WEBINAR April 2020 When you have no basis for an argument, abuse - - PowerPoint PPT Presentation
WEBINAR April 2020 When you have no basis for an argument, abuse the Plaintiff Cicero, eminent Roman jurist Logistics Please keep your microphone muted and video off for the duration of the webinar Please ask questions as we go
“When you have no basis for an argument, abuse the Plaintiff” – Cicero, eminent Roman jurist
April 2020
▪ Please keep your microphone muted and video off for the duration of the webinar ▪ Please ask questions as we go along using the comments tab– I prefer an interactive approach as much as possible ▪ If you see my face turn or eyes drift – I am using dual monitors, and my presentation is
Logistics
▪ General principles of leases ▪ Offers to lease & effect of rejections of amendments ▪ Most important lease clauses - * Part 1
Overview: Session 1
▪ Most important lease clauses * Part 2 ▪ Deeds of Suretyship ▪ Penalties ▪ Disclaimer Boards
Overview: Session 2
▪ A lease has to be in writing to be valid FALSE ▪ A lease has to be signed in black ink to be valid FALSE ▪ The suretyship must be in writing to be valid TRUE ▪ All the pages of the lease have to be initialled to be valid FALSE ▪ Any amendments to the lease must be in writing to be valid TRUE, DEPENDING…
Common Questions
▪ Essentials of a lease:
▪ Landlord ▪ Tenant ▪ Premises ▪ Rental amount
▪ Forms:
▪ Written ▪ Oral ▪ Tacit
General Principles: Essentials
▪ Basic principles of law of contract: offer and acceptance ▪ OtL to contain all the terms agreed upon ▪ Revocable before acceptance ▪ Acceptance of OTL by landlord – communication ▪ Counter-offer
Offer to lease - Principles
Case 1: Counter-offer
Case 1: Counter-Offer 1/2
▪ No written lease – no meeting of the minds! ▪ Partly written, partly tacit lease – took
▪ Terms: those uncontested terms of the OtL
Case 1: Counter-Offer 2/2
▪ Permanent supervening impossibility
▪ Generally brings the contract to an end ▪ The law will not expect a person to perform the impossible ▪ Reciprocal obligation also terminated
▪ Legal impossibility is a form of supervening impossibility
▪ Peters Flamman & Co v Kokstad Municipality 1919 AD 427
▪ Business wound-up by order of Government as the partners were interned as enemy subjects ▪ Due to the Government order, it became impossible for the partnership to carry out the contract ▪ Partnership was discharged from liability and could not be held liable for damages
Supervening Impossibility 1/3
▪ Temporary supervening impossibility
▪ Performance suspended for period of impossibility ▪ Provided it is possible to continue
impossibility ends ▪ Counter-performance similarly suspended
Supervening Impossibility 2/3
▪ Person relying on temporary impossibility has to prove:
▪ Did not have benefit of performance by the other for the full period of non- payment ▪ That the occurrence giving rise was unforeseen and uncontrollable ▪ That the event relied on was the direct cause of the inability to perform
▪ Transnet Ltd t/a National Ports Authority v Owner of MV Snow Crystal 2008 (4) SA 111 SCA
▪ Supervening impossibility will not necessarily excuse performance ▪ Difficulty, inconvenience or even hardship does not equate to impossibility ▪ Has to consider:
▪ The nature of the contract ▪ The relation of the parties ▪ The circumstances of the case ▪ The nature of the impossibility
Supervening Impossibility 3/3
Case 2: Supervening Impossibility
Case 2: Supervening Impossibility
World Leisure Holidays (Pty) Ltd v Georges 2002 5 SA 531 (W)
Case 2: Supervening Impossibility
Impossibility - Conclusion
▪ What are the respective obligations due by the parties?
▪ Landlord
▪ Delivery of premises ▪ Maintenance of the building ▪ Undisturbed use and enjoyment ▪ Other, as per lease
▪ Tenant
▪ Payment of rent ▪ Use and care of the property ▪ Return of property in same state ▪ Other, as per lease, e.g. continuous trading
▪ What has actually been rendered impossible during lockdown?
Most Important Lease Clauses 1/19
“The centre will be occupied by at least 75% of tenants (excluding the Tenant) (stocked, staffed and trading) on the lease commencement date and will remain so for the entire duration of the tenant’s lease and option periods. Should
landlord to remedy such and will be entitled to a pro-rata rent reduction on the same percentage as the vacancy below 75%. Should the vacancy remain below 75% three months after notice to the landlord, the tenant shall be entitled to cancel the lease agreement by giving one month’s written notice. In the event of such cancellation, the landlord will have no claim against the tenant for damages.”
Most Important Lease Clauses 2/19
“The Tenant shall, and it is a material term of this agreement, keep the leased premises open continuously during business hours and carry on its business during the whole term of its agreement or any extension or renewal thereof, with its full range of merchandise, subject to its right to close the leased premises on special occasions or when general conditions render it reasonably appropriate to do so, with the written consent of the Landlord. The Tenant agrees to the minimum business hours as set out in clause 10 of the schedule.”
▪ “The Tenant shall pay the gross rental for the first calendar month of this lease on commencement date of the Lease and thereafter monthly in advance so as to reflect as cleared and available funds, on the first day (1st)
set out in clause 9 of the Schedule or at such other address as the Landlord may notify to the Tenant, from time to time.” ▪ 3rd most important clause in the lease! ▪ Venter v Venter 1949 1 SA 768 (A) – bank error ▪ Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd 2017 ZASCA 176 ▪ “The privity and sanctity of contract entails that contractual obligations must be honoured when the parties have entered into the contractual agreement freely and voluntarily.” ▪ Even if the clause operates harshly – the parties freely concluded the lease
Most Important Lease Clauses 3/19
▪ “The gross rental and other payments payable by the Tenant in terms of this lease shall be made without demand, free of exchange and without any deduction or set-off whatsoever.” ▪ Most important clause in the lease! ▪ Reciprocity of obligations ▪ Exceptio non adimpleti contractus
Most Important Lease Clauses 4/19
▪ “The Tenant shall, on demand, pay its pro rata share of municipal rates and taxes payable on the property. The Tenant shall be liable for its pro rata share of any new tax or levy introduced by any local or other authority in respect of and/or relating to the leased premises, building, property, or signage erected thereon.” ▪ If the tenant fails to pay the rates, the municipality cannot recover it from the tenant, as there is no legal link between the municipality and the tenant.
Most Important Lease Clauses 5/19
▪ “Failure to pay in terms hereof within seven (7) days of the Tenant receiving the notice or invoice, shall entitle the Landlord to discontinue the service, apart from its other rights in terms of this agreement. In such event the Landlord shall not be responsible for any damages direct or consequential. Failure to pay the outstanding amount stipulated in the notice
20 and the Landlord may exercise any of its rights pursuant thereto.” ▪ Right to disconnect? ▪ Cancellation?
Most Important Lease Clauses 6/19
▪ “In the event of any interruption of any services or facilities or common services or facilities, or should any such services and conveniences or equipment become unusable, the Tenant shall not be entitled to a reduction of the monthly rental payable in terms of this agreement of lease, or withhold or defer payment of the monthly rental of have any claim of whatsoever nature against the Landlord or its agents, and the Tenant may furthermore not cancel this agreement of lease.”
Most Important Lease Clauses 7/19
▪ “The Tenant acknowledges that the Landlord does not warrant that the leased premises are suitable for the purpose of the Tenant’s business, nor that it will be granted any license or consent in respect of its business, or that such license or consent will be renewed or extended.”
Most Important Lease Clauses 8/19
▪ “The Tenant shall comply with and not contravene or permit the contravention of all applicable laws, by-laws and regulations (which regulations shall without limiting the generality thereof include the national building regulations and SABS codes), especially, but not limited to, those relating to the Tenants or occupiers of business premises or the conduct of any business carried on in the premises. The Tenant shall not contravene or permit the contravention of any of the conditions of title under which the property is held by the Landlord or any of the provisions of the town planning scheme applicable to the property. Nothing in this clause shall entitle any Tenant or person to oblige the Landlord to take action in terms of the subclause, nor shall any Tenant or
Most Important Lease Clauses 9/19
▪ “The Tenant shall be obliged at the Tenant’s sole costs and expense to take out, through an insurance company approved in writing by the Landlord, such Tenant’s public liability insurance and plate glass insurance for such amount of cover acceptable to the Landlord and in accordance with sound business practice and to maintain such insurance in full force throughout the currency of this agreement or the renewal thereof, and to furnish the Landlord with proof thereof upon written request.”
Most Important Lease Clauses 10/19
▪ “The Tenant shall during the currency of this agreement or any renewal (if applicable) thereof, at its costs maintain suitable insurance policies covering (included but not limited to) adequate public liability insurance and insurance against all risks that the Tenant bears under this agreement
destruction against all risks of the Tenant’s fixtures and fittings, installations, equipment, merchandise, books, records and documents in the premises, and damages, the loss of profit resulting from fire or storm and special perils, explosions, flood, earthquake, tempest, hail, riot, robbery (or attempted), theft (or attempted), forcible entry (or attempted), protest, strike, damage and other risks or due to any damage or destruction to the premises or any part thereof or anything contained therein and the Tenant indemnifies the Landlord against any such claim arising from such loss or damage.”
Most Important Lease Clauses 11/19
“No agreement at variance with the terms and conditions of this lease shall be binding on the parties unless reduced to a written agreement signed by both parties.” ▪ Second most important clause in the lease! ▪ SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964 4 SA 760 (A) ▪ Brisley v Drotsky 2002 4 SA 1 (SCA) ▪ Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & Another 2015 2 SA 118 (SCA)
Most Important Lease Clauses 12/19
Ben Groot Director: GVS Law South Africa Contact: 083 287 0909 Email: ben@gvs.law
All our previous opinions drafted for SAPOA are available on SAPOA’s website www.sapoa.org.za Our other opinions on the current pandemic are available on our website under the Covid-19 tab at www.gvs.law
“When you have no basis for an argument, abuse the Plaintiff” – Cicero, eminent Roman jurist
2020
▪ Please keep your microphone muted and video off for the duration of the webinar ▪ Please ask questions as we go along using the comments tab – I prefer an interactive approach as much as possible ▪ If you see my face turn or eyes drift – I am using dual monitors, and my presentation is
Logistics
▪ Most important lease clauses * Part 2 ▪ Deeds of Suretyship ▪ Penalties ▪ Disclaimer Boards
Overview: Day 2
Most Important Lease Clauses 13/19
“Save for the Landlord’s willful misconduct or willful omissions, neither the Landlord nor its agents nor employees shall be liable to the Tenant for any loss or damage of whatsoever nature (whether to person or property) which may be suffered by the Tenant and/or any of the Tenant's employees or invitees on or about the property, arising or caused in any manner whatsoever and howsoever occurring or sustained in consequence of any act or omission of the Landlord or any agent or servant of, or contractor to, the Landlord, or arising or caused by any other event or circumstance whatever occurring, or failing to occur, upon, in, or about the property, the building, or the leased premises or any parts thereof, whether or not the Landlord could otherwise have been liable for such occurrence or failure. Save for the Landlord’s willful misconduct or willful omissions, the Tenant hereby indemnifies the Landlord including its agents and employees and holds the Landlord including its agents and employees harmless in respect of all claims which may be brought or threatened against the Landlord and/or any
them on or about the property as arising from anything done or omitted to be done by the Landlord and/or its agents or employees, and notwithstanding that the Landlord may have been in breach of any of its obligations in terms of this agreement.”
Most Important Lease Clauses 14/19
“Neither the Landlord nor its agents or employees are liable for any direct or indirect loss, damage or injury whether direct or consequential of any nature suffered by the Tenant, its directors, agents, employees, invitees or any other person, (including loss of profits) by reason of the escalators or lifts, air conditioning installation or the interruption for any reason whatsoever and/or supply of electricity, water, gas or other amenities or services in or
damage to any assets of the Tenant including, but not limited to, stock-in-trade, fixtures, fittings, books and papers and other goods, or be liable for any injury or loss of life to the person of the Tenant or the Tenant’s employees or invitees as a result of the overflow or failure of water supply or any leakage or any fault in the plumbing works or any electrical fault or by reason of the elements of the weather or failure on the part of the Landlord to carry out any work or of latent of patent defect in the premises or of any other cause whatsoever including negligence of the Landlord, its employees or agents, and the Tenant indemnifies the Landlord against any claims howsoever arising. Specifically and without limiting the aforegoing, no omission or commission by the Landlord and in particular the provision of any security service to the building or property, shall be construed in any manner whatsoever as an acceptance by the Landlord of any responsibility or reliability towards the Tenant or any other person.”
Most Important Lease Clauses 15/19
“Any dispute in terms of this agreement regarding the calculation of any amount
amount is due by the Tenant to the Landlord shall be referred to the Landlord’s auditors
issued by the Landlord’s auditors or financial manager setting out the amount
proof thereof. Such certificate shall be valid as a liquid document in any court of competent jurisdiction for the purposes of obtaining provisional sentence or summary judgment against the Tenant.”
Most Important Lease Clauses 16/19
“No latitude, extension of time or other indulgence which may be given or allowed by the Landlord to the Tenant in respect of the performance any obligations hereunder or enforcement of any right arising from this lease and no single or partial exercise of any right by the Landlord shall under any circumstances be construed to be an implied consent by the Landlord to operate as a waiver or a novation of or otherwise effect any of the Landlord’s rights in respect of or arising from this agreement or estop the Landlord from enforcing at any time and without notice, strict and punctual compliance with each and every provision or term hereof.” ▪ A party’s delay in enforcing a contractual right may be indicative of a waiver ▪ “A contracting party, when faced with a breach of the contract by the other party, must elect whether to terminate or to enforce the contract. Once an election is made, the party is bound by
Properties 327 CC & Another v Old Mutual Life Assurance Company (South Africa) Ltd 2018 3 SA 405 (SCA)
Most Important Lease Clauses 17/19
“Should either the Landlord or the Tenant (herein after referred to as “the Invoking Party”) be prevented from fulfilling any of its obligations in terms of its agreement as a result of any act of God, strike, war, riots, fire, flood, legislation, insurrection, sanctions, trade dispute or economic embargo or any similar cause beyond the reasonable control of such Invoking Party (any such event herein after called “force majeure”) then: 1. The Invoking Party shall forthwith give written notice thereof to the other party: I. Specifying the course and duration of the force majeure; and II. Promptly upon termination of the force majeure, stating that such force majeure has terminated 2. The performance of any such obligations shall be suspended from the day which notice is given in terms
The Invoking Party shall not be liable for any delay or failure of the performance of any obligation hereunder, or loss or damage due to or resulting from the force majeure during the period referred to above, provided that the Invoking Party uses and continues to use its best efforts and takes all reasonable steps to perform such obligation and provides the necessary notices as specified above.”
Most Important Lease Clauses 18/19
“The Tenant does not have to comply with any of its obligations in terms of the lease, including but not limited to, paying the rent or any amount payable in terms of this lease, if it is substantially deprived of the occupation, enjoyment or use of the premises by any event of force majeure. Both parties are to take all steps to minimise the effect of any force majeure event, however neither party will be held reliable for any failure or delay in meeting any of its obligations in the lease, if the failure or delays caused by a force majeure event. In this lease a force majeure event means an event caused by any circumstance beyond a party’s reasonable control, including, but not limited to, war, riot, civil commotion or any order or regulation of any government or any other lawful authority which in the case of the Tenant prevents the Tenant from occupying, using or enjoying the premises for the purposes envisaged in this lease, fire, lightning, explosion, flood, earthquake, storm, hurricane or other action of the elements, malicious third party damage, sabotage, acts of God, blockade, revolution, radio active contamination, toxic or dangerous contamination, expropriation, requisition, confiscation or nationalization by any authority. A failure to pay because of lack of funds will not, in any circumstances, be a force majeure event. The obligations of the effected party will be suspended during the event of force majeure, provided that if the landlord is unable to provide the Tenant with the beneficial use and enjoyment of the premises because of a force majeure event, the Tenant shall not be obliged to pay rent or any other amount in terms of this lease until it resumes to beneficial occupation and use of the premises.”
Most Important Lease Clauses 19/19
“For the purposes of this clause the term “dispute” will be interpreted in its widest sense and shall include any dispute or difference in connection with or in respect of the conclusion or existence of the lease, the carrying into effect of this lease, the interpretation or application of the provisions of this lease, the parties’ respective rights and obligations in terms of and arising out of this lease, including also (but not limited in any manner whatsoever) to the Landlord’s right to evict the Tenant, to claim payment of any amounts payable in accordance with the provisions of the lease, the determination of any amounts payable, to claim payment of recoveries, to relocate the Tenant, to terminate this lease in case of redevelopment and/or renovation and/or upgrading of the leased premises or the building, and to effect in alterations or additions to the leased premises or the building, as well as in respect of the validity, rectification, termination or cancellation, whether in whole or in part, of this lease. Any one of the parties will be entitled to refer a dispute to arbitration in accordance with the provisions of this clause. The arbitration proceedings shall be conducted as expeditiously as possible and on the basis that the arbitration hearing will be finalised within 30 (thirty) calendar days from the date of appointment of the arbitrator. The decision of the arbitrator shall be final and binding and there shall be no right of appeal. Without detracting from the effect (if any) of any other act taken by any party which may effect the issue of prescription, the parties irrevocably agree and acknowledge that the arbitration notice shall interrupt prescription and shall be deemed to constitute the service of a process for the purpose of an interrupting prescription.”
Alternative Dispute Resolution
▪ Litigation: go to court ▪ Mediation
▪ Mediator facilitates discussion to arrive at settlement ▪ Now compulsory, unless good reasons advanced
▪ Arbitration:
▪ Final and binding unless appeal agreed to ▪ Arbitrator takes over role of judge ▪ Formal agreement required – in writing
Alternative Dispute Resolution
Litigation Arbitration Costs: High Higher Speed: Slow Faster Formalities: None Requires arbitration agreement Appeal: Yes No, unless pre-agreed Presiding officer: Randomly assigned Parties may agree identity
▪ Purpose: to facilitate settlement between the parties ▪ Parties may refer a matter to mediation:
▪ Before commencement of litigation; ▪ After litigation has started, but before judgement
▪ Uniform Rule 41A – since Monday 2 March 2020
▪ In any action/application issued and defended, file a notice to agree or
▪ If opposed, to advance reasons why mediation should not be ordered
▪ Court may at any time before judgement recommend mediation ▪ Parties jointly liable for fees of mediator ▪ Everything during mediation is confidential – without prejudice
Court-Annexed Mediation
▪ In writing!
▪ Identity of:
▪ Creditor ▪ Surety ▪ Co-principal debtor
▪ Nature and amount of debt
▪ Accessory nature of suretyship – valid principal obligation ▪ Who may be surety? ▪ Permissions ▪ Defences available to the surety ▪ Limited vs unlimited surety
Deed of Suretyship
▪ Co-principal debtor ▪ Jointly and severally liable ▪ Beneficium ordinis seu exussionis – excussion ▪ Beneficium divisionis – division ▪ Beneficium cedendarum actionum – cession ▪ Co-sureties
Deed of Suretyship
Deed of Suretyship: Introduction
“I, the undersigned, …(herein referred to as "the surety") do hereby interpose and bind myself to the Landlord and is assignees, cessionary or successors in title as surety for and co-principal debtor with … to the Landlord for the due, proper and timeous performance by the Tenant of all
and/or statutory compensation) to the Landlord arising from or related to the lease to which this Suretyship forms an Annexure to and/or the Tenant’s occupancy of the above-mentioned premises, subject to the following terms:…”
“The surety/ies hereby waive/s and renounce/s the benefits of excussion, cession, division, non causa debiti (the lack
an actionable debt), non numeratae pecuniae (no money was paid over), errore calculi (a mistake in the calculation of the amount due), de duobus vel pluribus reis debendi (benefit of division of debt and prior excussion), and the revision of accounts, with the meaning whereof he/they declare/s themselves to be acquainted”
Deed of Suretyship
“This suretyship is irrevocable and may not be cancelled or withdrawn” ▪ HNR Properties CC & Another v Standard Bank of SA Ltd 2004 4 SA 471 (SCA)
▪ Purpose is to protect the creditor. No prejudice to the surety ▪ Purpose furthermore to avoid spurious defences
Deed of Suretyship
Case 4: Suretyship
▪ Offer to Lease:
“10 The person/s signing this Offer on behalf of the Tenant, if such be the case, hereby guarantees the Tenant’s
personal capacity and on behalf of the Tenant, to procure that such of the Directors and/or Shareholders and/or members and/or partners and/or spouse of the Tenant, as the case may be, as the Landlord requires, will, if the Landlord requires, guarantee the obligations of the Tenant to the Landlord.” ▪ OTL signed by AB on behalf of E (Pty) Ltd ▪ Schedule: “B5 Suretyship: Attached. Bank guarantee to follow”
Case 4: Surety 1/3
▪ Lease signed by tenant, not landlord: clause on aircon charges deleted by tenant ▪ Deed of Suretyship is annexed to lease: “I/We, the undersigned AB hereby bind myself/ourselves as Surety and Co-principal Debtor, in favour of D (hereinafter referred to as the “LANDLORD”) for the due and proper fulfilment of all the obligations of E (hereinafter referred to as the “TENANT”), its successors-in-title or assigns, arising from the Agreement of Lease to which this Suretyship is annexed.” ▪ Lease signed by surety ▪ Surety also signed the deed of suretyship ▪ Surety’s defence: AB not bound as surety, as the suretyship refers to full lease agreement, and not the Offer to Lease.
Case 4: Surety 2/3
▪ Eviction
▪ AB says under oath “In elk geval het ek myself verbind as borg en medehoofskuldenaar vir E se verpligtinge.” ▪ Court: dismissed eviction, also no liability for surety ▪ Appeal: eviction granted, surety liable ▪ SCA: refused special leave to appeal
▪ Arrears
▪ Court: surety liable, judgement granted ▪ Appeal: surety not liable
▪ Lease not signed by Landlord, therefore not binding ▪ Suretyship does not refer to OtL as principal debt ▪ Therefore no principal debt secured by the suretyship
▪ SCA: Surety, but…
Case 4: Surety 3/3
▪ Conventional Penalties Act, 15 of 1962 ▪ Penalty = Provision in a contract that a person in breach
▪ Not allowed to recover both penalty & damages ▪ May be reduced by court if considered to be excessive ▪ In lease agreement:
▪ Penalty for late opening or non-trading: enforceable ▪ Penalty for non-payment of rent: not enforceable
Penalty Clauses
▪ Actually, contract to limit landlord’s liability ▪ So-called “ticket cases” ▪ Important to display prominently – people must not be able to miss it ▪ Must be able to prove that took reasonable steps to bring the notice under the attention of visitors ▪ Cannot contract out of wilful conduct or gross negligence
▪ Negligence – bonus paterfamilias – reasonable person ▪ Gross negligence: question of degree
Disclaimer boards 1
▪ Stearns v Robispec (Pty) Ltd 2020 ZAGPJHC 42
▪ Notice at entrance: “Pick n Pay will not be held responsible for loss, damage or injury sustained on its premises” ▪ Sign was not very visible – other signs at entrance were larger and more visible ▪ Court found that PnP did not do enough to bring the disclaimer to the attention of shoppers ▪ Therefore no contract was concluded ▪ Disclaimers should be pertinently displayed
Disclaimer boards 2
Ben Groot Director: GVS Law South Africa Contact: 083 287 0909 Email: ben@gvs.law
All our previous opinions drafted for SAPOA are available on SAPOA’s website www.sapoa.org.za Our other opinions on the current pandemic are available on our website under the Covid-19 tab at www.gvs.law