GOWORA
JA: This
matter was heard on 4 February 2020. After hearing argument from
counsel, the court reserved judgment. It was intended that judgment
would be availed within a reasonable period thereafter. The departure
of Bere JA who had been assigned the task of drafting the judgment
has resulted in an inordinate delay in determining the appeal. The
delay is regretted and the court sincerely apologises to the parties
for the inconvenience.
On
24 July 2013, the High Court granted judgment in favour of the
respondent herein. Consequent thereto, the court ordered that the
appellant vacate premises known as Shops 1 and 2 Benhay Art House,
situated at 120 Chinhoyi Street, Harare, and pay the sum of
USD22,730.99 being arrear rentals, and holding over damages in the
sum of USD5,000.00 together with operating costs from 1 November 2011
to the date of eviction.
The
court ordered the appellant to pay interest on the above-stated sums
at a rate that is 5 percent above the lending rate of commercial
banks, and costs of suit at the ordinary rate.
The
appellant was aggrieved and noted an appeal against the whole
judgment.
The
respondent was equally unhappy with part of the judgment and noted a
cross-appeal against the finding by the court that it was required to
give the appellant fifteen (15) days notice of cancellation of the
lease in the event of failure by the appellant to pay rent on due
date.
In
addition, the respondent particularly appealed against the finding by
the court that the letter dated 26 September 2011 by the respondent
did not constitute a cancellation of the agreement.
FACTUAL
BACKGROUND
The
appellant and respondent are private limited companies duly
registered as such under the laws of Zimbabwe and carrying on
business as such within the country.
On
or about 30 March 2010, the respondent and the appellant entered into
a written agreement of lease in terms of which the former leased to
the latter commercial property known as Shops 1 and 2 Benhay Art
House, situated at 120 Chinhoyi Street, Harare.
The
agreement was initially for a period of six months and was terminable
on 31 August 2010. Although the lease agreement suggests that it
commenced on 30 March 2010, evidence from the appellant during the
trial reveals that it first occupied the premises sometime in 2005.
This
fact is however of no moment as it was never disputed that there was
a subsisting lease between the parties.
It
is worth noting that, while there is no specific clause providing for
the renewal of the lease, clauses in the agreement suggest that it
was to endure beyond the stated period of six months. Indeed, when
the dispute erupted, the appellant had been in occupation of the
premises for over twelve months.
After
the lease period expired the parties continued with the lease on the
same terms and conditions.
This
is because the accepted sum due as rental at that stage was USD5,000
an amount far in excess of the USD1,000.00 stated in the original
written lease.
Moreover,
from the manner in which the proceedings in the court below were
conducted, it can be inferred that the lease was still subsisting.
The
terms and conditions of the lease agreement are the bone of
contention between the two.
The
terms of the agreement that are pertinent to the dispute are to be
found in clauses 3 and 12 of the agreement and relate to the payment
of rentals and operating costs.
The
parties agreed that the appellant would pay monthly rentals within
the first seven days of each month, together with operating costs at
agreed rates.
The
respondent alleged that the appellant was in breach of a material
term of the agreement by failing or neglecting to pay monthly rentals
and operating costs within the time stipulated in the lease
agreement.
Due
to the breach, the appellant allegedly incurred arrear rentals in the
sum of US$22,730.99.
As
a consequence of the breach, the respondent averred that it had
cancelled the lease agreement, demanded vacant possession of the
leased premises, and payment of the arrear rentals and operating
costs.
The
respondent posits that it did so by letter dated 26 September 2011
from its legal practitioners to the appellant cancelling the said
agreement.
On
12 October 2011, the respondent issued summons against the appellant
in which it claimed the following relief:
“(a)
An order for the eviction of the defendant together with its tenants,
assignees, invitees, and all other persons claiming occupation
through it from the plaintiff's premises known as Shops 1 and 2
Benhay Art House, located at 120 Chinhoyi Street, Harare.
(b)
Payment of the sum of USD22,730.99 in respect of arrear rentals.
(c)
Payment of holding over damages at a monthly rate of USD5,000.00
together with operating costs from 1 November 2011 to the date of
eviction.
(d)
Payment of interest on the sums of money claimed herein at a rate
which is 5 percent above the commercial bank minimum lending rate per
month or part thereof calculated from due date to date of payment in
full.
(e)
Payment of costs at the scale of legal practitioner and client.”
It
is common cause that the parties thereafter attempted to enter into
without prejudice negotiations.
A
deed of settlement was drafted which required the appellant to
acknowledge its indebtedness in the sum of US$16,980.00 and to
discharge its indebtedness at the rate of US$2,500.00 a month with
effect from 1 November 2011.
Further,
the appellant was to continue to pay monthly rentals of US$5,000.00
in accordance with the terms of the lease agreement.
The
respondent's legal practitioners signed the draft deed of
settlement. The appellant's legal practitioners did not.
As
it had threatened, the respondent proceeded with the suit culminating
in the holding of a pre-trial conference before a judge in chambers.
At
the pre-trial conference, the matter was referred to trial on the
following issues:
1.1
Whether or not the respondent properly cancelled the lease agreement
in respect of Shops 1 and 2 Benhay Art House, No. 120 Chinhoyi
Street, Harare.
1.2
Whether or not any agreement for the out of court settlement of this
matter was concluded between the parties.
1.3
If so, what were the terms of the agreement?
2.1
Whether or not the respondent was entitled to an eviction order.
For
the purposes of the trial, the court a
quo
formulated the issues that were before it for determination as:
1.
Whether the respondent gave adequate notice of intention to cancel
the lease agreement before the agreement was cancelled.
2.
Whether there was a valid cancellation of the lease agreement between
the parties.
3.
Whether the parties entered into a separate agreement relating to the
outstanding rent.
The
court a
quo
found in favour of the respondent and issued the order referred to
above.
In
arriving at its decision, the court a
quo
noted that clause 3.2 of the lease agreement stipulated that rent was
to be paid monthly in advance, at the latest by the seventh day of
the month. It also found that Clause 12 stipulated that if rent was
not paid as agreed, or where the tenant breached any other condition
of the agreement and remained in default for a period of fifteen days
after being given notice in writing by the landlord, then the
landlord could cancel the lease forthwith and retake possession of
the premises without prejudice to any claim for damages.
The
court also found that, in the light of these clauses, the letter
dated 26 September 2011 did not effectively cancel the lease
agreement.
The
court noted that, instead, the letter gave the appellant three days
to rectify the breach and that this period was contrary to the
agreement which allowed for a period of fifteen days to remedy a
breach.
The
letter in question was delivered to the appellant on 27 September
2011. The court, therefore, found that that is when the fifteen days
contemplated by clause 12 began to run.
Consequently,
the court concluded that the appellant had up to 12 October 2011 to
remedy the breach.
Accordingly,
the court a
quo
found that by 12 October 2011, when the respondent issued summons, it
did so in compliance with the lease agreement as the fifteen days
from the date the appellant received the letter had elapsed.
The
court further found that the letter of 26 September 2011, by which
the respondent said it cancelled the lease agreement, had the effect
of placing the appellant in mora.
Thereafter,
the court reasoned, the appellant had fifteen days from the date of
being placed in mora
to remedy the breach, failing which the respondent had the right to
cancel the agreement. The court further determined that there was no
compromise agreement as, by the appellant's own admission, it
failed to sign the deed of settlement.
The
court a
quo,
therefore, granted the respondent's claim in its entirety.
The
appellant has noted the present appeal on the following grounds:
“1.
The court a
quo
erred in granting an order for the monetary claim as made out in the
summons when it was apparent from the evidence that this money had
been cleared.
2.
The court a
quo
erred by extending the time of notice after it had made a finding
that there was insufficient notice given.
3.
The court a
quo
erred in finding, as it did, that notice though insufficient, was
given when in actual fact, the respondent cancelled the agreement of
lease without giving the notice required in terms of the agreement.
4.
The court a
quo
misdirected itself as it made a finding that there was no compromise
reached by the parties because the deed of settlement was not signed
by the appellant, yet the deed was for proof purposes only as the
agreement had already been reached.
5.
The court a
quo
erred generally by ordering eviction after the compromise and when
the arrears had been cleared.
6.
The court a
quo
erred by making a finding that the appellant's witness was not
credible when he gave straight forward evidence.”
ISSUES
FOR DETERMINATION
In
its heads of argument, the respondent has conceded that its
cross-appeal was ill-founded. As a consequence, it was not proceeding
to argue the same.
The
concession is proper.
The
cross-appeal sought to challenge findings of fact made by the court a
quo
without a corresponding prayer to alter the judgment itself.
The
concession leaves only the main appeal for determination.
In
my view, the remaining issues for determination, therefore, are the
following:
(i)
Whether the lease was properly cancelled;
(ii)
Whether the court a
quo
should have ordered the eviction of the appellant from the
premises;(iii) Whether the parties reached a compromise; and
(iv)
Whether the court a
quo
was correct to grant the monetary claim in its entirety.
WHETHER
THE CANCELLATION OF THE LEASE WAS LAWFUL
The
appellant contends that the court a
quo
fell into error in three respects:
(i)
The first, it argues, is that the court found that the respondent was
required in terms of the agreement of lease to give notice to the
appellant to rectify its breach and that the former did in fact give
the notice aforesaid.
The
appellant argues that the respondent was obliged to give it fifteen
days notice before it could validly cancel the lease. Instead, the
respondent only availed it notice amounting to three days. As a
consequence, there was no notice and the finding by the court a
quo
that there was notice and a valid cancellation consequent thereto was
erroneous.
A
lease comes into being once the landlord and the tenant have agreed
on the formalities that form the basis of their contract.
There
must be a property available for lease and the rent in respect
thereof must be settled.
The
lessor's obligation is to make the property's occupation, use, and
enjoyment available. In fulfilling this obligation, he has to refrain
from disturbing the lessee in the enjoyment of the property leased
and he must maintain the property in the condition agreed upon. In
addition, the property must be fit for the purpose for which it is
being let. Further, he must warrant the lessee against eviction by a
third party with better title.
The
primary obligations of the lessee are to pay the rent and incidental
costs and the charges incidental thereto at the proper time and place
agreed in the agreement and at the time of termination of the lease,
to restore the property in the same condition he would have found it.
In
casu,
it is not in dispute that the appellant fell behind in the payment of
its rent and accumulated arrears.
The
breach is admitted.
The
accumulation of arrear rentals is the cause of the conflict between
the parties.
The
respondent cancelled the lease after alleging a breach on the part of
the appellant. Cancellation of a contract is a legal act that
delineates the relationship between the parties to the contract at a
specific moment. Not every breach entitles the injured party thereto
to cancel the contract.
The
trite position is that, unless otherwise agreed, it is only that
breach that goes to the root of the contract that can give rise to a
right to cancel. In other words, it is a breach that goes to the root
of the contract that entitles the aggrieved party to cancel.
The
court a
quo
agreed with the appellant on the question of notice.
It
found however, that the respondent had given notice to the appellant
to rectify its breach when summons was issued for the eviction of the
appellant and its assignees. The court reasoned as follows:
“In
my view, the letter of 23 September 2011, did not effectively or
adequately cancel the lease agreement. It gave the defendant 3 days
within which to rectify its breach. Clause 3.2 as read with clause
12.2 of the lease agreement clearly stipulates that fifteen days be
given to the defendant, within which to rectify the breach.
That
letter was delivered to the defendant, on 27 September 2011. That is
when the fifteen day period began to run. The defendant had up to 12
October 2011 to remedy the breach.
Letters
were exchanged between the parties, on a without prejudice basis in
settlement negotiations.
On
3 November 2011, well after 12 October 2011 when the defendant was
legally obliged to remedy its breach, the plaintiff indicated that
the defendant should sign the draft deed of settlement. The defendant
did not do so, by its own admission.
It
is my view that by 12 October 2011, when the plaintiff issued summons
for eviction and for recovery of arrear rentals, it did so in
compliance with the provisions of the lease agreement. The stipulated
period within which the defendant ought to have remedied its breach
had lapsed.
After
12 October 2011, the plaintiff became entitled to cancel the lease
agreement, and to re-enter its premises. By coincidence, summons for
eviction was issued on 12 October 2011, which I accept constituted
notification of intention to cancel the lease agreement, at common
law.”
Although
the respondent has not persisted with the cross-appeal, it does not
support the finding by the court that notice was required before the
contract could be cancelled.
It
persists with the contention that the lease was validly cancelled.
The respondent contends that the lease did not require such notice.
The
manner of cancellation was the cause of contention between them, the
critical issue being whether or not the respondent was obliged to
give the appellant fifteen days notice to rectify its admitted breach
and pay the arrears before the lease could lawfully be cancelled.
Where
the parties to a contract have settled a procedure for the
termination of the agreement, they are bound by that procedure.
This
was the dictum in Minister
of Public Construction v Zescon (Pvt) Ltd
1989 (2) ZLR 311 (S), wherein this Court said:
“I
do not understand the above quotation to mean that the appellant was
not entitled to terminate the contract. The appellant may well have
been entitled to do so, but where parties to a contract have agreed
upon procedures for terminating an agreement, they are bound by the
provisions spelling out those procedures as if they had been imposed
upon them by law, and a departure from the agreement procedures will
not result in an effective termination of the contract. All that was
required of the appellant was if there was justification for
terminating the contracts, to terminate them in compliance with the
procedures spelt out in clause 20(a).”
There
is ample authority for the proposition that, in the absence of an
agreement to the contrary, a party who wishes to exercise his right
to cancel a contract must convey such decision to the other party
before the cancellation can become effective.
There
is also authority to the effect that this applies equally to a notice
calling upon the defaulting party to purge his default.
The
ratio
for the proposition is that termination of a contract has significant
and over-reaching consequences upon the reciprocal rights and duties
of the parties to the contract.
In
Swart
v Vosloo
1965 (1) SA 100 (A), HOLMES JA said the following:
“…….
it must be taken as settled that in the absence of agreement to the
contrary, a party to a contract who exercises his right to cancel
must convey his decision to the mind of the other party, and
cancellation does not take place until that happens.”
Generally,
as in this case, the payment of rent for leased premises must be
effected within a stipulated time frame. Where the parties have fixed
a time for performance, and the debtor does not perform accordingly,
the debtor is in
mora.
In
this scenario, the creditor does not need to demand performance from
the debtor. In legal terms, this is said to be in
mora ex re,
that is, mora
from the transaction itself.
Reliance
for this proposition may be found in a paragraph to that effect by
the learned authors Hutchinson, Van Heerden, Visser & Van Der
Merwe in their book Willes
Principles of South African Law to
the following effect:
“If
the time for performance has been fixed, performance must be made by
the time agreed upon. If the debtor has culpably failed to perform
his obligations by such time, he is automatically in default or in
mora (debitoris).
Mora,
in
this case, is known as mora
ex re
for no notice to the debtor is necessary, the rule being dies
interpellatio pro homine.
Where
the time for performance has not been fixed by the contract, the
general rule applies; namely, that performance may be demanded
immediately or within a reasonable time depending on the nature of
the obligation and the surrounding circumstances, provided, of
course, that the party making the demand is himself able and willing
to perform his own obligations.
Although
the performance may be due and claimable forthwith, the debtor need
not perform until he is called upon by the creditor to do so.
Only
when a specific time for performance has been set can the debtor's
default possibly constitute a breach of contract.
Thus
the creditor must make a demand calling upon the debtor to perform by
a date reasonable in the circumstances, and if the debtor fails to
comply with the demand by the specified date, he will fall into mora.
This
form of mora
is known as mora
in persona,
since it arises as a result of the personal intervention of the
creditor.
The
demand or interpellatio
may be made either judicially, that is, by means of a summons, or
extra-judicially, by means of a letter of demand. But no formal
demand is required, and it may be made orally, ………………..”
The
principle of law related above was discussed in the South African
case of Legagote
Development Co v Delta Trust & Finance Co
1970
(1) 584 T.P.D, wherein VILJOEN J opined at p587C-E:
“In
my view, this was an unnecessary onus
which
the plaintiff assumed. The plaintiff relied on a term of the
agreement in which a date for performance had been fixed, and it
would have been sufficient to allege that the defendant had not
performed before or on that day and that the plaintiff suffered
damages as a result.
In
expressing this view, I have not lost sight of the statement by
Wessels, Law
of Contract,
2nd ed. para.2858, that, before there can be mora,
the failure or delay must have been due to the culpa
of
the debtor, but Steyn, Mora
Debitoris
(to
whom Wessels
refers)
makes it clear at p.42 what type of culpa
he
postulates, namely, that the debtor must or should have been aware of
his obligation to perform timeously and of the nature of the
performance.
See
also Victoria
Falls Power Co. Ltd v Consolidated Langlaagte Mines Ltd
1915 AD 1 at p.31; West
Rand Estates Ltd v New Zealand Insurance Co. Ltd
1926 AD 173 at p.195.”
It
is settled therefore that where the contract itself does not fix the
time for performance, a creditor may fix the time for performance by
making demand for the due performance of the obligation by the debtor
by a certain date, the demand in this particular instance being
interpellatio.
If
the debtor fails to perform once demand has been made, the debtor is
in
mora,
justifying cancellation.
Whether
or not a party to a contract has the right to cancel based on a
breach depends on the agreement between the parties as to what
entitles the aggrieved party to exercise the right to cancel and if
the right has been exercised properly.
The
parties intention expressed in the contract is at the heart of the
decision to exercise the right. In his book The
Law of Contract in South Africa
3ed,
the
learned author R H Christie says the following:
“It
is undoubtedly correct that if the contract contains an express
forfeiture clause permitting cancellation for a specified breach, the
court will not investigate the materiality of the breach but will
give effect to the clause however hard the result. But the flaw in
Greenberg J's reasoning seems to be a misapplication of the concept
of a tacit term. The question the officious bystander ought to be
asking is not 'Do you both intend there should be forfeiture for
any breach of this term however trivial?' to which he would
probably receive conflicting answers, but 'Do you both intend there
should be forfeiture for such a breach of this term as to strike at
the root of the contract?' which would almost certainly result in
his dismissal with a common 'Oh, of course.'”
The
appellant contends that the agreement required the respondent to
place it in
mora
before it could lawfully cancel the lease.
It
argues that the notice required in the contract was fifteen days.
The
appellant contends that the lease provided for such notice and that
the cancellation was invalid absent such notice.
It
posits that the respondent, in complete defiance of the terms of the
lease, gave it, the appellant, three days to remedy the breach.
It
contends further that the respondent paid no regard to the terms of
the lease agreement and proceeded to exercise a right that the
agreement did not provide for.
Further,
the appellant suggests that the termination of the lease by the
respondent was summary and not permissible in law.
It
further suggests that the lease agreement in the present matter
provided for a notice period and that the demand or notice could not
have been made by means of a summons as posited by the respondent. It
argues that the court should find the cancellation was invalid in
this scenario.
My
considered view is that as evinced in the agreement, the parties
intention guides the court.
On
a consideration of the principles set out above, it is evident that
the correctness of the finding by the court a
quo
that the lease was cancelled lawfully can only be considered by
construing the clause relating to the payment of rent against the one
dealing with breach.
The
clause that delineates breach is clause 12, which reads as follows:
“12
Breach
If
-
12.1
Any rent is not paid on due date; or
12.2
The tenant commits any breach or fails to observe or perform any of
the terms and conditions of this agreement and remains in default for
a period of fifteen (15) days after the giving of notice in writing
by the landlord drawing attention to the breach or omission requiring
it to be remedied;
the
landlord may forthwith cancel this lease and re-enter upon and take
possession of the premises without due prejudice to any claim for
damages which the landlord any have against the tenant for any breach
of the lease by the tenant.”
In
turn, the clause providing for rent reads as follows:
“3.
Rent
3.1
The rental for the remaining period of this lease shall be the sum of
USD1,000 per month. Any other market-related figure may be agreed
between the parties from time to time in writing.
3.2
The rental shall be paid monthly, in advance, within the first seven
(7) days of the month, free of bank charges whatsoever on or before
the first day of the month throughout the period of this lease and
any renewal and extension thereof.
3.3
Any overdue rent or any other monies, including operating costs,
which the tenant fails to pay on time shall attract interest
calculated at 5 percent (five percent) above the commercial bank
minimum lending rates per month or part thereof from due date until
payment in full.”
Thus,
the critical consideration is whether the finding by the court a
quo
that the respondent was required to give notice to the lessee and, in
fact, gave the requisite fifteen days notice to remedy its mora
was the correct finding in light of the terms of the contract and the
surrounding circumstances.
The
clause relating to breach is in two parts. The critical issue for
consideration is whether the construction placed on the clause by the
court a
quo
can pass scrutiny.
In
casu,
the contract of lease provided that if rent was not paid on due date
as agreed, or if the tenant did not rectify any breach after fifteen
days notice to do so, then the landlord was entitled to cancel the
lease immediately and take possession of the premises.
The
issue in contention is whether, in the present case, the breach by
the appellant of its obligations entitled the landlord to cancel the
agreement immediately upon failure to pay the rent.
I
find that the court's construction a
quo
of the clause on breach was incorrect. It went against established
principle.
The
clause is in two parts with 'or' joining the parts. The word 'or'
is the determining factor in the construction of the clause.
The
first part provides for failure to pay rent, with the second
providing for breaches in general. The latter part relating to
general breaches is the one calling for notice to be given to the
lessee to rectify the breach within fifteen days from the date of
issuance of the notice by the lessor.
What
was at issue in
casu
did not relate to general breaches. It was concerned with the sole
failure to pay rent, a material breach going to the root of the
contract.
The
clause should be construed in a manner that gives effect and meaning
to “or” such that the two parts are read to be disjunctive as
opposed to conjunctive.
Within
this jurisdiction, the meaning to place on the word 'or' has been
determined in the case of S
v Ncube & Ors
1987 (2) ZLR 246. At p264E, GUBBAY CJ, commenting on the word 'or'
had this to say:
“In
the first place, the word 'or' is usually treated as disjunctive
unless there is a compelling indication that in its context, it means
'and'. See Colonial
Treasurer v Eastern Collieries Ltd
1904 TS 716 at 719; Hayward,
Young and Co (Pty) Ltd v Port Elizabeth Municipality
1965
(2) SA 825 (AD) at 829B; Greyling
& Erasmus (Pty) Ltd v Johannesburg Local Road Transportation
Board & Ors
1982
(4) SA 427 (AD) at 444C-D.”
In
turn, in Greyling
& Erasmus (supra),
the court opined that:
“That
conclusion rests on an interpretation of section 15(2)(a)
with
which I cannot agree, viz
that paras (i),(ii), (iii), and (iv) of section 15(2)(a)
are
to be read conjunctively.
No
glaring absurdity or other compelling reason for disregarding the
ordinary meaning of language suggests itself for construing 'or'
conjunctively in the several places where it occurs in section
15(2)(a).
On
the contrary, there are weighty considerations which, in my view,
point to an intention to attribute to the word 'or' its normal
meaning rather than an intention to treat 'and' as a substitute for
'or.'
The
first consideration is that a conjunctive interpretation would
necessarily require proof of paras (ii) and (iv) in every case
whereas these paragraphs concern issues which may often be
irrelevant. The second consideration is this: in contra-distinction
to the use of 'or' between paras (i)-(iv), the word 'and' links paras
(i)-(iv) with para (v); a clear indication that the Legislature had
no intention of deviating from the ordinary meaning of two words
which are in daily use.”
The
Oxford Dictionary defines 'or' as a disjunctive that connects two
or more alternatives. It also connects words, phrases, or clauses
with the same grammatical meaning.
It
was therefore imperative that the court a
quo
interpret the whole clause as it was duty bound to do in order to
give meaning to the word 'or' in the clause.
A
perusal of the judgment leaves one with the impression that the court
a
quo
paid scant or no attention to clause 12.1. Instead, the court focused
on clause 12.2.
The
court, to that extent, did not interpret the whole clause. Instead,
it placed attention on the clause relating to default in general. The
critical clause on rent remained untouched, and, as a result, the
decision was reached based on an erroneous reading of the clause.
In
Aucamp
v Morton
1949 (3) SA 611 (A), the Appellate Division said:
“Various
criteria have been suggested in our cases for the purpose of
determining whether or not a particular breach of contract by one
party entitles the other to treat the contract as terminated by such
breach and regard himself as discharged from further performance of
his obligations under it, and there must be much learning on the
subject in text books.
It
is not possible to find in them a simple general principle which can
be applied as a test in all cases. This is not surprising because
contracts and breaches of contract take many forms.
.………There
are two statements of the principle which are frequently quoted, one
by FLETCHER MOULTON L.J… in the case of Wallis
v Pratt and Hughes (1910
(2), K.B. 1003 at p1012) and one by LORD BLACKBURN in Mersey
Steel and Iron Co v Naylor
(9 A.C 434 at p443). They are as follows:
'A
party to a contract who has performed, or, is ready and willing to
perform his obligations under the contract is entitled to the
performance by the other contracting party of all the obligations
which rest upon him. But from a very early period of our law it has
been recognised that such obligations are not all of equal
importance. There are some which go so directly to the substance of
the contract or, in other words are so essential to its very nature
that their non-performance may fairly be considered as a substantial
failure to perform the contract at all.'
The
rule of law as I always understood it, is that where there is a
contract in which there are two parties, each side having to do
something…….if you see that the failure to perform one part goes
to the foundation of the whole, it is a good defence to say, I am not
going to perform my part of it when that which is the root of the
whole and substantial consideration for my performance is defeated by
your misconduct.”
It
is axiomatic that the primary obligation of a tenant in a lease
agreement is to pay the stipulated rent at the stipulated time and
the place provided for in the lease.
Failure
to do so constitutes a breach of a material term of the lease
agreement.
That
the appellant breached the agreement was never in dispute. The court
a
quo
found as such and there is no appeal against that finding.
The
appellant did not address its mind to the implications of the clause
relating to breach.
Had
it done so, it would have been aware of the distinct treatment of the
two parts of clause on breach. It would also have realised the
implications of the word 'or' in the clause.
In
motivating its position that the cancellation was invalid on the
alleged failure to give it the notice required in Clause 12.2, the
appellant placed reliance on Asharia
v Patel & Ors
1991
(2) ZLR 276 (S), where the court said at 279G-280D:
“The
general applicable rule is that where time for performance has not
been agreed upon by the parties, performance is due immediately on
conclusion of their contract or as soon thereafter as is reasonably
possible in the circumstances.
But
the debtor does not fall into mora
ipso facto
if he fails to perform forthwith or within a reasonable time. He must
know that he has to perform. This form of mora,
known as mora
ex persona,
only arises if, after a demand has been made calling upon the debtor
to perform by a specified date, he is still in default.
The
demand, or interpellatio,
may
be made either judicially by means of a summons or extra-judicially
by means of a letter of demand or even orally; and to be valid it
must allow the debtor a reasonable opportunity to perform by
stipulating a period for performance which is not unreasonable. If
unreasonable, the demand is ineffective.
Where
a debtor has fallen into the mora
ex persona
after demand, the creditor can acquire a right to cancel the contract
by serving notice of rescission in which a second reasonable time
limit is stipulated, making time of the essence.
Both
demand and notice of rescission are necessary in order to allow for
cancellation for non-performance. The two may be, and commonly are,
contained in the same notice. Such notice will then fulfil a double
function: it will fix a time for performance after which the debtor
will be in
mora,
and create a right in the creditor to rescind the contract on account
of that mora.
See Nel
v Cloete
1972 (2) SA 150 (A) at 163E; Flugel
v Swart
1979 (4) SA 493 (FCD) at 502E-H; and generally Joubert
General Principles of the Law of Contract at pp202-203; Kerr
The
Principles of the Law of Contract 4ed at pp461-462; de
Vos Mora Debitoris
and Rescission (1970) 87 SALJ at pp310-311.”
I
find that the reliance by the appellant on the above authority was
misplaced.
The
court in that case was considering mora
ex persona,
as it found that notice and demand were required before the contract
could be validly cancelled.
My
reading of the above authority leads me to conclude that the parties
in that case had not settled on a time for the due performance of its
obligation by the debtor. As a consequence, before cancelling the
contract on the premise of an alleged breach from the debtor, the
court found that creditor had to give the debtor notice to remedy the
breach. The demand by the creditor served a twofold purpose:
(i)
First, it fixed a time for performance and placed the debtor in
mora
if performance was not made according to the demand.
(ii)
The notice to the debtor also resulted in the creditor acquiring the
right to terminate in the event of the debtor failing to purge the
default once he was placed in
mora
as the failure to adhere to the notice was the trigger that fixed the
time for performance.
Despite
the appellant placing reliance on the authority, it is clearly
distinguishable from the dispute in casu.
It does not assist the appellant in any way as the facts are
disparate.
Cancellation
of the lease agreement in
casu
was effected by a letter from the respondent's legal practitioners.
The portion relating to notice and cancellation read thus:
“In
breach of the terms and conditions of the lease agreement mentioned
herein, you have failed and/or neglected to pay your monthly rentals
accumulating arrears thereby in the sum of USD16,980.99 as at 16
September 2011. As a result of your said breach, our client has
instructed us to cancel the lease agreement which we hereby do.
We
demand that you vacate our client's premises and pay arrear rentals
within three (3) days of this letter failing which legal proceedings
for your eviction will be commenced without giving you further
notice.”
The
parties hereto agreed that the rent was to be paid on the first day
of each month, in advance, but at the latest by no later than the
seventh day of each month.
The
appellant was supposed to pay USD5,000 every month. It admitted to
being in arrears in an amount in excess of USD16,000.
Given
that the time for performance, namely, the seventh of each month, was
fixed in the agreement, the appellant was in
mora ex re.
Thus,
the clause providing for cancellation must be construed in the light
of the principle that mora
ex re
entitles the creditor to cancel the lease without making demand for
rectification of the breach.
Having
due regard to the authorities cited above and the definition to be
placed on the word 'or' in the clause on breach, I find that the
court a
quo
was in error in its construction of the clause. The clause on breach
had two disjunctive parts. Yet, the construction by the court a
quo
made the parts conjunctive even in the face of the existence of
clause 12.1 and its significance as to the respective rights of the
parties under the agreement.
On
a proper construction of the entire clause, it is clear that the
clause providing for the cancellation on failure to pay rent did not
require the lessor to give the lessee fifteen days notice to rectify
its breach.
It
was never the case for the respondent that it was required to give
notice and did in fact give notice. The letter in terms of which
cancellation was effected did not call upon the appellant to rectify
its failure to pay rentals within fifteen days. Instead, it called
upon the appellant to vacate the premises and pay the outstanding
rentals within three days, failing which it faced eviction.
The
view I take is that the agreement did not require that the lessor
give the tenant notice to rectify the failure to pay rent.
Unlike
the position prevailing in Asharia
(supra),
the parties in the dispute at hand had expressly provided a time for
the rent payment in their contract of lease.
Based
on the authorities, the position is that the lessee would have been
in
mora ex re
due to the failure to pay its rentals on time. Such breach, being
mora
ex re,
entitled the lessor to cancel the lease immediately without giving
notice to the appellant.
In
view of this, it is unnecessary to determine the issues of the
credibility or lack thereof of the parties respective witnesses.
The
agreement speaks for itself.
Thus,
the respondent was entitled to an order evicting the appellant from
the leased premises.
However,
given the contention that the parties had reached a compromise, it
becomes necessary to consider whether the court erred in ordering
eviction in the face of a compromise, as is contended by the
appellant.
WHETHER
THE PARTIES REACHED A COMPROMISE
Subsequent
to the letter of 26 September 2011, which had the effect of
cancelling the contract, the appellant, through its legal
practitioners, addressed a letter to the respondent's legal
practitioners proposing to settle the arrears in rent by the payment
of an additional sum of USD2,500 over and above the monthly rental.
While
the appellant posits that a compromise was reached, the respondent's
attitude is to the contrary.
The
respondent places reliance on two letters for its position.
The
first is a letter dated 3 November 2011, and the paragraph relied on
is set out as follows:
“We
have therefore prepared a Deed of Settlement copy of which is
attached hereto for your consideration. If your client is agreeable
to the terms contained in the Deed of Settlement, we request that
urgent arrangements be made for the same to be signed without further
delay. We will be grateful to hear from you in near course.
(sic)”
There
was no response to the letter, and on 7 December 2011, the appellant
was served with a summons. It reacted, and, on 8 December, its legal
practitioners addressed a letter to the respondent's which reads as
follows:
“Our
client was served with the summons. They are paying in terms of the
agreement reached. The reason why signing was delayed was that we
wanted to ascertain the exact amount outstanding. Our client is still
committed to resolving this matter out of court.”
The
response from the respondent was unequivocal.
On
14 December 2011, in a letter from its legal practitioners, the
respondent threatened to apply for summary judgment if it did not
receive a signed copy of the Deed of Settlement by close of business
on 16 December 2011.
The
response from the appellant was cryptic. In a terse letter dated 20
December 2011, its legal practitioners stated:
“We
refer to your letter dated 14 December 2011. Please bear with us
while finalise our part with client.” (sic)
There
was no further correspondence on the matter.
The
respondent placed the appellant on terms to respond to the summons
and declaration, and the parties proceeded to file pleadings in terms
of the Rules.
There
is no evidence on record that, apart from the letters referred to
above, the parties met to discuss a compromise.
The
letters speak for themselves.
The
respondent was unwilling to compromise its position without a
commitment from the appellant in writing that it was willing to abide
by the terms of the Deed of Settlement.
Over
and above the payment of arrear rentals, the respondent sought an
agreement from the appellant that, if the latter defaulted in
settling the arrears and paying rentals as proposed, then in that
event, the full amount outstanding would become due and payable and
the respondent would be entitled to obtain judgment on the unopposed
roll.
It
goes without saying that none of the letters exchanged between the
parties spoke to anything other than the payment of rentals and
reduction of the arrears. The other issues raised in the draft deed
of settlement were never related to in the letters.
The
appellant has not drawn the court's attention to any evidence that
would counter the assertion by the respondent that it did not enter
into any compromise on any terms that differed from those set out in
the draft Deed of Settlement.
The
appellant refused to sign the same.
I,
therefore, find that no compromise agreement was reached.
The
court a
quo
was correct to order the eviction of the appellant and its assignees
from its premises.
WHETHER
THE COURT WAS CORRECT IN ISSUING THE MONETARY AWARD
I
turn to consider the issue of the monetary award.
It
is not in dispute that there were no arrear rentals outstanding by
the date of trial. Therefore, the award by the court a
quo
of the monetary claim for arrear rentals was erroneous and must be
set aside.
However,
in view of the fact that the appellant remained in occupation after
the cancellation of the agreement, it stands to reason that holding
over damages would be due for payment.
Mr.
Magwaliba suggested that there was no evidence adduced as to what
such holding over damages should be.
I
am constrained to agree.
The
claim in respect of holding over damages was not proved. The
respondent did not lead any evidence establishing how much the
holding over damages were.
Indeed,
in his oral address, counsel for the respondent accepted that the
entire monetary claim should be set aside.
The
concession is well made.
COSTS
The
appellant prays for the costs of the appeal. However, the respondent
has left the decision to the court's discretion.
Each
of the parties has achieved some success.
In
its heads of argument, the respondent conceded that both the
cross-appeal and the monetary claims were not sustainable. In light
of the concession, the only contentious issues were the validity of
the cancellation of the lease, the consequential eviction, and the
alleged compromise. The respondent has prevailed on these issues.
I
believe this measure of success entitles it to an award of costs.
In
clause 19.2 the agreement provides that “all legal costs and
expenses including any VAT on services, collection commission,
disbursements and legal practitioner/client charges which the
landlord may reasonably incur in consequence of any default by the
tenant in the due payment of rent for the premises or of any other
breach…………..shall be payable by the tenant on demand……….”
For
this additional reason, the appellant cannot escape an order for
costs.
When
the respondent issued summons, the appellant was in arrears in its
rental obligations. The default was admitted and the evidence on
record is that the last instalment on the arrears was paid on 9 July
2012. Thus the summons claiming arrear rentals was justified.
I
see no reason for not awarding the respondent its costs.
Even
though the written agreement provides for such, the respondent has
not sought an award of costs on the higher scale. It would seem that
it is content with an award on the ordinary scale.
It
is therefore awarded the same.
DISPOSITION
The
appellant failed to pay rentals for the premises it was occupying in
terms of a lease agreement. It was in arrears for a substantial sum.
Thus it was in breach of its primary obligation under the contract of
lease.
The
interpretation by the appellant that it was in mora
ex persona
and that, consequent thereto under the agreement, the respondent was
obliged to furnish it with notice to rectify its breach by paying
arrear rentals is faulty, as it has no foundation in the
circumstances prevailing herein. Failure to pay rent within the
period stipulated in a lease agreement constitutes mora
ex re,
justifying cancellation of the lease without notice or demand.
To
the extent that the court a
quo
found that the agreement called for notice of fifteen days, such
finding was clearly erroneous.
There
was no requirement for such.
It
follows therefore that the court a
quo
had to find that the appellant was in
mora ex re
and,
further, that no notice to remedy the breach was required to be given
by the respondent before it could exercise its right to cancel the
contract of lease. The contract was validly cancelled.
The
appeal against eviction based on the cancellation of the lease must
fail.
The
judgment in respect of the monetary claim has not been supported and
the appeal against that part of the judgment succeeds.
Accordingly,
it is ordered that:
1.
The appeal succeeds in part.
2.
The appeal against the order for the eviction of the appellant, its
assignees, sub-tenants, and invitees from the respondent's
premises, namely, shops 1 and 2 Benhay Art House situated at 120
Chinhoyi Street in Harare, is dismissed.
3.
The appeal against the order by the court for the payment by the
appellant of the following amounts:
(i)
USD22,730 in respect of arrear rentals; (ii) USD5,000 monthly as
holding over damages; together with interest on the said sums
succeeds and the judgment by the court a
quo
is set aside and in its place is substituted the following:
“The
plaintiff's claims for arrear rentals, operational costs and
holding over damages together with interest on the said sums be and
are hereby dismissed.”
4.
The cross-appeal is dismissed.
5.
The appellant shall pay the respondent's costs of appeal.
MAKARAU
JA:
I agree
BERE
JA:
(no
longer in office)
Bvekwa
Legal Practice,
appellant's legal practitioners
Gill
Godlonton and Gerranns, respondent's legal practitioners
1.
At
p316H-317A
2.
8ed at p476-7
3.
See
Noel v Cloete
1972 (2) SA 150
4.
At p570
5.
At 619-620
