rely on a non-variation
clause' (referring to Leyland (SA) (Pty) Ltd v Rex Evans Motors
(Pty) Ltd 1980 (4) SA 271 (W) at 272H-273A).’
[17]
However, in Brisley v Drotsky, supra, at 16 F-H the
majority of the Supreme Court of Appeals of South Africa was critical
of the Resisto Dairy case mentioned in this extract in so far
as it was relied upon to bolster an argument that Shifren
should not be applied if such application would be contrary to the
norm of bona fides in the contractual context. This probably
explains why the passage in the second edition of Mr Christie’s
book, to which Wunsch, J refers in the Gray case, was omitted
from later editions of this work. What was stated in the Resisto
Dairy case at 571F is:
‘The plaintiff Company
agreed in advance to a condition which is hard and onerous, and it
seems to me that unless it can be shown that it would, indeed, in the
circumstances of this case, be fraudulent, or unconscionable, or a
manifestation of bad faith, to rely on this condition, effect should
be given to it. (Wells
v South African Alumenite Co.,
1927 AD 69 at p. 73; Zuurbekom
Ltd v Union Corporation Ltd.,
1947 (1) SA 514 (AD) at p. 537).’
[18] The
majority in Brisley v Drotsky pointed out that Resisto
Dairy was decided before Shifren. Furthermore, it was
overruled on appeal and it is evident from the judgment on appeal
that the matter was in fact concerned with estoppel (and not bona
fides) (see Resisto Dairies (Pty) Ltd v Auto Protection
Insurance Co Ltd 1963 (1) SA 632 (A) at 642F-643G). The majority
further stated that it was more important to consider the authorities
to which Rosenow J referred (which, as I understand it, turn out not
to be authority for the view he expressed in relation to mala
fides). The Zuurbekom judgment loco citato dealt
with the exceptio doli generalis (which was held in Bank of
Lisbon and South Africa Ltd v De Ornelas and Another 1988 (3) SA
580 (A) not to be part of South African common law). In the other
case, Wells v South African Alumenite Co., Innes CJ stated:
‘No doubt the condition [a
provision that the buyer may not rely on a misrepresentation] is hard
and onerous; but if people sign such conditions they must, in the
absence of fraud, be held to them. Public policy so demands.’
[19]
Clearly the Wells case merely re-affirms the established
principle that fraud by a party seeking to rely on, e.g. a
non-variation clause, is an exception to the rule that a party to a
contract is bound to its terms.
[20]
Furthermore, counsel for the defendant sought support for their
argument in a passage from Prof. Dale Hutchison’s article
((2001) 118 SALJ 720 at 720) quoted with approval in Brisley v
Drotsky, supra, at p26G-J, but overlooked the fact that
they were dealing with the minority judgment by Olivier JA. The
majority judgment clearly states that the apparent point of departure
in the said article that a court has a general discretion to either
enforce an entrenchment clause or not to do so is clearly incorrect
(at p12I). In principle a court has no discretion to refuse to
enforce a valid contractual provision (of which entrenchment clauses
are merely an example). The majority also found that it is incorrect
to state that a court can refuse to uphold reliance on an
entrenchment clause if this would amount to a breach of the good
faith principle (at p13A).
[21] In
my view the defendant’s reliance on the so-called
‘unconscionable’ conduct by the plaintiff is nothing but
a futile attempt to resurrect the exceptio doli.
[22] As
far as the defendant’s reliance on public policy is concerned,
counsel referred to the following statement by Cameron JA, who
concurred with the majority in a separate judgment in Brisley v
Drotsky, supra (at p34G):
‘The jurisprudence of this
Court has already established that, in addition to the fraud
exception, there may be circumstances in which an agreement,
unobjectionable in itself, will not be enforced because the object it
seeks to achieve is contrary to public policy.’ [Sasfin
(Pty) Ltd v Beukes 1989 (1) SA 1 (A); De Beer v Keyser and
Others 2002 (1) SA 827 (SCA) para [22].]
[23]
Applying Sasfin, the majority the court was of the view that
this principle should be sparingly applied and limited to cases where
the enforcement of the entrenchment clause would be so unfair that it
could be described to be “inimical to the interests of the
community’ (at p18D) (see also Brummer v Gorfil Brothers
Investments (Pty) Ltd 1999 (3) SA 389 (SCA) at 419G-J; Old
Mutual Life Assurance Company (Namibia) Ltd V Symington 2010 (1)
NR 239 (SC); Africa Personnel Services (Pty) Ltd v Government of
the Republic of Namibia and Others 2009 (2) NR 596 (SC) at [27].
Prima facie it seems to me that the defendant is unlikely to
pass the stringent test for the application of the principle of
public policy to the facts of this case. However, as Mr Frank
pointed out, it is not necessary to decide this issue. The problem
for the defendant is that this is not the case it has pleaded.
[24] The
same answer counters Mr Corbett’s alternative
submissions, namely that the defendant can rely on a waiver to the
plaintiff’s benefit or on estoppel. Counsel for the defendant
indicated that the defendant reserved its right to still apply for
leave to amend its pleadings while presenting evidence. However, at
this late stage without an actual application for leave to amend on
the table, I was not inclined to indulge the defendant, especially in
light thereof that, in terms of the case management rules, the issues
to be resolved at the trial had already been agreed upon on the basis
of the existing pleadings. I also bear in mind that, in any event,
paragraph 8 of the Schedule of Conditions to annexure “A”
contains an anti-waiver provision.
[25] In
the result I made the order on claim 1 as set out in paragraph [1]
supra.
[26] As
far as the second claim is concerned, the plaintiff then proceeded to
lead evidence by its expert witness, Mr Wilders, a property valuator
and sworn appraiser, who expressed the opinion that the market
related monthly rental for the premises amounts to N$50 090.00. His
evidence was not put in issue in any meaningful way. The parties
eventually agreed that, based on his valuation, the plaintiff’s
damages are to be calculated at a total figure of N$359 965.64.
[27] The
result is, then, that I made the order set out in sub-paragraphs 3
and 4 in respect of claim 2 as appears in paragraph [1] supra.
I also ordered in respect of both claims that the plaintiff should
be paid its costs of suit, as set out in sub-paragraph 5 of paragraph
[1] supra.
______________________
K van
Niekerk
Judge
APPEARANCE
For the
plaintiff: Adv T J Frank
SC (with him Adv G Dicks)
Instr by
Ellis Shilengudwa Inc
For the
defendant: Adv A W Corbett
(with him Adv T Wylie)
Instr by
Neves Legal Practitioners