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IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

Case No.: 113/16 In the matter between: NTSWAKI JOYCE MOKONE Applicant

and TASSOS PROPERTIES CC First Respondent

BLUE CANYON PROPERTIES 125 CC Second Respondent

__________________________________________________________________

WRITTEN SUBMISSIONS ON BEHALF OF THE APPLICANT __________________________________________________________________

1. The applicant seeks leave to appeal a judgment of the Gauteng Local Division of

the High Court,1 in which the Court found that she did not have a right of pre-

emption to purchase the premises from which she has run her business since 1

March 2004.2 The applicant was refused leave to appeal by both the High Court3

and the Supreme Court of Appeal.4

2. These submissions are made in response to the directions of this Court dated 19

July 2016, that brief submissions5 be filed on the following issues:6

(a) the meaning of the inscription recorded on the front page of the written lease

agreement upon its renewal;

(b) whether, upon extension of a lease agreement, a clause in a lease

agreement affording the lessee a right of first refusal in the event of a sale of

the leased premises by the lessor automatically gets renewed when the

lease is extended, or whether the extension must specifically provide for the 1 Dated 25 November 2015. 2 Founding affidavit, page 9, paragraph 9.1. 3 On 24 February 2016, page 42, Annexure NJM4 to the founding affidavit. 4 On 12 May 2016, page 43, Annexure NJM5 to the founding affidavit. 5 Of a maximum length of 15 pages. 6 Although the submissions were initially due on 2 August 2016, the Registrar’s office granted an extension of 8 weeks to the applicant on the request of her attorneys, ProBono.Org.

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extension of the clause;

(c) if at all, whether the right of first refusal would have survived both the

renewal referred to in paragraph (a) and an earlier one that was oral;

(d) whatever the position may be, whether the law on (b) is consistent with the

values in the Constitution;

(e) if not, whether the law must be developed, and if so, what that development

should entail, and

(f) whether the issues raised in (b) to (e) are arguable points of law of general

public importance which ought to be considered by this Court.

3. Due to the brevity required by the directions, we do not deal with any other

relevant issues, save in passing, nor do we, at this stage, embark on a full

analysis of the judgment of the High Court.

4. This matter was heard and determined by De Vos J in the Gauteng Local

Division of the High Court, who considered only the question of law relating to

whether the plaintiff’s right of pre-emption was capable of being extended or

renewed,7 on the basis of only the following facts:8

4.1. the parties entered into the initial written lease agreement which

commenced on 1 March 2004;9

4.2. the written agreement was extended by an oral lease agreement on

essentially the same conditions as contained in the written lease, from 1

March 2005,10 and

4.3. the parties then agreed to the extension of the written lease on 3 May

2006, until 31 May 2014 at a monthly rental of R5 500, by written

7 Page 28, para [3], judgment. 8 Page 28, para [4], judgment. 9 Pages 68-95, NJ1F to the founding affidavit. 10 Page 97, para 5.2, founding affidavit.

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annotation on the original lease agreement.11

5. We pause to note that these facts are bare in the extreme, and exclude facts

which, in our submission, are necessary for a Court to consider in hearing the

matter.12 Should more comprehensive submissions called for, it will be argued

that the facts on which the High Court decided the matter were woefully

inadequate, and if there was in fact a set of “agreed and stated facts”,13 they

ought not to have been accepted.14

6. We deal now with the issues raised in the directions.

THE MEANING OF THE INSCRIPTION

7. The inscription appears on the front page of the written lease agreement which

the parties entered into on 1 March 2004. It reads “3/5/06 Extend till 31/5/2014

monthly rent R5500” and is signed by the landlord.

8. The applicant submits that the inscription means that the parties agreed to

extend or renew the written lease agreement on the same terms and conditions

as contained in the written lease agreement (on which the inscription appears) at

a new monthly rental of R5500 per month.15 The renewed contract therefore

includes the right of first refusal to purchase the leased premises contained in

clause 6 of the initial lease agreement and all the other terms of the agreement,

save for the period of the lease and the amount of the rental payable.

11 Pages 97-98, para 5.3, founding affidavit. 12 For example, that the applicant has been running her business from the leased premises since March 2004, and that she has procured a liquor licence in order to do so. 13 As alleged by the respondents in the answering affidavit, para 16, page 117. 14 See Minister of Police v Mboweni 2014 (6) SA 256 (SCA) at [8]. 15 Page 14 para 15, founding affidavit.

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9. The Court a quo held that the right of pre-emption was not extended.16

10. The Court found that the only relevant factors which could be applied to the

interpretation of the inscription were the wording of the inscription itself; the fact

that the “common cause facts” did not contain a plea of a tacit term that the

extension was “on the same terms and conditions as contained in the written

lease”, and the finding that clause 617 could only have been intended to endure

for a maximum of two years only.

11. It is submitted that this is incorrect, and that a number of factors are relevant to

the interpretation of the inscription.

12. In the first instance, that the Judge’s finding that clause 6 could only have

endured for two years is incorrect. It is based on case law that deals with terms

in a lease which are interpreted as “collateral” to the lease primarily because

they are not relevant to the relationship between landlord and tenant or are

extremely prejudicial or harsh, such as a restraint of trade,18 or an option to

purchase, which limits the amount for which the property may be sold to the

tenant, and obliges the landlord to sell at the tenant’s instance.19

13. The right at issue in this case is different. It entitles the tenant to be first in line to

purchase the property when, and only when, the landlord wishes to sell it, and at

a price to be negotiated at the time. There is no prejudice to the landlord

embodied in this clause. However, it provides protection for the tenant, and a

sense of security, which permits the tenant to invest in her business and in the

16 Page 36 – 37, para 16, Judgment. 17 Which contains the right of pre-emption. 18 Levy v Banket Holdings (Private) Ltd [1956] 3 All SA 68 (FC) which also mentions as collateral in nature an agreement to be imprisoned should the lessee fail to pay rental. 19 For example, Webb v Hipkin 1944 AD 95 and the English case law referred to therein, including Sherwood v Tucker 1924 (2) Ch.440

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premises with a lower risk than would otherwise be the case.

14. On this basis, it is submitted that, in the context of this case, the right of first

refusal was an integral part of the written lease, and not simply a collateral term.

The leases should therefore be interpreted in this context.

15. Secondly, the manner in which leases are interpreted has changed since the

cases on which the High Court relied were decided. For example, in Shenker

Brothers v Bester,20 the AD decided that an exclusive right to trade was a

collateral right and could not be extended except explicitly. However, in

Masstores (Pty) Ltd v Pick n Pay Retailers (Pty) Ltd and Another,21 the SCA

found that an exclusivity clause was not a collateral term but an integral part of

the contract. This demonstrates the difference in the values informing

interpretation between 1952 and 2016. Pronouncements on the intention of

parties made almost a hundred years ago,22 before the advent of the

Constitution, and in a truly different commercial environment have limited value.

16. It is submitted that the following factors are relevant to the interpretation of the

inscription:

16.1. The wording of the written contract;

16.2. The fact that the inscription was written on the face of the written

contract, rather than any other piece of paper, which leads to a

conclusion that the parties were relying on the contents of and renewing

the written lease on its terms, save for those which were explicitly

amended;

20 1952 (3) SA 664 (A) 21 2016 (2) SA 586 (SCA) 22 In the case of Sherwood v Tucker, which was 92 years ago.

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16.3. The fact that clause 6 of the written contract served to protect the tenant

from eviction by a prospective purchaser, while causing no prejudice to

the landlord;

16.4. The fact that the inscription was made after the written contract had

expired, and, arguably, after the oral extension had also expired, so that

it was, in essence, a renewal. The significance of the distinction is that it

was not simply an extension of the period of time for which the lease

would endure. Instead it renewed and amended the relationship between

the parties, using the written agreement upon which it was placed as a

framework for that relationship.

16.5. It is also relevant that the applicant held a liquor licence in respect of the

premises in order to operate the liquor trading business,23 had conducted

her business at the premises since March 200424 and had made capital

investment into the business, and that the landlord knew that the

applicant’s business was intimately linked to the leased premises and

that applicant wanted to acquire the ownership of the premises for the

long term benefit of the business.25

16.6. Further, the fact that the lease was renewed for a relatively long period of

time, that is, 8 years, rather than the initial one-year term, demonstrates

that a measure of security was necessary for the applicant if she was to

make a long-term investment in the business situated at the premises. It

is also relevant that the liquor licence obtained by the applicant would, in

terms of the applicable law, be tied to the premises. 23 Page 20, para 23, founding affidavit. 24 Page 98, para 6, particulars of claim. 25 Page 100, para 13, particulars of claim.

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17. Because the written terms of the contract encapsulated in the inscription are not

immediately obvious, it is submitted that the applicant’s actions on discovering

the sale of the premises to the second respondent are also relevant. The fact

that she simply attempted to exercise her right of first refusal, and sued on the

basis that her right was still in existence, must lend weight to a conclusion that

there was never any explicit attempt to exclude the right, and, in fact, that it was

included in the renewal.

18. For these reasons, we submit that the meaning of the inscription is that the

written contract on the face of which the inscription appears is renewed on the

same terms and conditions, save that the date on which it expires is 31 May

2014, and the monthly rental R5 500.

WHETHER A RIGHT OF FIRST REFUSAL IS AUTOMATICALLY RENEWED ON

EXTENSION OF THE LEASE

19. A clause in a lease agreement affording a lessee right of first refusal does not

automatically get renewed when the lease is extended. This conclusion arises

from two propositions in the current case law:

19.1. Firstly, that a right of pre-emption is a “collateral issue” in a lease

agreement. It is not recognised as an incident of the lease.26

19.2. Secondly, that when a lease agreement is renewed or in instances

where there was a tacit re-location of the lease, collateral issues

contained in a contract of lease are not carried forward into the renewal

26 Doll House Refreshments (Pty) Ltd v O’Shea and Others 1957 (1) SA 345 (T) at 352.

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of the lease and the renewal will only contain those terms which have a

direct bearing on the lease.

20. The South African jurisprudence supporting these two propositions arises from

the English case of Sherwood v Tucker (above). The English principles were

adopted into South African law in Webb v Hipkin, Doll House Refreshments (Pty)

Ltd v O’Shea and Others and Levy v. Banket Holdings (Private) Ltd., all referred

to earlier in these submissions.

21. This approach has not been re-considered in the constitutional era. Academic

opinion varies on the status of collateral rights when a lease agreement is

expressly renewed.

21.1. Sharrock contends that the principle is same both for tacit relocation and

express renewal and states that terms such as a restraint of trade, right

of pre-emption and option to purchase are collateral terms and not

presumed to be renewed.27 Cooper also takes this position.28

21.2. The only authority indicating a different position are Bradfield and

Lehmann, who state that in cases of express renewal of a lease, “in the

absence of an express stipulation to the contrary in the renewal

agreement, any collateral pacts in the lease must also be taken to have

been renewed.”29 This argument is based on the minority decision of Van

Den Heever J.A. in Shenker Brothers v Bester that has not been affirmed

in subsequent cases.30

27 R Sharrock – Business Transactions Law 5th edition, Juta 2014 at 316-317. 28 WE Cooper – LandLord and Tenant 2nd edition, Juta 1994 at 349-350 29 G Bradfield and K Lehmann – Principles of the Law of Sale & Lease 3rd ed, Juta 2013 at 196. 30 1952 (3) SA 644 (A) at 677. This dictum was rejected in the case of Doll House Refreshments (supra).

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22. The question whether the parties intended collateral rights to be included in the

renewal is of course a question of fact. But the question of what facts are

relevant to the issue, and how those facts, and the written contract, are to be

interpreted, are questions of law.

23. Where a written agreement is at issue, both the construction of the written

document and any relevant evidence have a bearing on the conclusion.

24. Where the answer does not appear patently from the express terms of the

agreement,31 the parties’ intention is to be determined, if possible, from

interpretation of the extension or renewal agreement. The real issue is the

intention of the parties when they made a fresh agreement32 - "What did the

parties intend to renew? Did they intend to renew the whole contract with all its

terms, or a part of it only?"33

25. In Doll House Refreshments (Pty) Ltd v O’Shea and Others34 Ramsbottom J

relied on the case of Levy v Banket Holdings (Private) Ltd35 and held that “terms

collateral to and independent of” contractual relationships are only renewed the

parties make clear their intention to renew, and it is “beyond question” either

from the language used or the circumstances of the case that this was the

intention.

26. The Supreme Court of Appeal has recently reaffirmed that determining context

and intention require the court, in addition to examining the words of the

31 As in Batchelor v Murphy 1926 A.C. 63 and Webb v Hipkin (above) 32 Levy v Banket Holdings (Private) Ltd quoted with approval in Doll House Refreshments (Pty) Ltd v O’Shea and Others at 351. 33 Supported by Halsbury’s Law of England, 2nd ed. Vol. 20 para 69 cited with approval in Webb v Hipkin and Doll House Refreshments, which does not require express statement of the inclusion of collateral rights, but requires it to be clearly shown that it was the intention of the parties to include them. 34 1957 (1) SA 345 (T) at 350-351. 35 1956 (3) SA 558 (FC) at 562.

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agreement, to also examine the circumstances in which the agreement was

concluded, including the factual context and relevant subsequent conduct of the

parties.36

27. Thus, the law as it stands is that a right of first refusal is a collateral term, that

collateral terms are not ordinarily imported into a renewal lease, that the question

is whether the parties intended it to be imported, and that the intention of the

parties depends not only on the words of the renewal or extension, but also on

the circumstances of the case.

WHETHER THE RIGHT OF FIRST REFUSAL SURVIVES BOTH THE ORAL AND

WRITTEN RENEWALS

28. For a pre-emptive right to purchase immovable property to be valid it must

comply with the formalities in section (2)(1) of the Alienation of Land Act 68 of

1981.37 Following the judgment of Hirschowitz v Moolman38 if the contract to

which the right applies is one that statute law requires to be in writing and

signed, the contract conferring the right of first refusal must comply with these

requirements.39

29. The right of pre-emption is for the sale of land is contained in clause 6 of the

36 G4S Cash Solutions v Zandspruit Cash & Carry (Pty) Ltd [2016] ZASCA 113 (12 September 2016) at [12]. See also Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at para 18. 37 Section 2(1) provides: “No alienation of land after the commencement of this section shall… be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority”. 38 Hirschowitz v Moolman and Others 1985 (3) SA 739 (A). 39 Cooper (above) at 147 fn 72 suggests the principle in Hirschowitz v Moolman should not require the signature of both parties, but only of the grantor of the right, being the landlord in this scenario.

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initial lease agreement.40 The original agreement was in writing and signed by

both parties. The clause constituted a valid pre-emption right in terms of that

agreement.

30. Because the initial extension of the lease for one year was oral, it does not

comply with the requirement of being in writing. It is our view that it is unlikely

that the pre-emption endured for a second year, because the extension was oral

and did not comply with the Alienation of Land Act.

31. However, as set out above, the extension or renewal encapsulated in the

inscription renewed the entire contract contained in the document on which it

appeared. It thus renewed, or brought into existence afresh, the terms of the

original lease, including the right of pre-emption. The fact that the right may have

lapsed during the period in which the oral extension applied becomes

irrelevant.41

32. Since the inscription is in writing and signed by the landlord, if this revives the

pre-emption right, it does so in writing. This would be sufficient to meet the test in

Hirshowitz v Moolman as understood by Cooper and to create a valid right of

pre-emption, which would have existed until the new lease expired.

40 Clause 6 provides: “The Tenant shall have the first right of refusal to purchase the leased premises when the Landlord which [sic] to sell the leased premises. The purchase price shall be negotiated when the Landlord which [sic] to sell the leased premises.” 41 In Witvlei Meat (Pty) Limited v Agricultural Bank of Namibia (SA 27/2013) [2014] NASC 8 (27 May 2014) at [57] the Namibian Supreme Court accepted that that an option can be revived by a renewal agreement after the lease agreement had lapsed.

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WHETHER THE LAW ON RENEWAL OF A RIGHT OF FIRST REFUSAL SET OUT

ABOVE IS CONSISTENT WITH THE VALUES IN THE CONSTITUTION

33. We submit that the existing law is inconsistent with the values in Constitution in

two ways.

34. The first is that it interferes unnecessarily with the concept of pacta servanda

sunt42 by providing for a presumption about the parties’ intentions when there is

no explicit indication one way or the other, and by providing for parties to escape

their obligations under a contract which is, and ought to be considered as a

whole, when the parties have not provided for that escape.

35. The second is that it does not take into account the fairness and equity or

otherwise of the interpretation that is imposed on a contract, including the

unequal bargaining power of the parties, and the purpose of the particular term in

making the relationship of the parties less unequal.43

36. Although the law does require a court to look beyond the face of the document

when interpreting a contract, this requirement is not adhered to when considering

the extension or renewal of an option to purchase, because of the entrenched

views that (a) a right of pre-emption is collateral in nature and (b) a collateral

right is not ordinarily extended.

37. Insistence on these principles without interrogating them precludes the

development of the common law to infuse the relevant contractual and

42 Which this Court has confirmed is consistent with and bolstered by the Constitution in Barkhuizen v Napier 2007 (5) SA 323. 43 See in this regard the judgment of the Cape High Court in Mozart Ice Cream Franchises (Pty) Ltd v Davidoff And Another 2009 (3) SA 78 (C)

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interpretive principles with constitutional values.44

WHETHER THE LAW MUST BE DEVELOPED, AND HOW

38. When a court interprets the terms of a contract extending a lease agreement to

determine whether determine whether it was the parties’ intention that the right of

pre-emption is extended along with the incidents of the lease, it must do so

through the lens of constitutional values. In this regard, the Court should include:

38.1. fairness,45 including the considerations of unequal bargaining power in

contracts46 especially between landlord and tenant;

38.2. the underlying notion of good faith in contract,47 and

38.3. the Rule of Law, as encapsulated in the maxim pacta servanda sunt.

39. This Court has accepted that “[c]ontracting parties certainly need to relate to

each other in good faith.”48

40. It is submitted that the Court may and ought to take into account the changing

landscape of the commercial world to which the law operates, in that the parties

are now more diverse, coming from different backgrounds and with different

presumptions about what interests the law protects. This would facilitate a critical

development of the law so that it is consistent with the changing values and

44 Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd (2012 (1) SA 256 (CC); 2012 (3) BCLR 219 (CC)) at para 72. 45 Fairness is considered an incident of public policy – see Barkhuizen v Napier at [73] 46 Barkhuizen v Napier (above); Uniting Reformed Church De Doorns v the President of the Republic of South Africa and Others 2013 (5) SA 205 (WCC). 47 Bredenkamp and Others v Standard Bank of SA Ltd 2010 (4) SA 468 (SCA); Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (above); Botha and Another v Rich N.O. and Others 2014 (4) SA 124 (CC). 48 Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd (2012) (1) SA 256 (CC); 2012 (3) BCLR 219 (CC)) at para 71.

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interests of our society.49

41. The manner in which we submit that the common law may be developed so that

it is consistent with the principles set out above is as follows:

41.1. The question whether a term in an original contract is collateral or

integral is not in itself determinative of whether it is included in a renewal

or extension that does not explicitly mention it;

41.2. The nature of the term must be determined in the context of the contract

as a whole, and the circumstances in which it has been concluded;

41.3. Whether the term is included in the renewal or extension must be

determined in the context of the original contract as a whole as well as

the context of the renewal and the circumstances in which it has been

concluded, and

41.4. Unless there are clear indications to the contrary, a clause which

protects the rights of one party in the contractual relationship without

prejudicing the rights of the other party, and the rights which are

protected are, as in this case, intimately related to the character of the

agreement, is considered to have been included in the renewal or

extension.

42. In this context, it may be found that the right of first refusal is not so far removed

from the relationship between landlord and tenant in context as to require an

explicit mention if it is to be renewed.

49 See in this regard Mozart Ice Cream Franchises (above) at 84F-G

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ARGUABLE POINTS OF GENERAL PUBLIC IMPORTANCE WHICH OUGHT TO

BE CONSIDERED BY THIS COURT

43. In Paulsen and Another v Slip Knot Investments 777 (Pty) Limited (CCT 61/14)

[2015] ZACC 5 this Court provided guidance on the scope of the Court’s

jurisdiction on matters raising arguable points of law. In the main judgment (per

Madlanga J) the Court found that:

43.1. the point must be one of law and not of fact;50

43.2. have some degree of merit;51 and

43.3. must have an impact not only on the litigants, but on a significant part of

the general public. 52

44. This matter clearly raises an arguable point of law of general public importance –

namely, the correct approach to interpreting terms of contracts. Fairness in

contract, the doctrine of contra preferentum, unequal bargaining power, the

doctrine of pacta servanda sunt and interpretation of contracts are all of general

public importance.

45. There have been previous attempts to approach this Court to determine the

correct approach to contractual interpretation, which have been unsuccessful.

This demonstrates a need for this Court to hear and determine the issue.

46. Furthermore, the matter raises a new and difficult question of law. The answer to

the question in issue is not readily discernible. In this case, there is no post-

Constitutional authoritative pronouncement on the issue. Direction from the 50 Para 20. 51 “The notion that a point of law is arguable entails some degree of merit in the argument. Although the argument need not, of necessity, be convincing at this stage, it must have a measure of plausibility.” At [21]. 52 Para 26.

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Constitutional Court on the extent to which context and fairness inform

interpretation in the civil law context is of general public importance, and would

prevent the over-formalistic approach which is embodied by the judgment of the

High Court in this matter.

CONCLUSION

47. In the circumstances, the applicant submits that this Court should grant leave to

appeal against the order of De Vos J and call for comprehensive submissions on

both the merits of the matter and the appropriate remedy once the Record has

been filed.

Seena Yacoob

Frances Hobden

Isabella Kentridge (pupil)

Chambers, Sandton

27 September 2016

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TABLE OF AUTHORITIES

1. Barkhuizen v Napier 2007 (5) SA 323 (CC)

2. Batchelor v Murphy 1926 A.C.

3. Bredenkamp and Others v Standard Bank of SA Ltd 2010 (4) SA 468 (SCA)

4. Botha and Another v Rich N.O. and Others 2014 (4) SA 124 (CC)

5. Doll House Refreshments (Pty) Ltd v O’Shea and Others 1957 (1) SA 345 (T)

6. Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC)

7. G4S Cash Solutions v Zandspruit Cash & Carry (Pty) Ltd [2016] ZASCA 113 (12 September 2016)

8. Hirschowitz v Moolman and Others 1985 (3) SA 739 (A)

9. Levy v. Banket Holdings (Private) Ltd. 1956 (3) S.A. 558 (F.C.)

10. Masstores (Pty) Ltd v Pick n Pay Retailers (Pty) Ltd and Another 2016 (2) SA 586 (SCA)

11. Minister of Police v Mboweni 2014 (6) SA 256 (SCA)

12. Mozart Ice Cream Franchises (Pty) Ltd v Davidoff And Another 2009 (3) SA 78 (C)

13. Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)

14. Paulsen and Another v Slip Knot Investments 777 (Pty) 2015 (3) SA 479 (CC)

15. Shenker Brothers v Bester 1952 (3) SA 644 (A)

16. Sherwood v Tucker 1924 (2) Ch.440

17. Uniting Reformed Church De Doorns v the President of the Republic of South Africa and Others 2013 (5) SA 205 (WCC)

18. Webb v Hipkin 1944 AD 95

19. Witvlei Meat (Pty) Limited v Agricultural Bank of Namibia (SA 27/2013) [2014] NASC 8 (27 May 2014)

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SECONDARY AUTHORITY

1. G Bradfield and K Lehmann – Principles of the Law of Sale & Lease 3rd ed, Juta 2013

2. WE Cooper – LandLord and Tenant 2nd edition, Juta 1994 at 349-350

3. Halsbury Law of England, 2nd ed. Vol. 20

4. R Sharrock – Business Transactions Law 5th edition, Juta 2014 at 316-317

IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

In the matter between:

NTSWAKI JOYCE MOKONE

And

TASSOS PROPERTIES CC

BLUE CANYON PROPERTIES 125 CC

CC CASE NO: CCT 113/16

Applicant

First Respondent

Second Respondent

FIRST AND SECOND RESPONDENTS' WRITTEN SUBMISSIONS

1. These submissions are filed in response to the directions issued by the Chief

Justice on 19 July 2016. We address the questions listed as (a) to (f) in turn.

THE MEANING OF THE INSCRIPTION

2. The respondents contend that the words "315106 Extend till 3115/2014 monthly

Rent R5500", which were handwritten on the front page of the initial written lease

agreement, means that the lease was renewed (including the incidental terms),

and the lease period extended until 31 May 2014 at a new monthly rental of

R5500 per month. The endorsement did not renew all the provisions contained

in the written agreement, only those terms that were incidental to the lease. It

did not renew the applicant's right of first refusal to purchase in clause 6 of the

written agreement, as this was not an integral part of the lease but a self­

standing right and collateral term in the initial written lease agreement.

3. Determining the meaning of the endorsement requires the court to determine

what the contracting parties intended when they made the endorsement. This

entails determining -

3.1 whether the contracting parties intended to renew the entire lease

agreement, including all its terms and conditions, or only the incidents

and material terms of the lease; and

3.2 if the latter, whether the contracting parties considered the right of first

refusal to be an incident or material part of the lease agreement.

4. The High Court correctly recognised that determining the intention of the

contracting parties required it to consider the inscribed words and "all the

relevant and admissible context provided by reading the particular provision in

light of the document as a whole, including the circumstances attendant upon

its coming into existence". 1

5. The High Court had regard to the following textual indicators of the parties'

intentions:

5.1 the use of the word "extend', which denotes the continuance of the period

of the lease and not the renewal of a self-standing right (of first refusal );2

and

5.2 the endorsement did not include the words "on the same terms and

conditions", but referred only to the period of lease and the rental

1 High Court judgment at para 10, following Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18. Cf Spearhead Property Holdings Ltd v E&D Motors (Ply) Ltd 2010 (2) SA 1 (SCA) at paras 51-53; WE Cooper, Landlord and Tenant, 2nd ed p 303.

2 High Court judgment para 15.6. The Oxford English Dictionary (2nd edition, val V, p 594) defines "extend" as inter alia "to prolong in duration".

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amount.3

6. The High Court also had regard to the following contextual indicators that the

right of first refusal was not integral to the lease, but a collateral term that was

not automatically renewed with the extension of the lease:

6.1 the short duration of the initial written lease agreement - being of one

year, renewable for a further year;4

6.2 that there were no facts from which a tacit agreement to renew the right

of first refusal could be inferred when the endorsement was made;5 and

6.3 that there were no facts from which it could be inferred that the right of

first refusal was a necessary condition of the initial written lease

agreement or the extension of the lease when the endorsement was

made.6

7. While the High Court.confined itself to the common cause facts in the particulars

of claim, as agreed to between the parties under High Court rule 33(4) and

3 High Court judgment paras 14 and 15.2-15.3. Cf Shenker Brothers v Bester 1952 (3) SA 664 (A) at 667G-668B; Batchelor v Murphy 1926 A. C. 63 (where the words used were "execute a new lease for the unexpired term of eight years and six months from the sixth of October last on the same terms and conditions in all respects as the lease of 17 October, 1913"); Webb v Hipkin 1944 AD 95 (where the words used were " ... do hereby agree to a renewal of the aforementioned Lease for a further period of Three (3) years from 1'' September.1941, under the same terms and conditions as aforewritten" and Witvlei Meat (Ply) Ltd v Agricultural Bank of Namibia 2014 JDR 1038 (NmS) at 20 (where the renewal was "on the same terms and conditions contained therein, and subject to the terms and conditions contained and agreed'). Emphasis added.

4 Clauses 1.6 and 1.14 of the Agreement of Lease, pp 69-70.

5 High Court judgment para 14.

6 High Court judgment para 15.4.

3

33(6), we submit that even had the court considered the particulars of claim as

a whole, it would have reached the same findings. The applicant did not plead

that the parties had expressly or tacitly agreed to renew the written lease on all

the same terms and conditions as contained in the written lease (as the plaintiff

did in pleading the terms of the oral agreement) 7 The applicant also did not

plead that the right of first refusal was an integral part of the lease or that it was

renewed by necessary implication. Accordingly, in the absence of having

pleaded such facts, it cannot be inferred that all the terms and conditions in

the initial written agreement were renewed.

8. The applicant contends that the High Court erred by not considering certain

other facts that indicate that the right of first refusal was an integral part of the

written lease and was intended to be renewed when the endorsement was

made a

9. In the first place, we submit that it is not open to this Court to consider facts

other than those which the parties - all of whom were represented by attorneys

and counsel at the time - agreed to set aside for the purposes of determining

the separated issue. To do so on appeal would be seriously prejudicial and

unfair to the respondents, especially since such other facts on which the

7 Compare paras 5.2 and 5.3 of the Particulars of Claim pp 97-98.

8 Applicant's written submissions paras 5, 14 and 16.

4

applicant relies are disputed.9

10. However even if all the facts alleged in the particulars of claim were taken to be

correct, we submit that this would not prove that the contracting parties intended

the right of first refusal to be an integral part of the lease or intended that it be

renewed when the endorsement was made. 10

10.1 Contrary to the applicant's submissions, no facts are pleaded as to what

the parties intended to convey by "extending" the lease by means of an

inscription on the face of the written lease agreement. 11

10.2 The applicant does not allege that her conclusion of the lease agreement

was conditional on the granting of a right of first refusal, and that clause

6 was agreed to as an integral or material condition of the lease.

10.3 Clause 6 does not serve to protect the tenant from eviction by a

prospective purchaser, as the applicant submits. 12 The tenant is

protected from eviction by a new purchaser and landlord by the huurgaat

voor koop rule (hire takes precedence over sale}n The applicant's

security of tenure as a lessee is not contingent on the right of first refusal

9 Mighty Solutions tla Orlando Service Station v Engen Petroleum Ltd and Another 2016 (1) SA 621 (CC) paras 61-63; Everfresh Market Virginia (Ply) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC) at paras 50-52, 66. The alleged "common cause" facts in paragraphs 18.3 and 18.3.1 and 18.3.2 of the founding affidavit (p 15) are not common cause but are denied in the plea. See para 23 of the answering affidavit, p 122. The allegations in paragraph 16.5 of the applicant's written submissions are also not common cause.

10 Applicant's written submissions paras 14, 16.

11 Applicant's written submissions para 16.2.

12 Applicant's written submissions para 16.3.

13 Spearhead Property Holdings Ltd v E&D Motors (Ply) Ltd 2010 (2) SA 1 (SCA) at para 52.

5

to purchase. 14 In this case, the applicant was also afforded security of

tenure as a lessee by the duration of the period of extension of the lease

-i.e., for a further eight years.

10.4 The conduct of the applicant upon learning of the first respondent's sale

of the leased premises to the second respondent does not demonstrate

that the applicant consciously intended to preserve the right of first refusal

under clause 6 when the endorsement was made, or that this right was

intended to be an integral part of the lease. To the contrary, the fact that

the applicant first invoked her alleged right of first refusal 18 months after

learning of th.e sale15 suggests that the applicant relied on clause 6 as an

after-thought and only considered it on obtaining legal advice. 16

11 . The High Court's findings that the inscription on the written lease extended

the lease period and renewed only the integral terms of the lease, which did

not include the right of first refusal, was thus correct.

WHETHER A RIGHT OF FIRST REFUSAL IS AUTOMATICALLY RENEWED ON

THE EXTENSION OF THE LEASE

12. Subject to what is set out hereunder, the respondents agree with the applicant's

14 Doll House Refreshments v O'Shea 1957 (1) SA 345 (T) at 352A-C.

15 The applicant first learned that first respondent had sold the leased premised to the second respondent in July 2010 (Amended Plea para 1 0.2), but only invoked her alleged right of preemption on 27 January 2012 (Annexure D to the Particulars of Claim).

16 See Levy v Banket Holdings (Private) Ltd 1956 (3) SA 558 (FC) at 566A-B, where the court regarded the plaintiffs delay in seeking to enforce a restraint clause as indicative of the fact that the clause was only related to the lease in a very minor degree, if at all, and "was virtually an unconnected and independent pact".

6

summation of the existing common law at paragraphs 18 to 26 of the applicant's

written submissions.

13. A right of first refusal is not automatically renewed when a lease agreement

is extended or renewed, unless:

13.1 the parties agree expressly or it is necessarily implied that the right of

first refusal is to survive; or

13.2 unless the right of first refusal is shown to have been an integral part

of the tenancy, despite ordinarily being regarded as a collateral term.

14. The common law does no more than establish a presumption-

14.1 that a right of first refusal is not an incident or material condition (sine

qua non) of a lease agreement; and

14.2 that parties to a written lease agreement ordinarily intend only to renew

the material terms of the lease agreement when it is renewed (and not

such collateral and independent rights as may also be recorded in the

written agreement).

15. These presumptions are merely interpretative aids- they are not hard and fast

rules. They must be and are applied together with all other relevant textual and

contextual considerations in determining the intention of the contracting parties.

16. The courts recognise that the presumptions are rebuttable and do not apply

where it is clear from the express words used or conduct of the contracting

7

parties that the parties intended the right of first refusal to be a material term of

the lease agreement or intended that the right be renewed with the extension of

the lease, or where this is otherwise necessarily impliedn For instance,

16.1 In Sherwood v Tucker, 18 the court held:

"Prima facie, those documents which extend the lease ought to be held to extend the relation of landlord and tenant, and the person who seeks to give to them any further meaning than that must find in the document extending the lease either something expressed ... or something which by necessary implication has that effect."

16.2 In Levy v Banke! Holdings (Ply) Ltd, 19 Tredgold CJ stated:

"In each case the real issue is the intention of the parties when they made a fresh agreement. As always, this is simply a question of the interpretation of what they said. An agreement may contain a /ease and in addition extraneous matters upon which the parties wish to contract. When a party to a composite agreement of this sort agrees to renew the lease he, unless the contrary is clearly indicated, agrees to renew the lease and those features of the agreement that are an integral part of the lease, but no more."

17. Whether the right of first refusal is renewed on the extension of a lease

agreement depends, ultimately, on the intention of the parties. However, if a

contrary intention is not clear from the words used and the context, the

common law presumptions will prevail.

WHETHER THE RIGHT OF FIRST REFUSAL SURVIVES BOTH THE ORAL AND

WRITTEN RENEWALS OF THE LEASE AGREEMENT

17 Levy v Banket Holdings supra at 562G, 564F-565A; Doll House Refreshments supra at 350F-352D, 348G-349B.

18 Sherwood v Tucker 1924, 2 Ch. 440 at 448.

19 Levy v Banket Holdings supra at 563A-B.

8

18. The applicant is correct in contending that the grant of a right of first refusal must

be in writing to comply with s 2 of the Alienation of Land Act 68 of 1981.20

However, where the right is contained in a written agreement, we submit that a

written agreement (including the right of first refusal) may be extended orally

provided the written agreement has not lapsed and/or that the oral extension is

not precluded by a non-variation clause. If the written agreement lapses, the

non-variation provisions similarly lapse. An extension of a written contract can

be oral, written or tacit (in the sense of a tacit relocation)21

19. In this case, the oral agreement was concluded on 1 March 2005. It did not

extend the initial written lease agreement as contemplated in clause 1.14,22

because the written lease expired due to the effluxion of time on 28 February

2005. To extend or renew a contract, the right of renewal must be exercised

before the initial contract lapses. 23

20. The oral lease was thus a new agreement. It is alleged that the oral

agreement was concluded "on, essentially, the same terms and conditions as

the initia/lease". 24 However the right offirst refusal could not have been validly

conferred under the new oral agreement, as it was not reduced to writing. The

right of first refusal thus did not survive under the oral agreement.

20 Hirschowitz v Moo/man and Others 1985 (3) SA 739 (A).

21 WE Cooper, Landlord and Tenant, 2"' ed. pp 345-351.

22 Seep 70. 23 WE Cooper, Landlord and Tenant, 2"' ed. p 347.

24 Para 5.2 of the Particulars of Claim pp 97.

9

21. For the reasons submitted above, the endorsement of 3 May 2006 only

renewed the incidents of the initial written lease for the specified - extended -

period at a new rental, and not the initial written agreement as a whole.

WHETHER THE CURRENT LAW ON THE RENEWAL OF THE RIGHT OF FIRST

REFUSAL IS CONSISTENT WITH THE VALUES OF THE CONSTITUTION

22. The common law position is consistent with the values of the Constitution and

the principles of equity, fairness and pacta sunt servanda.

23. The common law position is implied by law and applies only "in general". The

parties are free to expressly or tactility agree otherwise and it remains open

to a court, by interpreting the particular language of the agreement, to find

that the particular collateral term is actually integral to the contractual

relationship25 As we have emphasised, the common law only establishes

presumptions as to the contracting parties' intentions as an interpretive aid. The

common law does not permit the court to disregard the words and deeds of the

contracting parties or any other relevant contextual facts. It is thus sufficiently

context-sensitive.

24. Contrary to the applicant's submissions, the common law presumptions do not

permit the court to disregard the intention of contracting parties or allow

25 Cf Mighty Solutions 1/a Orlando Service Station v Engen Petroleum Ltd and Another 2016 (1) SA 621 (CC) at para 55; Masstores (Ply) Ltd v Pick 'n Pay Retailers (Ply) Ltd and Another2016 (2) SA 586 (SCA at para 24.

10

parties "to escape their obligations under a contract" 26 The presumptions

also do not permit the court to ignore the purpose of any particular term in a

contract, nor does it preclude a party from pleading that a particular term is

unfair, contrary to public policy and unenforceable.27

25. We submit that the common law approach is an entirely sensible and

reasonable one. It recognises that, ordinarily, the subject matter of a contract

of lease is not the leased property itself, but the use and enjoyment and

occupancy thereof. 28 As Tredgold CJ explained in Levy v Banket:29

" If there is in existence an agreement containing a lease and

matters that are not incident to the relationship of landlord and

tenant, and if agreement is reached simply 'to renew the lease' then

surely any reasonable person would understand that the lease and

nothing more was to be renewed, and would feel it incumbent on him

if he wished to extend any other portion of the agreement to stipulate

expressly that this should happen".

26. The fact that in borderline cases it may not be easy to apply the

presumptions, or that they do not always apply, does not affect the

soundness of the presumptions.30

' 6 Applicant's written submissions para 33.

27 The applicant suggests that the common law may have this effect at para 34 of the submissions.

28 Pothier Letting and Hiring par 22, approved in Oatorian Properties (Pty) Ltd v Maroun 1973 3 SA 779 (A) 785G. See also Genae Properties Jhb (Pty) Ltd v NBC Administrators CC 1992 1 SA 566 (A) 576DF.

29 Levy v Banket supra at 564E-565A; cited with approval in Dolls House supra at 351 B-E.

' 0 Levy v Banket supra at 565A.

11

27. The applicant's contention that the presumptions result in an "over-formalistic

approach"31 is belied by the case law to which we refer. 32 It is clear from these

cases that the courts do indeed consider whether other relevant and admissible

facts rebut the presumptions and prove a contrary intention on the part of the

contracting parties. In the present case, the High Court's limited consideration

of the facts was a result of the parties' agreement to have the separated issue

determined only on the common cause facts, not the result of an overly-

formalistic common law.

WHETHER THE LAW MUST BE DEVELOPED, AND IF SO, HOW

28. We submit that there is no need for the common law to be developed. Indeed,

the "development" proposed by the applicant in her written submissions is, for

the most part, no different from the existing common law position.

29. Each of the alleged developments proposed in paragraphs 40.1 to 40.3 of

the applicant's submissions reflect the position under the existing common

law. They are not developments at all. The courts have already held that

terms that are ordinarily presumed to be collateral33 can, notwithstanding the

presumption, be incident to the contract itself depending on the facts of the

31 Applicant's written submissions paras 35-36.

32 See paragraph 16 above and the cases cited in footnote 49.

33 Such as (i) options to purchase: Sherwood v Tucker supra; Batchelor v Murphy supra; Webb v Hipkin supra; Spearhead supra at paras 51-53; (ii) rights of pre-emption/ first refusal: Doll House supra at 348G-349B; (iii) restraint and exclusivity clauses: Shenker Brothers v Bester 1952 (3) SA 664 (A); Levy v Banket supra at 565A; Masstores supra at para 24; and (iv) rights to use trademarks: Golden Fried Chicken (Pty) Ltd v Sirad Fast Foods CC and Others 2002 (1) SA 822 (SCA) at paras 4-7; cf Shala/a and Another v Gelb 1950 (1) SA 851 (C) at 856-864; Mignoel Properties (Pty) Ltd v Kneebone 1989 (4) SA 1042 (A) at 10501-1051A.

12

particular case and the interpretation of the extension or renewal

agreement.34

30. It is only in paragraph 40.4 that the applicant appears to contend for a limited

reversal of the presumption. The applicant proposes that where certain

conditions are met (i.e. the clause protects the rights of one party and does

not prejudice the other party, and the clause is "intimately related to the

character of the agreement") a collateral term of a lease should be

automatically renewed with the extension of the lease unless a contrary

intention is clear. There are several difficulties with this proposal however.

30.1 First, the applicant recognises that the law ought only to automatically

renew rights (or clauses) that are "intimately related to the character

of the agreement". But that is precisely what the current common law

presumptions achieve.

30.2 Second, in the present case, the right of first refusal is not intimately

related to the character of the agreement. The right of first refusal

affords the applicant a right that relates to title in the property itself; it

does not concern the applicant's rights as lessee- i.e., the right to use

and enjoy the property.

30.3 The applicant's tenure as lessee is protected by the duration of the

34 Archibald & Co Ltd v Strachan & Co Ltd 1944 NPD 40 at 43; Tor Industries (Pty} Ltd v Gee-six Superweld CC and Others 2001 (2) SA 146 (W) 1600-1610; Spearhead supra at paras 51-52; Masstores supra at para 24; Uys and Another v Sam Friedman Ltd 1935 AD 165 at 166.

13

lease and the common law huur gaat voor koop rule. The right of first

refusal does not afford the applicant security of tenure as lessee; it

only protects the applicant against a change of landlord. The applicant

remains secure as tenant despite the change of ownership.35

30.4 Third, it cannot be assumed that a right of first refusal would not

prejudice the landlord, as the applicant suggests. The question of

prejudice will depend on the circumstances of the case and is a matter

for pleading.

31. Finally, we submit that this Court will not lightly develop the common law,

especially where, as in this case, (i) the court would be required to develop

the common law as the court of first and last instance; (ii) the applicant has

not pleaded (either in the court a quo or on appeal) that the common law

offends the spirit, purport and objects of the Bill of Rights or is contrary to

public policy; (iii) any development of the common law would occur on the

basis of disputed facts; (iv) because a particular case evokes sympathy or

because a party finds herself on the wrong side of the existing law; (v) if by

altering the implied term, the contractual relationship is changed

retrospectively and converted to one on terms that the parties might not have

agreed to; and (vi) the development of the common law would have a far-

35 Oo/1 House supra at 352.

14

reaching and fundamental impact on contracts of lease.36

WHETHER THE ISSUES RAISED ARE ARGUABLE POINTS OF LAW OF

GENERAL PUBLIC IMPORTANCE WHICH OUGHT TO BE CONSIDERED BY THIS

COURT

32. The respondents accept that, if it were to be found that the common law of lease

does not accord with constitutional values, this would indeed raise an issue of

general public importance. However, for the reasons we have given, the

common law presumption on the renewal of the right of first refusal does not

offend the Bill of Rights and constitutional values. There is thus no arguable

point of law of general public importance that requires the attention of this Court.

33. Even if there were such an arguable point of law, that would not be the end of

the jurisdictional enquiry. As this Court made clear in Everfresh Market Virginia,

the court must be satisfied that it is in the interests of justice to determine the

issue.37 In light of the considerations listed in paragraph 31 above, we submit

that the interests of justice do not favour this Court determining the issue.

W G PRETORIUS

J BLEAZARD

Counsel for the Respondents Chambers, Sandton and Cape Town

5 October 2016

36 Makate v Vodacom Ltd 2016 (4) SA 121 (CC) at para 160; Mighty Solutions tla Orlando Service Station v Engen Petroleum Ltd and Another2016 (1) SA 621 (CC) paras 39-49, 63-67; Everfresh Market Virginia (Ply) Ltd v Shoprite Checkers (Pty) Ltd 2012 ( 1) SA 256 (CC) at paras 49-52, 63-66, 73-74; Barkhuizen v Napier2007 (5) SA 323 (CC) at paras 70-71; Laws v Rutherfurd 1924 AD 261 at 264.

37 At paras 48-50.

15

TABLE OF AUTHORITIES

Cases

Archibald & Co Ltd v Strachan & Co Ltd 1944 NPD 40

Barkhuizen v Napier2007 (5) SA 323 (CC)

Batchelor v Murphy 1926 A. C. 63

Doll House Refreshments v O'Shea 1957 ( 1) SA 345 (T)

Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC)

Genae Properties Jhb (Pty) Ltd v NBC Administrators CC 1992 1 SA 566 (A)

Golden Fried Chicken (Pty) Ltd v Sirad Fast Foods CC and Others 2002 (1) SA 822 (SCA)

Hirschowitz v Moo/man and Others 1985 (3) SA 739 (A)

Laws v Rutherfurd 1924 AD 261

Levy v Banket Holdings (Private) Ltd 1956 (3) SA 558 (FC)

Makate v Vodacom Ltd2016 (4) SA 121 (CC)

Masstores (Pty) Ltd v Pick 'n Pay Retailers (Pty) Ltd and Another2016 (2) SA 586 (SCA)

Mighty Solutions tla Orlando Service Station v Engen Petroleum Ltd and Another2016 (1) SA 621 (CC)

Mignoel Properties (Pty) Ltd v Kneebone 1989 (4) SA 1042 (A)

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)

Oatorian Properties (Pty) Ltd v Maroun 1973 3 SA 779 (A)

Shalala and Another v Gelb 1950 (1) SA 851 (C)

Shenker Brothers v Bester 1952 (3) SA 664 (A)

Sherwood v Tucker 1924, 2 Ch. 440

Spearhead Property Holdings Ltd v E&D Motors (Pty) Ltd 2010 (2) SA 1 (SCA)

Tor Industries (Pty) Ltd v Gee-six Superweld CC and Others 2001 (2) SA 146 (W)

Uys and Another v Sam Friedman Ltd 1935 AD 165

Webb v Hipkin 1944 AD 95

Witvlei Meat (Pty) Ltd v Agricultural Bank of Namibia 2014 JDR 1038 (NmS)

Secondary authorities

Pothier Letting and Hiring

WE Cooper, Landlord and Tenant, 2nd ed.

16

1

IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

Case No.: 113/16 Case No.: 291/16

In the matter between: NTSWAKI JOYCE MOKONE Applicant

and TASSOS PROPERTIES CC First Respondent

BLUE CANYON PROPERTIES 125 CC Second Respondent

__________________________________________________________________

APPLICANT’S COMBINED WRITTEN SUBMISSIONS __________________________________________________________________

1. The two cases before this Court concern the enforceability of a right of pre-

emption to purchase business premises situate at 119 Commissioner Street

("the premises") which was granted to the applicant as lessee by her lessor,

the first respondent, Tassos Properties CC ("Tassos") in terms of a written

lease agreement and its subsequent extension.

2. On 15 July 2009 Tassos sold the premises to the second respondent, Blue

Canyon Properties CC (“Blue Canyon”), who took transfer on 1 March 2010.1

3. As soon as the applicant became aware of the sale, in August 2010, she

sought to exercise the right of pre-emption.2 In January 2012 the applicant

1 CCT 113/16 Vol 2, page 114, Offer to Purchase; CCT 113/16 Vol 1, page 47, Deed of Transfer.

2

again sought to enforce her right through delivering an offer to purchase the

property.3 Tassos refused to give effect to the right of pre-emption contending

that it did not form part of the extended lease agreement and was therefore

unenforceable.4

4. Consequently, on 3 April 2012 the applicant initiated action proceedings

against Tassos and Blue Canyon under case number 12229/2012 in the High

Court to set aside the sale and transfer of the property and to compel a sale. In

the alternative, she claimed damages.5 The basis of her claim, which is

pursued in this Court, was that the right of pre-emption formed part of the

extended lease agreement concluded on 3 May 2006 and was therefore

enforceable against Tassos at the time it sold the premises to Blue Canyon.

5. Tassos and Blue Canyon contend that the simple renewal of the initial lease

agreement did not include its collateral terms. They maintain that the right of

first refusal is not incident to the relation of landlord and tenant, and it does not

form part of the extended lease agreement.6

6. On 24 November 2015, De Vos J dismissed the applicant’s claim.7 The

applicant’s applications for leave to appeal were dismissed at both the High

2 CCT 291/16 Vol 1, pages 89 to 104, Notice of Motion and Founding Affidavit under case number 30021/10.

3 On 27 January 2012 Mokone’s attorney addressed a letter to Tassos informing them that Mokone wished to

exercise her right of pre-emption under clause 6 of the lease and offering R55 886.60 as payment price for the property. CCT 291 Vol 1, page 63-64, Letter addressed to Tassos Properties dated 27 January 2012.

4 CCT 113/16 Vol 1, page 60, Plea.

5 CCT 291/16 Vol 1, pages 65-76, Summons issued under case number 12229/2012 with attached particulars of

claim; CCT 113/16 Vol 1, pages 96 to 104, Amended particulars of claim; CCT 113/16 Vol 1 page 12 and page 103.

6 CCT 113/16 Vol 2, page 114, para 16, founding affidavit.

7 “CCT 113/16 Vol 2, pages 127-138, High Court Judgment dated 24 November 2015.

3

Court8 and Supreme Court of Appeal.9 The order of De Vos J is the subject of

the appeal under case CCT 113/16.

7. Blue Canyon applied to the Boksburg Magistrate’s Court for an eviction order

on 17 February 2015.10 Blue Canyon was unsuccessful in the Magistrate’s

Court, but on 21 September 2016 Modiba J and Hassim AJ upheld Blue

Canyon’s appeal in the High Court.11 The eviction order is subject of the

appeal under case CCT 291/16.

8. Although these matters are brought as two distinct cases, they share a factual

background and arise in an overlapping history of legal disputes between the

parties regarding each of their rights in respect of 119 Commissioner Street.

We therefore deal with both matters in these written submissions.

9. We address the following topics:

9.1. First, we describe the four lease agreements;

9.2. Second, we demonstrate that the right of pre-emption was a material and

integral part of the written lease agreement, and that it formed part of the

extended lease agreement between Tasso and the applicant;

8 CCT 113/16 Vol 2, page 142, High Court order refusing application for leave to appeal.,

9 CCT 113/16 Vol 2, page 143, SCA order refusing lease to appeal.

10 CCT 291/16 Vol 1, pages 1-10, Notice of Motion and Founding Affidavit under case number 1094/15.CCT

291/16 Vol 1, page 45, para 5, Letter from Brooks & Brand Attorneys dated 10 December 2014. On 10 December 2014 Mokone received a letter from Blue Canyon to vacate the property and purportedly terminating the month-to-month lease agreement from 31 January 2015.

11 CCT 291/16 Vol 2, pages 168-172, High Court Judgment under case number A3017/16; CCT 291/16 Vol 2,

pages 173-174, High Court order under case number A3017/2016

4

9.3. Third, in the alternative, we submit that Tassos and the applicant intended

to include the right of pre-emption when they extended the initial lease

agreement by endorsing the front of the document;

9.4. Fourth, to the extent that this Court is not with us on the previous two

submissions, we submit that considerations of equity, fairness and

pragmatism should lead this Court to the conclusion that the right of pre-

emption was included in the extended lease agreement;

9.5. Fifth, we contend that the High Court erred in determining whether the

right of pre-emption had been extended without reference to material facts

informing the context and circumstances of the extended lease

agreement. These facts would have informed the High Court’s

interpretation of the inscription on the initial lease agreement giving rise to

the extended lease agreement;

9.6. Lastly, we discuss the appropriate relief and the reasons why this Court

should grant leave to appeal.

THE LEASE AGREEMENTS

10. Over the course of the last thirteen years, there have been four lease

agreements governing the applicant’s right to occupy the premises:

10.1. A written lease agreement entered into by entered into by the applicant

and Tassos12 on 1 March 2004 for an initial period of one year (“the initial

12

CCT 113/16 Vol 1, pages 16-43, Agreement of Lease dated 1 March 2004.

5

lease agreement”). This lease was in writing and signed by the parties.

The written lease recorded a right of pre-emption in clause 6 as follows:

“OPTION TO PURCHASE LEASED PREMISES

The Tenant shall have the first right of refusal to purchase the

leased premises when the Landlord which [sic] to sell the leased

premises. The purchase price shall be negotiated when the

Landlord which [sic] to sell the leased premises.”13

10.2. Upon the expiry of the initial lease agreement, the applicant and Tassos

continued to operate under an oral lease agreement during the period 1

March 2005 to 3 May 2006.14 (“the oral lease agreement”)

10.3. The applicant and Tassos concluded a new lease agreement on 3 May

2006 through an endorsement on the front of the initial lease agreement

(“the extended lease agreement”). The lease period was extended from

3 May 2006 until 31 May 2014 and rental amount increased from R4

500.0015 to R5 500.00 per month.1617 It is the terms of this extended

lease agreement that are in dispute.

10.4. From 1 June 2014 there existed a tacit month-to-month lease between the

applicant and Blue Canyon – who had purchased the property in July

13

CCT 113/16 Vol 1, page 23, clause 6, Agreement of Lease dated 1 March 2004.

14 CCT 291/16 Vol 2, page 184, para 8.3, Applicant’s Founding Affidavit.

15 CCT 113/16 Vol 1, page 17, clause 1.7.1, Agreement of Lease dated 1 March 2004.

16 CCT 113/16 Vol 1, page 16, Endorsement on Agreement of Lease. Applicant’s Founding Affidavit p. 184 of

CCT291/16 Bundle at para 8.4.

17 Respondent’s (Blue Canyon’s) Answering Affidavit under case number CCT291/16, p.198 of CCT291/16

Bundle at para 9. Blue Canyon disputes the validity of this lease However, the validity of the lease was accepted as common cause for the purpose of separating the legal issue before De Vos J under High Court case number 12229/12.

17 The validity of the lease was also not disputed for the purposes of the eviction application before the

Magistrate’s Court under case number 1094/2015. Therefore, the determination of the validity of the lease agreement is not before this Court.

6

2009. (“the tacit month-to-month lease”) This agreement was

purportedly terminated on 31 January 2015.18

THE RIGHT OF PRE-EMPTION WAS A MATERIAL TERM OF THE INITIAL

LEASE AGREEMENT

11. In the court a quo, De Vos J proceeded on the basis that the right of pre-

emption was “not in itself one of the incidents of the lease”19 and that “the right

of pre-emption is collateral to the relation of landlord and tenant and terms that

are collateral to and independent of such relationship are not renewed when a

lease is renewed simpliciter.”20

12. This approach arises from earlier case law which holds that a right of pre-

emption is a “collateral issue” in a lease agreement and is not recognised as an

incident of the lease.21

13. On this premise, De Vos J found that the right of pre-emption, as a collateral

right, was not one of the terms of the extended lease agreement. The applicant

was required to show that there was a “clear intention that the right of pre-

emption should continue throughout the extended period”.22

14. De Vos J erred in accepting, without more, that the right of pre-emption

contained in the initial lease agreement was a collateral right, independent of

18

CCT 291/16 Vol 1, page 8, para 6.8.

19 CCT 113/16 Vol 1, page 36, para 15.7, Judgment.

20 CCT 113//16 Vol 1, page 36, para 15.6, Judgment.

21 Doll House Refreshments (Pty) Ltd v O’Shea and Others 1957 (1) SA 345 (T) at 352.

22 CCT 113/16 Vol 1, page 36, para 15.6, Judgment.

7

the relationship of landlord and tenant, and not in itself once of the incidents of

the lease.

15. In the constitutional era, the courts have considered the fate of terms

historically characterised as ‘collateral’ in different scenarios.23 The

jurisprudence has shifted away from a technical or formalistic approach, in

favour of a context-specific analysis of the facts of a particular case.

16. It is not possible, nor desirable, to determine a priori whether or not a term of an

agreement between parties is a collateral term, and to impose a presumption

that such a term is not included in an extension of the initial lease agreement.

This formalistic approach of ‘fixed rules’ and presumptions interferes

unnecessarily with the concept of pacta sunt servanda24 by providing for a

presumption about the parties’ intentions when there is no explicit indication

one way or the other. This is particular so in respect of particular terms – such

as a right of pre-emption - that seek to provide protection to a tenant and which

do not impose an undue burden or prejudice on the landlord.

17. The correct approach is a substantive enquiry which is context specific and

based on the facts of a particular case. The applicant submits that the primary

question is whether the right of pre-emption was an integral and material part of

the initial lease agreement and whether the parties intended for it to form part of

any extended lease agreement.

23

For example, in Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd 2010 (2) SA 1 (SCA); [2009] 4 All SA 417 (SCA) the Supreme Court of Appeal considered whether collateral rights in a lease agreement (such as an option to purchase) are transferred to a new owner of the property in accordance with the huur gaat voor koop principle.

24 Which this Court has confirmed is consistent with and bolstered by the Constitution in Barkhuizen v Napier

2007 (5) SA 323.

8

18. This approach has been followed in a number of cases considering whether

and when certain historically characterised ‘collateral’ terms pass from the

original landlord to the purchaser in accordance with the huur gaat voor koop

principle:

18.1. In Shalala v Gelb 1950 (1) SA 851 (C), the court held that considerations

of principle and convenience dictate that the renewal period provided for

in a lease falls to be included in the protection that the rule accorded to

the tenant.25 The learned judge continued: there is thus much to be said,

both on grounds of convenience and of equity, for the view that the

obligation to recognize a renewal of the lease should likewise pass from

the original landlord to the purchaser.

18.2. In Banket Holdings v Levy 1955 (4) SA 74 (SR), Murray CJ relied on the

judgment of Wessels CJ in Uys & Another v Sam Friedman Ltd 1935

AD 165 for his dictum that a determination whether or not an option to

purchase is collateral to the lease depends on the interpretation of all the

terms of the agreement.

18.3. In Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd 2010 (2)

SA 1 (SCA), Maya J in a minority judgment, found that the key question

was whether or not the term was material. She found in that case that the

option to purchase was a “material component of and was a key

motivating factor in the conclusion of the lease agreement.”

25

Ogilvie Thompson J's view in the Shalala & Another v Gelb 1950 (1) SA 851 (C).

9

19. The question as to whether a term of the initial lease agreement is included in

the written extension of a lease should not centre around the question of

whether the term is characterised as collateral or not. Rather, the court should

consider whether the term is a material part of the lease agreement. In doing

so it must consider:

19.1. Whether the term is ‘manifestly incident to the contract itself’’ through the

parties’ intention;

19.2. The agreement as a whole;

19.3. The context in which the agreement was concluded;

19.4. The purpose of the agreement; and

19.5. Grounds of convenience and of equity.

The right of pre-emption was a material part of the lease agreement

20. When considering the lease agreement as a whole, it is clear that the purpose

of the initial lease agreement and the extended lease agreement was to provide

the applicant with premises to conduct her business of a retail liquor store.

20.1. At the time the applicant originally leased the premises it was trading as

“Nic’s [sic] Liquor Store”.26 The premises were described as “retail liquor

store”.27

20.2. Clause 1.11 stated:

26

CCT 113/16 Vol 1, page 16, clause 1.5, Lease Agreement

27 CCT 113/16 Vol 1, page 17, clause 1.5.1, Lease Agreement

10

“PURPOSE FOR WHICH TENANT IS RENTING LEASE

PREMISES

Retail liquor outlet and such other business as per the provision of

the Liquor Act, Act 27 of 1989 (as amended) and for no other

business whatsoever.”28

20.3. Clause 13.1 reiterates the above, stating:

“The Premises are let to the Tenant for the purpose of conducting

therein the business specified in clause 1.11 of the agreement

and for no other purpose whatever without the prior written

consent of the Landlord.”29

20.4. By entering into the lease agreement the applicant was required to sell

liquor, keep an adequate stock of liquor merchandise over and above

immediate sales, and employ an adequate number of staff to run the

business. If the premises were to be used for the purpose of retail

business, as the above clauses required, then in terms of clause 16.2.4

the Tenant was required to:

“ensure that the Premises are both adequately stocked with

merchandise and properly staffed with personnel.”30(Emphasis

added)

20.5. In addition, clause 16.1.3. required the Tenant to:

28

CCT 113/16 Vol 1, page 18, clause 1.11, Lease Agreement

29 CCT 113/16 Vol 1, page 26, clause 13.1, Lease Agreement

30 CCT 113/16, Vol 1 page 31, clause 16.2.4, Lease Agreement

11

“comply with all laws, byelaws and regulations relating to

Tenants or occupiers of business Premises or affecting the

conduct of any business carried on in the Premises;”31

21. Clauses 3.1 and 3.2 define the core of the lease agreement – the letting and

hiring of the property – and expressly include the terms and conditions set out

in the lease agreement.

“Letting and Hiring

3.1 The Landlord lets the Premises to the Tenant who hires

the Premises from the Landlord.

3.2 Such letting and hiring shall be on the terms and

conditions set out in this Lease.”32 (Emphasis added)

22. At the time the parties entered into the extended lease agreement, it was clear

to Tassos that the premises were essential to the continuation of the applicant’s

business, and that the applicant required security of tenure at the premises in

order to successfully exercise her right to trade as a liquor store and to pursue

her livelihood:

22.1. The applicant’s liquor licence permits her to trade in liquor and sell liquor

“under the name Nick’s Liquor Store upon premises situated at erf 1679,

119 Commissioner Str. Boksburg” and “Liquor not required for immediate

sale shall be stored on the licensed premises.” A copy of the applicant’s

31

CCT 113/16 Vol 1, page 28, clause 16.1.3, Lease Agreement

32 CCT 113/16 Vol 1, page 21, clauses 3.1 and 3.2, Lease Agreement

12

converted license issued in terms of section 143(2) of the Gauteng Liquor

Act No. 2 of 2003 was attached to her particulars of claim.33

22.2. Furthermore, in terms of clause 16.1.16 of the lease agreement, the

tenant shall not “change the advertised and/or trading name of the

business operated in the leased premise without written consent of the

Landlord which consent shall not be unreasonably withheld”.34 The effect

of this clause being that any goodwill engendered by her business

operating as “Nick’s Liquor Store” attached to the trading name of the

premises not to the applicant personally.

22.3. The terms of the liquor licence read with the initial lease agreement meant

that the applicant could only exercise her right to sell or store liquor:

22.3.1. while in occupation of the premises at 119 Commissioner

Street.

22.3.2. under the trading name ‘Nick’s Liquor Store’ which was

the name attached to the premises at the time the initial

lease agreement was entered into.35

22.4. Without occupation of the premises, the applicant:

22.4.1. Could not benefit from any of the goodwill built up over the

previous two years.

22.4.2. Could not make a living from her chosen trade.

33

CCT 113/16 Vol 1, page 15, Liquor License

34 CCT 113/16 Vol 1, page 31, clause 16.1.16, Lease Agreement

35 CCT 113/16 Vol 1, page 16, clause 1.5, Lease Agreement

13

23. We submit these factors indicate the clause 6 was not merely incidental to the

lease agreement but was in fact material to the parties concluding the

agreement in the first place. The blanket assumption that a right of pre-emption

in every case will be ancillary to the lease agreement simply cannot be applied.

24. As such the right of pre-emption – a material term of the lease agreement –

was extended to form part of the extended lease agreement through the

endorsement on 6 May 2006.

ALTERNATIVELY, THE PARTIES INTENDED FOR THE TERM TO BE

EXTENDED

25. When interpreting the inscription extending the initial lease agreement, this

Court must consider not just the plain wording of the endorsement but also all

the admissible context including:

25.1. The circumstances attendant upon its coming into existence;

25.2. The purpose to which it was directed;

25.3. The material known to those responsible for its production.36

26. We submit that the extensive evidence set out above provides a clear intention

of the parties to include the right of pre-emption in the extended lease.

27. In respect of the plain wording:

36

National Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at para 18.

14

27.1. The inscription appears on the front page of the written lease agreement

which the parties entered into on 1 March 2004. It reads “3/5/06 Extend till

31/5/2014 monthly rent R5500” and is signed by the landlord.

27.2. In Natal Joint Municipal Pension Fund v Endumeni Municipality 2012

(4) SA 593 (SCA) at para 18 the court held “A sensible meaning is to be

preferred to one that leads to insensible or unbusinesslike results or

undermines the apparent purpose of the document.”

27.3. The applicant submits that the inscription means that the parties agreed to

extend or renew the written lease agreement on the same terms and

conditions as contained in the written lease agreement (on which the

inscription appears) at a new monthly rental of R5500 per month.37

27.4. Another reason why the right of pre-emption is clearly intended to be

included in the extended agreement is that the initial lease agreement

contains 25 clauses with numerous sub-clauses and governed a variety of

scenarios arising from the relationship between the parties. For example:

27.4.1. The scale at which rent would be increased if property

rates, levies or taxes were increased by the local

authorities;38

27.4.2. The manner in which the lessee can sub-let the

premises;39

37

CCT 113/16 Vol 2, page 114, para 15, founding affidavit.

38 CCT 113/16 Vol 1, page 23, clause 8.2 and its sub-paragraphs, Lease Agreement

39 CCT 113/16 Vol 1, pages 26-27, clauses 14.1-14.6, Lease Agreement

15

27.4.3. How to settle disputes arising over certain charges;40

27.4.4. The requirements for the retail business to trade

continuously on all business days and to keep the

shopfronts clean.41

27.5. The above provisions, amongst many others, were seen as necessary for

one-year commercial lease agreement and were recorded in the

agreement accordingly. Yet, the respondent contended that for an eight-

year lease no such clarity was sought.42 It is simply not plausible that the

parties intended for the lessee to be granted carte blanche over the

property for eight years, subject only to the common law of lease.

27.6. The need to interpret a contract in a sensible manner ensuring

businesslike results supports the applicant’s contention that the terms of

the initial lease agreement were renewed in their entirety by endorsing the

lease on the face of the document.

28. De Vos J’s only reference to the initial written lease is to the time period of the

lease – being one year with the possibility of a one-year renewal. His Lordship

argues that this indicates that the parties could only have contemplated the

right of pre-emption enduring for a maximum of two years.43 We submit, with

respect, that this misses the point. The question is not whether at the time of

40

CCT 113/16 Vol 1, page 25, clause 11.4, Lease Agreement

41 CCT 113/16 Vol 1, page 31, clauses 16.2.1 and 16.2.2, Lease Agreement

42 The defendants’ argument was recorded in De Vos J’s judgment as follows: “if agreement is reached simply

‘renew the lease’ then any reasonable person would understand that only the lease of the premises and nothing more was to be renewed; and if he wished to extend any other portion of the agreement would feel it incumbent upon him to stipulate expressly that this should happen. The defendants hold that if the reletting is express, the question relating to which of the terms of the expired lease form part of the new contract is a question of interpretation.” CCT113/16 Founding Affidavit, page 27, para 8, Annexure “NJM1”: High Court Judgment.

43 CCT113/16 Vol 2, page 135, para 15.1, High Court Judgment.

16

entering into the initial lease agreement the parties intended a right of pre-

emption to exist for all time, but whether, given the context of the agreement,

the parties recognised the pre-emption right as a material provision governing

their relationship. If they did the right is presumed to have been renewed along

with the lease agreement. If they did not then this factor would be one amongst

the many highlighted above which the court should have considered when

determining whether there was an intention to include the pre-emption right. We

submit that weighted against all of the above provisions the likelihood would

have been found in the applicant’s favour on a balance of probabilities.

29. Finally, it falls to mention that the subsequent conduct of the parties was not

placed before the court in the agreed statement of facts. Despite this, during

the hearing the court assumed that the fact that Tassos subsequently sold the

property was indicative of the fact that there was no consensus to extend the

pre-emption clause at the time the extended lease agreement was entered

into.44 We submit that for the defendant’s later conduct, which constituted the

very breach complained of, to provide such a defence is untenable.

CONSIDERATIONS OF EQUITY

30. In the circumstances, to the extent that there is insufficient evidence before this

Court to find that the right of pre-emption was a material term of the initial lease

agreement, or that the parties intended it to be extended, the applicant submits

that considerations of fairness, equity and pragmatism should inform a finding

that the right of pre-emption formed part of the extended lease agreement.

44

CCT113/16 Vol 1, page 86, lines 5-7, Proceedings on 23 November 2015 in the Court a quo.

17

31. To the extent that the current common law does not support this approach, the

applicant submits that the common law should be developed to incorporate

these considerations, and to give effect to the applicant’s right to trade, when

considering whether a right of pre-emption forms part of an extended or

renewed lease.45

32. If this Court finds the agreement to be ambiguous, the doctrine of contra

proferentum should have led to a reading which favoured the tenant, who did

not have the opportunity to write or sign the 3/5/2006 agreement and was in a

position of unequal bargaining power.

33. This court has inherent jurisdiction to develop the common law. When

developing the common law the court must promote the spirit, purport and

objects of the Bill of Rights where it conflicts with the Constitution.46 This in turn

requires the Court to consider whether the common law conforms to the Bill of

Rights and, if not, to develop it.47 This Court has done so on previous

occasions.48

34. Our courts, and this Court in particular, are increasingly recognising the

considerations of unequal bargaining power49 and the underlying notion of good

faith in contract50 underpinned by the principles of the Constitution.

45

Section 22 of the Constitution provides: “Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law.”

46 Section 39(2) of the Constitution of South Africa, 1996.

47 Carmichele v Minister of Safety and Security 2001 (4) SA 938 (CC) para 39.

48 Carmichele v Minister of Safety and Security 2001 (4) SA 938 (CC) para 39; K v Minister of Safety and

Security 2005 (6) SA 419 (CC); F v Minister of Safety and Security 2012 (1) SA 536 (CC); Masiya v Director of Public Prosecution Pretoria 2007 (5) SA 30 (CC).

49 Barkhuizen v Napier 2007 (5) SA 323 (CC); Uniting Reformed Church De Doorns v the President of the

Republic of South Africa and Others 2013 (5) SA 205 (WCC).

18

35. In this regard, the applicant submits that fairness and equity supports a finding

that the right of pre-emption formed part of the terms of the extended lease

agreement:

35.1. We have demonstrated above that the right of pre-emption was an

integral and material part of the agreement.

35.2. The right of pre-emption seeks to provide a tenant with security of tenure,

which permits and encourages a tenant to invest in her business and in

the premises with a lower risk than would otherwise be the case.

35.3. Tassos, the property owner and landlord, occupied the stronger

bargaining position at the time of the initial written lease, but also when

the lease was extended on 6 May 2006. We have shown above, that both

parties were aware that the applicant could not exercise her rights under

the liquor licence or conduct her chosen trade unless she remained in

occupation of the premises.

35.4. We note that the right at issue in this case is not an option to purchase. It

entitles the tenant to be first in line to purchase the property when, and

only when, the landlord wishes to sell it, and at a price to be negotiated at

the time. There is no prejudice to the landlord embodied in this clause. It

is a clause purely for the protection of the tenant. In this case, the tenant

was in a substantially weaker position in negotiating the terms of any

lease agreement.

50 Bredenkamp and Others v Standard Bank of SA Ltd 2010 (4) SA 468 (SCA); Everfresh Market Virginia (Pty)

Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC); Botha and Another v Rich N.O. and Others 2014 (4) SA 124 (CC).

19

35.5. A right of pre-emption does not infringe on the landlord’s right to evict a

lessee. It does not affect the owner’s right to retain ownership of the

property. It does not affect the owner’s right to sell the property to another

– provided of course the right holder has been given the first option to

buy. It does stipulate the amount for which the seller must be prepared to

part with the property. For all these reasons the right to pre-emption has

little impact on the rights of the landlord and/or owner. The right does,

however, provide what little security it can for a lessee whose livelihood

depends on occupation of the property.

35.6. The applicant is the holder of a liquor licence granted under the Gauteng

Liquor Act 2 of 2003. The Liquor Act is the legislation giving effect to right

to trade in section 22 of the Constitution. The respondent’s conduct in this

case has the effect of barring the applicant from selling and storing liquor

in terms of her licence. Her licence – and her ability to engage in her

chosen trade – is rendered nugatory by Tassos’s conduct.

35.7. It is in these circumstances that Tassos, without notice to the applicant,

sold the premises to Blue Canyon. We set out below the facts on record

demonstrating the suspicious circumstances under which the premises

were sold.

36. Tassos’s conduct in the circumstances is also relevant. There is no dispute

that Tassos knew that the initial lease agreement contained a right of pre-

emption to purchase the premises. It was also clear at the time the lease was

extended that the right of pre-emption created essential security of tenure for

the applicant and enabled her to fully exercise her rights under the liquor

20

licence and section 22 of the Constitution. With this knowledge, Tassos – in its

position of superior bargaining power – continued to conclude the extended

lease agreement without informing the applicant of its view that the right of pre-

emption was not material, and would not be included in the extended lease

agreement.

THE DETERMINATION OF THE MATTER WITHOUT REGARD TO MATERIAL

EVIDENCE

37. It is common cause that the matter proceeded before De Vos J only on a

question of law. De Vos J recorded that the parties agreed to separate the

question of law from the other disputes in terms of Rule 33(4) and (6) and the

remaining issues were postponed sine die.51 In the circumstances, De Vos J

stated that “the question of law to be determined relates to whether the

plaintiff’s alleged right of pre-emption as per clause 6 of the lease agreement

between the parties was – in law – capable of being extended / renewed based

on the facts recorded in the particulars of claim.”52

38. The applicant’s counsel a quo set out the common cause facts as those

appearing on page 7 of the particulars of claim, specifically paragraphs 5 to

5.3.53 De Vos J’s judgment reproduces these same facts.54 Paragraphs 5 to

5.3 set out the three lease agreements entered into by the applicant and first

respondent. The stated facts also include the entire document of the initial

51

CCT113/16 Vol 2, page 127, para 2, High Court Judgment.

52 CCT 113/16 Vol 2, page 128, para 3, High Court Judgment.

53 CCT113/16 Vol 1, page 72, lines 8-10; page 73 lines 3-25, Proceedings on 23 November 2015 in the Court a

quo.

54 CCT113/16 Vol 2, page 128, para 4, High Court Judgment.

21

lease agreement as well as the later endorsement on the front page of the

same document. This was attached as Annexure A to the particulars of claim.55

39. Due to the inclusion of Annexure A in the agreed statement of facts the court

could have regard to all the clauses of the initial lease agreement and not

merely clause 6 and the written endorsement.

40. In light of the well-established principles of interpretation, it is clear that when

interpreting the agreement, the High Court needed to consider all the

admissible context.56

41. In G4S Cash Solutions v Zandspruit Cash & Carry (Pty) Ltd [2016] ZASCA

113 (12 September 2016) the court reaffirmed that context and intention require

interpreting more than the words of the agreement. The court held:

“[12] Whilst the starting point is the words of the agreements, it

has to be borne in mind, as emphasised by Lewis JA in Novartis

SA (Pty) Ltd v Maphil Trading (Pty) Ltd [2015] ZASCA 111; 2016

(1) SA 518 (SCA) para 27, that this court has consistently held

that the interpretative process is one of ascertaining the intention

of the parties ─ in this case, what they meant to achieve by

incorporating clause 9.9 in the agreements. To this end the court

has to examine all the circumstances surrounding the conclusion

of the agreements, ie the factual matrix or context, including any

relevant subsequent conduct of the parties.”

55

CCT 113/16 Vol 1, page 6, para 5, Particulars of Claim; CCT113/16 Vol 1, page 73, lines 11-13, Proceedings on 23 November 2015 in the Court a quo. CCT113/16, Vol 2, page 127, para 4, lines 16-18, High Court Judgment.

56 National Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at para 18.

22

42. The court goes on to say, “To single out words and phrases in an attempt to

arrive at a different conclusion simply means that the context in which they are

used is ignored.”57

43. We submit that it was imperative for the court to have had regard to the entire

document of the initial lease agreement when undertaking an interpretation of

both the initial lease and the extended lease agreement.

43.1. The clauses of the initial lease agreement were the only facts before the

court from which the court could determine whether or not clause 6 was

intended to be a material term of the initial lease agreement.

43.2. They were the only facts before the court as to the surrounding and

background circumstances to the extended agreement coming into

existence.

43.3. They were also the only facts before the court which signalled to previous

negotiation (or agreement) between the parties.

43.4. They were the only facts before the court as to the material known to the

parties when they drew up the extended lease agreement.

44. We submit that the court a quo should have considered not merely the clause

in dispute and the plain wording of the endorsement, but also the above factors.

Doing so would have aided in the interpretation of both the initial and the

extended lease agreement.

57 G4S Cash Solutions v Zandspruit Cash & Carry (Pty) Ltd [2016] ZASCA 113 (12 September 2016)

at para 18.

23

45. Undertaking such an interpretation, it is evident that the intention of the parties

must have been to include the right of pre-emption as a material term of the

initial lease agreement. However, even if the court held the view that the right

was by its nature “collateral” we submit that a proper interpretation of the

extended lease agreement would in any event show that the intention must

have been to include the right of pre-emption.

46. The question of law set out by His Lordship De Vos J includes two sub-

questions:

46.1. First, whether the clause was capable of being renewed at all; and

46.2. Second, if capable of being renewed, whether it had been renewed in this

instance “based on the facts recorded in the particulars of claim”.

47. In answer to the first question both the parties and the court were in agreement

that where a right is an ordinary incident of the lease (being a material term of

that lease agreement) it is presumed to be included in an extension. Where a

term was collateral to the lease it is only renewed where it is the parties’

expressed the intention that the right be included in the lease agreement. It was

therefore possible that the right was capable of being renewed on either of

these two basis. (As we have submitted in our earlier submissions before this

court, such renewal would of course have to comply with any applicable

formalities).

48. The court was therefore seized with the answer to the second question, i.e. was

the right renewed in this particular scenario. Meaning, was it either:

24

48.1. a material provision of the initial lease agreement and therefore presumed

to be included; or

48.2. a provision which the parties expressly intended to include in the

extended lease agreement.

49. To answer the first proposition the court would need to have interpreted the

initial lease agreement; to look at the document in its entirety and its purpose.

To answer the second proposition the court would need to interpret the

extended lease agreement in the context in which it came into being; the initial

lease agreement set out this context.

50. De Vos J acknowledged the principles of interpretation of contract in his

judgment58, however His Lordship erred in not properly applying them in this

matter.

51. While the question of law may have once been easily answered based on the

old English and South African authorities cited by the court59, these cases do

not apply the current rules of interpretation followed by our courts. For example,

in Levy v Banket Holdings (Private) Ltd. 1956 (3) SA 558 (F)(cited with

approval by De Vos J60) Tredgold C.J. held “In each case the real issue is the

intention of the parties when they made a fresh agreement. As always, this is

simply a question of what they said.”61 (Emphasis added)

58

CCT113/16 Founding Affidavit, page 31, para 10, Annexure “NJM1”: High Court Judgment.

59 Sherwood v Tucker 1924 (2) CH 440; Bachelor v Murphy 1926 A.C. 63; Webb v Hipkin 1944 AD 95; Levy

Banket Holdings (Private) Ltd 1956 (3) SA 558 (FC).

60CCT113/16 Vol 2, page 135, para 15.1, High Court Judgment.

61 At 563A.

25

52. We have set out above the relevant provisions in the initial lease agreement

that provide the necessary context in which to view the relationship between

the lessee and the premises, and the intention of the parties at the time of

entering into their various agreement.

53. It follows that the order of the court below has to be set aside and the question

of law be found in the applicant’s favour.

REMEDY

54. Appropriateness, effectiveness and fairness, together with the assurance that

an order can be can be complied with, are what is required when this Court

considers remedy. At times, as in the present matter, this Court is called upon

to forge an innovative remedy that secures the applicant’s rights.

55. In Fose v Minister of Safety and Security 1997 (3) SA 786 (CC), Ackermann

J writing for the majority of this Court stated that courts have–

“a particular duty to ensure that, within the bounds of the

Constitution, effective relief be granted for the infringement of

any of the rights entrenched in it. In our context an appropriate

remedy must mean an effective remedy, for without effective

remedies for breach, the values underlying and the rights

entrenched in the Constitution cannot properly be upheld or

enhanced. Particularly in a country where so few have the

means to enforce their rights through the courts, it is essential

that on those occasions when the legal process does establish

that an infringement of an entrenched right has occurred, it be

effectively vindicated. The courts have a particular responsibility

in this regard and are obliged to forge new tools and shape

26

innovative remedies, if needs be, to achieve this goal”.62 (Our

emphasis.)

56. In Hoffmann v South African Airways 2001 (1) SA 1 (CC), Ngcobo J

tabulated the elements of “appropriate relief” in terms of section 38 of the

Constitution:

“The determination of appropriate relief, therefore, calls for the

balancing of the various interests that might be affected by the

remedy. The balancing process must at least be guided by the

objective, first, to address the wrong occasioned by the

infringement of the constitutional rights; second, to deter future

violations; third, to make an order that can be complied with; and

fourth, of fairness to all those who might be affected by the relief.

Invariably, the nature of the right infringed and the nature of the

infringement will provide guidance as to the appropriate relief in

the particular case. Therefore, in determining appropriate relief,

we must carefully analyse the nature of the constitutional

infringement, and strike effectively at its source.” 63 (Our

emphasis.)

57. We have demonstrated above that the right of pre-emption was a term of the

extended lease agreement and was enforceable at the time that Tassos

purported to sell the property to Blue Canyon. The applicant is therefore

entitled to an order that gives effect to the right of pre-emption to purchase the

premises, and ensures that she is not prejudiced by the unlawful conduct of

Tassos.

62

Fose v Minister of Safety and Security 1997 (3) SA 786 (CC) at para 68. See also Minister of Home Affairs v National Institute for Crime Prevention and the Re-Integration of Offenders (NICRO) and Others 2005 (3) SA 280 (CC) at paras 73 to 74. 63

Hoffmann v South African Airways 2001 (1) SA 1 (CC) at para 45.

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58.

59. If this Court accepts that Tassos has breached the extended lease agreement

by selling the premises to Blue Canyon, then it follows that:

59.1. The sale of the premises to Blue Canyon should not have taken place,

and was unlawful;

59.2. The registration of the premises should not have taken place, and was

unlawful.

60. Blue Canyon has obtained an eviction order ejecting the applicant from the

premises. Once the application of CCT 291/16 is finalised before this court, the

eviction order can be executed. The applicant urges this Court to ensure that

she has effective relief if successful in CCT 113/16, and that her right to

purchase and remain in lawful occupation of the premises are protected.

61. In the circumstances, we submit the Court should go further than merely setting

aside one or both of the High Court judgments and permitting the matters to

return to the High Court.

62. By merely overturning the judgments of the court a quo, this Court requires the

applicant to return to the High Court to lead evidence regarding the breach of

the right of pre-emption and to claim either specific performance or damages.

The applicant must also undertake the necessary proceedings to rescind or set

aside the eviction order.

28

63. We submit that such a result is not just and equitable. The applicant has been

attempting to enforce her right to pre-emption and security of tenure for almost

7 years. The applicant’s livelihood depends on a swift resolution to this matter.

64. In addition to overturning the judgments of De Vos J and Modiba J in the High

Court, it is open to this Court to set aside the sale of the premises, and the

transfer of the property and direct that the premises be offered to the applicant

on the same terms and conditions as it was offered to Blue Canyon.

65. In the event that this Court declines to order such relief and requires the

applicant to return to the High Court to properly vindicate her rights, we submit

that this Court should stay the execution of the eviction order until such time as

the applicant has instituted and finalised the necessary proceedings to unravel

the unlawful conduct.

66. This order is a just and equitable one. Neither Tassos nor Blue Canyon appear

from the record to be truly innocent parties in the transactions. The facts on

record before this Court indicate collusion between the two respondents in an

attempt to bypass her right of pre-emption. We submit the papers raise a

suspicion of mala fides on the part of the respondents for the following reasons:

66.1. Firstly, the second respondent maintains that the property was purchased

for R9 550 000.00.64 However, the Title Deed65, the Power of Attorney,66

and the SARS documentation67 all record the purchase price to have been

64

CCT 291/16 Vol 2, page 199, para 10, Answering Affidavit

65 CCT 291/16 Vol 1, page 14, Deed of Transfer

66 CCT 113/16 Vol 1, page 44, Annexure “B”

67 CCT 113/16 Vol 1, page 57, Annexure “NJID”, Transfer Duty

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R55 886.60.68 The property was not sold by Tassos for R9 550 000.00.

The property was mortgaged by Blue Canyon for the amount of R900

000.00.69

66.2. Secondly, the Offer to Purchase does reflect a purchase amount of R955

000.00 with R900 000.00 to be secured by way of a mortgage bond.70

However, when one looks at the mortgage agreement Tassos (the seller)

is the mortgagee.71

66.3. Thirdly, Tassos alleges that only bare dominium was transferred and that

a usufruct is registered over the property. The usufruct is recorded in the

Deed of Transfer as one in favour of Adriana de Wit.72 The same name,

Adriana De Wit, appears on the purchase agreement acting on behalf of

Blue Canyon.73 Ms De Wit’s signature appears in the place of the

purchaser on the offer to purchase.74 Although the precise details are

unclear from the papers, there is a plausible inference that Ms De Wit is

connected to both Tassos and Blue Canyon, and that the sale of the

premises was a simulated transaction to avoid the right of pre-emption.

67. In addition to the dubious manner in which the sale and transfer was

conducted, the applicant submits that her rights were known to both the

respondents at the time the sale was entered into.

68

This is the purchase price at which the applicant has tendered to pay for the property. See CCT113/16, page 50, Annexure D Letter from Applicant to First Respondent dates 27/01/2012.

69 CCT 113/16 Vol 1, page 47, Deed of Transfer.

70 CCT 113/16 Vol 2, page 144, para 2, Annexure “NJ1A” Offer to Purchase.

71 CCT 113/16 Vol 2, page 159, “NJ1E”: Mortgage Bond.

72 CCT 113/16 Vol 1, page 48, para B, Deed of Transfer.

73 CCT 113/16 Vol 2, page 144, Annexure “NJ1A”, Offer to Purchase.

74 CCT 113/16 Vol 2, page 150, Annexure “NJ1A”, Offer to Purchase.

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68. Blue Canyon denies knowledge of the applicant’s pre-emption right in its

opposing affidavit under CCT291/16. 75 Blue Canyon’s knowledge of the

applicant’s right of pre-emption can be objectively determined on the papers for

the following reasons:

68.1. Blue Canyon has admitted that its premises are located at 113

Commissioner Street Boksburg.76 It is common cause that Nick’s Bottle

Store is located at 119 Commissioner Street Boksburg.

68.2. In addition, Blue Canyon acknowledged having inspected the property

under clause 3 of the Offer to Purchase.77

68.3. Blue Canyon must have been aware that there was a tenant occupying

the premises and conducting the business of a liquor store.

68.4. Blue Canyon acknowledges that as purchaser it would step into the shoes

of the lessor and be bound by the terms of any lease agreement

governing the property at the time of sale.78 In light of this, it is reasonable

to assume that once it was aware that the property was occupied Blue

Canyon would have enquired into the terms of the lease.

68.5. Finally, Tassos and Blue Canyon entered into a mortgage bond

agreement in terms of which the mortgagee (the seller) was empowered

75

CCT 291/16 Vol 2, page 199, para 11, Answering Affidavit. Blue Canyon also alleges that such allegation were not before the magistrate in the eviction proceedings and are not validly before this Court. We submit that these allegations are validly before this court as they were included in the plaintiff’s particulars of claim under matter 12229/12. CCT 113/16 Vol 1, page 9, para 8.1, Particulars of Claim.

76 CCT 113/16 Vol 1, page 6, para 3, Particulars of Claim; CCT 113/16 Vol 1, page 53, para 4, Plea; this address

appears as the purchasers domicilium on the offer to purchase (CCT 113/16 Vol 2, page 147 para 6.1.2, Annexure “NJ1A” Offer to Purchase.)

77 CCT 113/16 Vol 2, page 145, clause 3, Annexure “NJ1A” Offer to Purchase.

78 CCT 291/16 Vol 2, page 198, para 6 (including listed authorities), Answering Affidavit.

31

to receive “rents and other revenues or moneys which may accrue from

the hypothecated property”.79 The parties should reasonably have been

expected to discuss whatever lease agreements were governing the

property at this stage of the negotiations, which would inevitably include

the right of pre-emption.

69. Therefore, Blue Canyon’s contention that it is an innocent purchaser is

unconvincing given the totality of the circumstances surrounding the private

sale80 between the two respondents. An order setting aside the sale and the

subsequent transfer of the property is therefore just and equitable in the

circumstances.

LEAVE TO APPEAL SHOULD BE GRANTED

70. We refer to the short written submissions filed in CCT 113/16 regarding the

reasons why leave to appeal should be granted.

71. In respect of CCT 291/16, we submit that it is in the interests of justice for this

Court to grant leave to appeal in order to ensure the just and equitable remedy

flowing from CCT 113/16. Should this Court refuse to grant leave to appeal,

the eviction order will stand, and upon the dismissal of the application, will

become executable.

79

CCT 113/16 Vol 2, page 162, clause 6, Annexure “NJ1E” Mortgage Bond.

80 CCT 113/16 Vol 2, page 149, clause 12, Annexure “NJ1A” Offer to Purchase.

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CONCLUSION

72. In the circumstances, the applicant submits that this Court should grant leave to

appeal against the order of De Vos J and uphold the appeal granting the relief

described above.

Tembeka Ngcukaitobi

Frances Hobden

Isabella Kentridge

Chambers, Sandton

10 February 2017

33

LIST OF AUTHORITIES South African case law

1. Barkhuizen v Napier 2007 (5) SA 323 (CC)

2. Botha and Another v Rich N.O. and Others 2014 (4) SA 124 (CC)

3. Bredenkamp and Others v Standard Bank of SA Ltd 2010 (4) SA 468 (SCA)

4. Carmichele v Minister of Safety and Security 2001 (4) SA 938 (CC)

5. Doll House Refreshments (Pty) Ltd v O’Shea and Others 1957 (1) SA 345 (T)

6. Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC)

7. Carmichele v Minister of Safety and Security 2001 (4) SA 938 (CC)

8. F v Minister of Safety and Security 2012 (1) SA 536 (CC)

9. Fose v Minister of Safety and Security 1997 (3) SA 786 (CC)

10. G4S Cash Solutions v Zandspruit Cash & Carry (Pty) Ltd [2016] ZASCA 113 (12 September 2016)

11. Hoffmann v South African Airways 2001 (1) SA 1 (CC)

12. K v Minister of Safety and Security 2005 (6) SA 419 (CC)

13. Masiya v Director of Public Prosecution Pretoria 2007 (5) SA 30 (CC)

14. Minister of Home Affairs v National Institute for Crime Prevention and the Re-Integration of Offenders (NICRO) and Others 2005 (3) SA 280 (CC)

15. National Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)

16. Shalala & another v Gelb 1950 (1) SA 851 (C)

17. Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd 2010 (2) SA 1 (SCA)

18. Uniting Reformed Church De Doorns v the President of the Republic of South Africa and Others 2013 (5) SA 205 (WCC)

19. Uys & another v Sam Friedman Ltd 1935 AD 165

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20. Webb v Hipkin 1944 AD 95 International case law

1. Bachelor v Murphy 1926 A.C. 63

2. Banket Holdings (Private) Ltd v Levy 1955 (4) SA 74 (SR)

3. Levy v Banket Holdings (Private) Ltd. 1956 (3) SA 558 (FC)

4. Sherwood v Tucker 1924 (2) CH 440 Legislation

1. Constitution of the Republic of South Africa, 1996

2. Liquor Act 59 of 2003

3. Gauteng Liquor Act 2 of 2003