1
CASE
NO. 3492/97
IN
THE HIGH COURT OF SWAZILAND
IN
THE
MATTER BETWEEN
E.B.
INVESTMENTS APPLICANT
VS
HESTER
LOUBSTER TRUST 1st RESPONDENT
HESTER
MARIA PETRONELLA LOUBSTER 2nd RESPONDENT
CORAM S.B.
MAPHALALA - A J
FOR
APPLICANT W.K. KLEVANSKY
FOR
RESPONDENT N. KADES
JUDGEMENT
The
applicant is the registered owner of Portion 649 of farm no. 188,
Dalriach , situated in the District of Hhohho (The Castle). The first
respondent is Hester Loubster Trust, a trust constituted in terms of
the laws of the Kingdom of Swaziland, carrying on business of the
aforesaid premises. The second respondent is Hester Maria Petronella
Loubster who is the sole trustee of the first respondent, resident at
the aforementioned castle.
On
the 15th December 1994, and at Mbabane, Swaziland the applicant and
the first respondent entered into an agreement of lease ('The
Agreement") in terms of which the applicant as lessor, leased
the Castle to the first respondent as the lessee, The first
respondent duly took occupation of one of the apartments on the
leased premises.
In
these proceedings applicant claims an order for ejectment from the
said immovable property of the two respondents and further that the
respondents pays the costs of this application.
In
applicant's founding affidavit, which was deposed to by one Karl
Grant, a Director of applicant. The applicant deposed in its founding
affidavit that on the 27th January 1997 the second respondent, on
behalf of the first respondent gave notice of intention by the first
respondent to renew the lease in terms of clause 3 of the agreement.
In terms of the lease clause 2 thereof, the lease would run for a
period of three years commencing on the 1st December 1994 and
terminating on the 30th November 1997. In terms clause 1 (b) thereof,
the lessee was permitted and obliged to occupy one of the leased
apartments on the leased premises.
2
In
terms of clause 3 thereof:
'If
the lessee shall still be in occupation of the leased premises by
virtue of this lease, the lessee shall be entitled to renew this
lease for a further period of 3 (three) years giving written notice
of renewal to the lessor not later than the 3rd day of May, 1997".
In
terms of clause 4 (d) thereof,
"If
the lease is renewed, the rental and escalation thereof shall be
subject to negotiation between the lessor and the lessee and should
they fail to reach agreement, such rental shall be determined by
arbitration".
The
applicant avers that the option to renew, as embodied in the
aforesaid clause 3, is neither binding on the applicant nor
enforceable by the respondent, unless and until the parties shall
have agreed upon the rental payable during the renewal period or
failing such agreement, unless the said rental had been determined by
arbitration. The applicant at no stage agreed to a renewal of the
lease, nor were there any negotiations or agreement reached as to
rental payable in respect of the renewal period nor has any
arbitration taken place or even, for that matter, been arranged or
convened in order to determine such rental. In the premises the lease
has not been renewed beyond the 30th day of November, 1997 nor has
the applicant ever agreed to such renewal and/or agreed on any rental
in respect of such renewal period and/or arbitration in respect
thereof, nor does applicant in all the circumstances accept the first
respondent's attempt to renew. On or about the 14th
March,
1997, the applicant in writing conveyed to the respondents that it
did not recognize the first respondent's purported renewal, as
appears from paragraph 3 of the letter marked annexure "EB4".
On the 28th November, 1997 the applicant inter alia gave written
notice to the respondents to vacate the leased premises not later
than 30th November, 1997. A copy of the letter is marked annexure
"EB5". The lease not having been renewed, the respondent
right to occupy the leased premises or any part thereof in terms of
the agreement terminated on the 30 November, 1997. Despite demand the
respondent have wrongfully and unlawfully failed, refused or
neglected to vacate the premises and restore same to the applicant.
The
answering affidavit filed on behalf of the respondents it was
admitted that applicant is the owner of the property in question. The
answering affidavit of the first and second respondents is deposed by
the second respondent where she related in great detail the recent
history of the relationship between the respondent and the applicant
and she attempted to bring to the attention of the court acts of
harassment made by the applicant to evict respondent. She avers that
as it appears from the documents in case number 12/96 which was heard
before this court, she, on the 5th January 1996 acting on behalf of
the first respondent launched an urgent application to interdict the
applicant and the respondent Karl Grant, from "inter alia,
entering the leased premises for any purpose other than to inspect
same in terms of the lease agreement, and interdicting and
restraining applicant and Karl Grant, from interfering or in any way
interrupting the operation of the hotel business known as 'The
Castle" carried on, at the aforesaid leased premises. Despite
the opposition of applicant and Karl Grant, who filed answering
affidavit, the court, after hearing argument, granted a final
interdict in that matter and awarded costs against applicant and Karl
Grant on the attorneys and own client scale. She went on to aver that
on the 13th November, 1995 she
3
received
a letter (annexure HL2) from applicant's attorneys of record to first
respondent, it purported to cancel the lease on that date. As appears
from annexure "H" to the said application and been received
by her for the King's office indicating that the leased premises were
to be vacated at the end of November, 1997 and that there was now a
new landlord of the premises. She drew the attention of the court to
the contents of paragraph 10.4 of the founding papers in case no.
12/96 and the answer thereto in paragraph 7.10 and 7.11 of the
respondent's answering affidavit therein attested to by Karl Grant
wherein he admits that he had informed her that he had sold the
property to an undisclosed purchaser. It subsequently transpired that
the aforesaid purchaser is the King of Swaziland and, indeed, it was
only after an order was made calling upon the deponent Karl Grant, to
the sale of the leased premises and failing which he would be
committed for contempt of court that the aforesaid document was
eventually produced. She submitted further that, in the
circumstances, that it is quite clear from the contents of these
proceedings that applicant is no longer the owner of the leased
premises and as such has no locus standi to bring these proceedings
and it will argued in limine accordingly. I must say at this juncture
that when the matter came for arguments this point was not raised by
respondent's counsel and the tenor of the arguments from both sides
was that for present purposes it was the applicants and the
respondents who are disputants in this matter.
To
revert back to the second respondent's answering affidavit she
submits that on the 15th November, 1995 and in case no. 2698/95,
applicant issued summons against the first respondent for payment of
the sum of E72,344-00 being in respect of arrears
rentals.
In spite of its contention of the 13th November 1995 as witnessed in
annexure "HL2", that it had cancelled the agreement of
lease, applicant has continued to accept rental from the first
respondent who continued to occupy the premises and denies that
applicant has any right to cancel the lease. As appears from
paragraph 10.1 of the answering affidavit of the applicant in case
no. 12/96, applicant states that it has cancelled the lease on the
basis that first respondent is in arrears with its rental and that
such cancellation is in terms of clause 14 of the lease. There
appears to be numerous correspondences from applicant's attorney and
respondents attorney relating to the issue. Finally she avers that
applicant has misinterpreted the contents of the paragraph quoted by
it in that the aforesaid interpretation is misleading and not in
accordance with the contents of the lease, annexure "EB3".
In the circumstances she denies that the option to renew is neither
binding nor enforceable unless and until the parties shall have
agreed upon the rental payable during the renewal period. In any
event, such rental on applicant's version has been determined. She
submits further on the alternative, that should it be found that
applicant's interpretation of the aforesaid clauses is correct, that
she submit that having exercised the option to renew the lease that
the onus lies on applicant to suggest a rental and in the event of
the parties failing to agree upon such rental that the matter should
be referred to arbitration. The applicant has failed to disclose the
letter of the 7th August, 1997 annexed marked HL5 addressed by
applicant's previous attorney, Robinson Bertram, to first respondent
as appears from that letter it was applicant's case that the
agreement that the option to renew in terms of paragraph 3 of the
said lease has been properly been exercised, that applicant has
accepted that this is so and has in the circumstances demanded
payment of rental of E44,000-00 due as it alleges from 1st August,
1997.
4
These
are the facts before me. The matter came before me for arguments on
the 29th June, 1998 where Mr Klevasky for the applicant filed from
the bar applicant's heads of argument which I must say have been very
helpful. The applicant's contention is that the option to renew
embodied in clause 3 of the lease is neither binding on the applicant
nor enforceable by the first respondent "...unless and until the
parties shall have agreed upon the rental payable during the renewal
period or failing such agreement, unless the rental has been
determined by arbitration "
Clause
3 of the lease must be read together with clause 4 (d) of the lease,
which reads as follows:
Renewal
3. "If
the lessee shall still be in occupation of the lease, the lessee
shall be entitled to renew this lease for a further period of 3
(three) years by giving written notice of renewal to the lessor not
later than the 31st day of May, 1997".
Rental
4(d) "If
the lease renewed the rental and escalation shall be subject to
negotiation between the lessor and the lessee and should they fail to
reach agreement such rental shall be determined by arbitration in
terms of the arbitration law in force in Swaziland on the basis of
what is a reasonable rental for the leased premises at the time".
The
applicant contended further that, at no stage did it agree to a
renewal of the lease nor were there any negotiations or agreement
reached as to rental payable in respect of the renewal period nor has
any arbitration taken place, or even, for that matter, been arranged
or convened in order to determine such rental. Mr Klevasky submitted
that in so far as Clause 4(d) does not specify the rent, but
stipulates that rental and escalation shall be subject to negotiation
between the lessor and the lessee, such provisions are invalid and of
no force and effect. An option to renew must contain the essential
elements of the lease so that if the lessee exercises the option, a
lease is concluded. Thus an option to renew which does not specify
the rental, but stipulates that the lease will be renewable at a
rental to be mutually agreed upon if exercised by the lessee will not
result in a lease because agreement on rent is an essential element
of the lease, and until agreement has been reached on it no lease is
concluded. A fortiori an option entitling a lease to renew upon terms
to be arranged, if exercised by the lessee, will not result in a
lease (refers to Landlord and Tenant, 2nd W.
E
Cooper page 347, Lawsa, Vol 14p 174) with further regard to the
further requirement under clause 4 (d) that if agreement is not
reached.
"Such
rental shall be determined by arbitration in terms of the arbitration
law then in force in Swaziland on the basis of what is a reasonable
rental for the leased premises at the time"
5
The
applicant states that the respondents have misconceived the law with
regard to the essential elements which an option to renew must
contain and more particularly in regard to the stipulation of the
rent, and in the premises, no onus lies on the applicant to suggest a
rental as alleged by the respondent in clause 25.3 or to negotiate.
Further in so far as the applicant's then attorneys advised the
respondent's attorneys of record on the 14th March,
1997
and 29th November, 1997 that the first respondent's purported
exercise of an option was of no legal force and/or effect, and/or
that the applicant maintained his position that it would not agree to
renew the lease under any circumstances, it was incumbent upon the
respondent, on proper construction of the lease, if it desired
arbitration proceedings to "activate" such arbitration
delivery of an arbitration notice during the currency of the lease.
This has not been done and the applicant maintains that the first
respondent, by failing to activate arbitration proceedings cannot
rely on arbitration provisions of clause 4(d) of the lease or contend
that the lease has been renewed. Applicant further contended that the
arbitration provisions of clause 4(d) relating to "reasonable
rental" are vague and unenforceable in so far as such provisions
deal with the concept of reasonable rental. The applicant further
averred that, in so far as:
4.5.1 it
is the owner of the premises
4.5.2 the
respondent is in possession of the premises, it is entitled on the
facts to possession of the premises (referred to the case Graham vs
Ridley 1931 T.
P.
D.
476)
This
is the applicant's case. Mr Klevasky when the matter came before me
on the 29th June 1998 submitted essentially the same arguments as are
reflected in his heads of argument.
Mr
Kades for the respondent did not file heads of argument but made
submissions from the bar. His view is that this matter is very
simple. One has to look at the founding affidavit of the applicant to
see that the applicant has no case. The applicant blows hot and cold.
The applicant has taken the view that the lease was cancelled but if
you want to renew you must do what the lease asks you to do. That in
terms of the lease agreement the second respondent is not the lessee
but it is the trust. She is not a party to the lease personally. Mr
Kades took the court to the various papers filed of record to
buttress his arguments. He further took the court through the case of
Letaba Sawmills (EDMS) BPK vs Majovi (EDMS) BPK
1993
(1) S.A. 768 more particularly at page 773 in which the option is set
out in English which states at clause 3.1 the lessee shall exercise
the right to renewal by giving to the lessor notice in writing of
intention to review the lease agreement at least 6 months prior to
the termination of the agreement. That this clause is identical to
the one in the case in casu. Further it states the rental payable by
the lessee to the lessor shall be negotiated between the parties
subject to the rental being fixed between the limits of market
related prices for timber, if the lease is renewed and rental and
escalation shall be subject to arbitration between the lessee and the
lessor and should they fail to reach agreement such rental shall be
determined by arbitration. Mr Kades submitted further that the
mention to "an arbitrator in terms of the arbitration law of
Swaziland and the arbitrator must determine the rental as reasonable
rental at that time". That this is a perfectly good arbitration
clause. There is a long line of decided cases in 1980's and
culminating in the Letaba Sawmills Case (supra) which was decided in
the early
6
1990's
which lay down the law perfectly clearly that where rental is
determinable by reference to a specific procedure there is a valid
lease and valid option and in the present case the respondent has
exercised the option. He argued that the applicant relies on a lease
that has been cancelled and on the other hand he says the respondent
should get out of the premises because the lease has lapsed.
Mr
Kades further submitted that respondent has exercised an option what
more were they supposed to do. They have been tendering a rental and
it has been rejected every month. That respondents have done whatever
they could do. There was a valid lease at the time respondents
exercised the option to renew and that these proceedings are
premature and do not relate to reality. Before the lease expired they
had exercised the option to renew.
This
is the respondent's case.
I
have reviewed the papers before me very carefully and have also
considered the helpful submissions by both counsels in this case. I
have also considered the decided cases cited by counsel in support of
their contentions. The crisp legal issue before me is whether or not
the option to renew by the respondents as embodied in annexure EB3
valid and enforceable. It is trite law that a lessee who wishes to
exercise his option to renew must communicate to the lessor his
acceptance of the latter's offer (refer to Landlord and Tenant BT
W.E. Cooper (2nd ED) and the cases cited there at). The lessee must
communicate his decision during the period stipulated in the lease or
if no period is stipulated, before the lease has been lawfully
terminated or has lapsed through effluxion of time. In the present
case the lessee exercised the option to renew more than a year of the
expiry of the lease and it communicated its option in writing as
evidenced by annexure EB3. It is clear therefore and it is beyond
doubt that the respondent exercised the option within the period
prescribed by the lease. The next step is to determine whether the
option itself was vague and thus invalid and unenforceable as
contended by the applicant. The law on the subject is succinctly
outlined by author W.E. Cooper in his book "South African Law of
Landlord and Tenant (2nd ED) at page 317" an option to renew
must contain the essential elements of a lease so that if the lessee
exercises the option a lease is concluded. Thus an option to renew
which does not specify the rent but stipulates that the lease will be
renewable at a rent to be actually agreed upon if exercised by the
lessee, will not result in a lease because agreement on rent is an
essential element of a lease and until agreement on rent has been
reached on it no lease is concluded. The learned author cites the
cases of Biloden Properties (Pty) Ltd vs Wilson 1946 N.
P.
D.
736 and the South African Reserve Bank vs Photocraft (Pty) Ltd 1969
(1) SA. 610 © in support of this statement. However, in the most
recent case of Letaba Sawmills (Pty) (supra) decided in 1993 the
court was faced with a similar situation as the court in the present
case. In that case the facts show that in June 1984 the appellant
concluded a contract of lease with the respondent in terms of which a
certain plantation was leased to the appellant for a period of nine
years and eleven months. The contract also granted the appellant the
option to renew the lease for a further period of nine years and
eleven months. The appellant applied in a provincial division for an
order declaring the lease valid, and the respondent opposed it. The
dispute revolved around the validity of the said option is valid, as
a whole was invalid in terms of the provisions of section 3 (d) of
the Subdivision of Agricultural Land Act 70 of 1970 which prohibits
leases of agricultural land for periods exceeding 10 years unless the
7
minister
concerned consents thereto. It was common cause that clause 3 (which
contains the option) was separable from the rest of the contract, so
that the lease was valid even if the option was not. Clause 3 inter
alia specified that the rental for a further period had to be
negotiated afresh between the parties subject to rental being fixed
within the limits of market related prices for the timber on the
leased property and rental payable in respect thereof (clause 3.2.)
and that in the event of the parties being unable to reach agreement
on the said rental, it has to be determined by arbitration (clause
3.3.). According to the appellant, the above provisions were so vague
as to be unenforceable, thus rendering the option invalid. The
appellant's application was dismissed by the court a quo. On appeal
it was held that it was clear that clause 3.2 had stood on its own
(that without clause 3.3.) the option would have been void. An
agreement to negotiate and agree upon a rental was unenforceable and
would result in the invalidity of the option, and if it made no
difference that the parties had circumscribed the envisaged agreement
by limiting the ambit of the negotiations and the resulting
agreement. Further, it was held that the parties were entitled to
agree that a rental had to be determined by arbitration, and if
clause 3.3. had stood alone, the option would have been valid. It was
furthermore, inter alia found by that court further, that it was
clear that the parties had intended to fix the limits of the rental
with reference, firstly, to the price of timber on the open market
and that there was accordingly no room for the argument that the
content of the provision referring to "market related prices"
was not determinable.
After
reviewing the ratio in this case I am in total agreement with Mr
Kades assertion that the present case is at fours with the Letaba
Sawmills case. It is my considered view that clause 3 read with
clause 4 (d) do not create any vagueness as to render the option to
renew void and unenforceable. The lessee in the present case acted
within the ambit of the lease. agreement, which is a document that
outlines the rights and obligations of the parties to the lease
agreement. The lessee acted within the prescribed time as provided
for by the lease agreement. What more was the lessee expected to do
after it had exercised the option.
The
lessor on the other hand did all possible to thwart lessee's rights
under the lease. The lessor cannot now come before court and blow hot
and cold and challenge the option on one hand yet on the other rely
on the purported cancellation which was communicated months after the
notice to exercise the option was communicated to the lessor. I agree
entirely with Mr Kades that the issue of paramount importance in this
case is to determine whether or not the option to renew is valid. I
have held that it is valid and thus the lease is in force.
In
the result, I dismiss the application with costs. Costs of Senior
Counsel to be exempt from the normal taxation of counsel fees
provided in the rules.
S.B.
MAPHALALA
ACTING
JUDGE
