---

NOT REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: 2010/30319

DATE:23/02/2012

In the matter between:

WERLEX PROPERTIES (PTY) LTD......................................................Plaintiff

and

THE MARKETING AND GRAPHIC MEDIA COMPANY (PTY) LTD Defendant

J U D G M E N T

TSOKA, J:

[1] The plaintiff sued the defendant for damages arising from a breach of contract based on a lease agreement and installation agreement. In respect of the lease agreement, the plaintiff claims payment of the sum of R652 608 plus VAT while in respect of the installation agreement, it claims payment in the sum of R104 661,93 plus VAT.

[2] It is alleged by the plaintiff that the aforesaid agreements were partly written and partly oral. It is further alleged that the agreements were entered into by the parties on 2 February 2009, the plaintiff represented by Alex Zybrand alternatively Elsje Naude, while the defendant was represented by Deon Kruger.

[3] The terms of the written agreement as envisaged by Annexure “A” to the particulars of claim were as follows –

1. the plaintiff would lease to the defendant the premises situate at Media Mall, 7 Quince Road, Milpark, Johannesburg, measuring 871 square metres in extent, comprising of two buildings of 528 and 326 square metres respectively together with 35 parking bays (“the property”);

2. the defendant would take occupation of the property on 1 May 2009 and that the agreement would be for a period of 37 months expiring on 28 February 2012;

3. the defendant would pay the plaintiff a monthly rental of R65 325 (which equated to R75 per square metre) plus VAT, subject to annual escalation at the rate of 12% per annum.

[4] With regard to the installation agreement, the defendant would, inter alia, be liable to the plaintiff for the installation of –

1. dry walling;

2. doors and accessories; and

3. sealing or painting of concrete floors.

[5] It is further alleged by the plaintiff that the defendant repudiated the agreements, which repudiation was accepted by the plaintiff.

[6] In its plea, the defendant denies the existence of the agreements. In the alternative, only if the court finds the existence of the agreement of lease, the defendant pleads that such lease agreement was substituted by a new oral agreement entered into subsequently on 23 March 2009 the terms of which were: –

1. the defendant would enter into a lease agreement with the plaintiff for the property measuring 326 square metres;

2. the property measuring 528 square metres would be let to another tenant; and

3. the defendant would not be liable to the plaintiff for any damages in consequence of cancellation of the alleged lease agreement.

[7] The issues in this matter are whether the agreements as alleged by the plaintiff, were entered into.

[8] It is common cause that the alleged agreement of lease was preceded by various emails exchanged between the parties. In the various emails the terms of the lease agreement are raised and discussed between the parties. Ultimately on 2 February 2009, according to the plaintiff, the aforesaid lease agreement was entered into.

[9] From Annexure “A”, which the plaintiff alleges constitute the written part of the lease agreement, the following emerges –

1. the email emanates from the plaintiff and is addressed to the defendant;

2. it confirms that Mr Zybrand and Mr Kruger had further discussed this matter and that an agreement has been reached;

3. the author of the email, Elsje Naude wishes to amend the agreement and clarify the commencement date as 1 March 2009, asking Mr Kruger to confirm the expiry date of the lease as 28 February 2012 or 31 March 2012;

4. Mr Kruger responds to the email by stating that the commencement date is changed to 1 March 2009 (subject to the building being ready) and that the expiry date is changed to 28 February 2012.

[10] According to the plaintiff the email of 2 February 2009 constitutes the written lease agreement. On the other hand, the defendant disputes that this email constitutes the written lease agreement. The defendant contends that it was the common intention of the parties that the lease agreement would be in writing and that for this purpose a draft lease agreement was forwarded to Mr Kruger to peruse. Once the terms as contained in the email were finalised, the parties were to enter into a written lease agreement.

[11] The onus is on the plaintiff to prove the existence of both the lease agreement and the installation agreement.

[12] Mr Alex Zybrand (Mr Zybrand), the sole director of the plaintiff testified on behalf of the plaintiff. He states that the plaintiff and the defendant concluded the agreement on 2 February 2009. As the property was not ready for occupation by the defendant, the defendant remained on the old premises on month to month rental basis. In confirmation that a lease agreement was entered into, the plaintiff undertook the massive building project in order to cater for the needs of the defendant. However, he was shocked, when in February/March of 2009, in a parking lot, Mr Kruger informed the plaintiff that he will not be occupying the property. The shock resulted in him walking away from Mr Kruger without uttering a word. As he had a huge liability he had to look for a new tenant. The property was at that stage 98% complete. He engaged the services of brokers to have the property let but was unable to do so. At the end he could only secure a tenant from July 2009. This was in respect of the 528 square metres section only. For the period March to July 2009 the other section of the property was empty and the plaintiff was without rental income.

[13] Although he agrees that Mr Kruger was busy perusing the written lease agreement, and that the various emails exchanged between the parties speak of proposals, he avers that an agreement was entered into. According to him as at 2 February 2009 there was nothing outstanding with regard to the lease agreement that required finalisation. All the terms of the lease agreement were agreed to between the parties.

[14] With regard to the installation agreement, the bill of quantities by the Quantity Surveyor contains each cent actually spent on the building project. He attended to the dry walling as required by the defendant.

[15] In cross-examination he concedes that the deposit required from the defendant in exercising either of the rental options, was not paid. Neither has the plaintiff demanded payment of the said deposit. He further concedes that he embarked on the massive building project without a written lease agreement as this was not necessary between the parties. He further concedes that Mr Kruger was in possession of a draft lease agreement which lease agreement contained extensive terms such as suretyship. He insists that a written lease agreement was not a necessity.

[16] Mr Zybrand concedes further that he did not obtain an occupational certificate in terms of the by-laws, but states that this does not negate the fact that a lease agreement was entered into. He agrees that Mr Kruger did inform him that he does not require bigger premises anymore as one of his biggest clients had cancelled his contract with the defendant. He denies informing Mr Kruger that he will not hold the defendant liable for any damages. He however concedes that he did not tell Mr Kruger that the defendant will be liable for any damages resulting from the defendant’s repudiation of the agreement.

[17] He did not invoice the defendant for the plaintiff’s damages as same had not, at that time, been quantified. Although he does not recall in detail what transpired when Mr Kruger informed him about the defendant’s biggest customer cancelling its contract, he denies that he informed Mr Kruger that the defendant will not be liable for plaintiff’s damages. According to him, the plaintiff did not waive its right to claim damages from the defendant. He was advised by his legal representative to rely on the oral lease agreement of 2 February 2009. Although he stated in the papers that the property was rented to another tenant, this other tenant is in fact, the defendant. He never invoiced the defendant for the actual moneys expended on the property.

[18] Mr Kruger’s testimony, the Managing Director of the defendant, is that the various emails, and in particular the email of 2 February 2009 reveal that once the terms of the agreement were finalised, a written lease agreement would be entered into. The plaintiff, in pursuance of this understanding, sent him a copy of a draft written lease agreement which was unsigned, for perusal. Neither did he pay the deposit of R100 000 as required by the plaintiff as he would only pay this on signature of the draft written agreement.

[19] On 23 February 2009, in defendant’s boardroom, he informed Mr Zybrand that one of his biggest clients is cancelling the agreement he had with the defendant. This will result in him not requiring bigger premises. It was as a result of this cancellation, that he informed Mr Zybrand of the defendant’s financial predicament. He again informed Mr Zybrand that he will not be moving into the new building. Mr Zybrand, who was sympathetic, informed him that there will be no ramifications with regard to the unsigned lease agreement. At the same time, Mr Kruger was also sympathetic to the costs incurred by the plaintiff on behalf of the defendant. He requested Mr Zybrand for the invoices in respect of these costs for settlement. To date he has not received any invoices for work done on defendant’s behalf. He reiterates his willingness to settle the invoices, once presented to the defendant for settlement, in particular with regard to the dry walling. On 7 July 2009 he signed a new written lease with the plaintiff. The lease was for a period of 12 months only. It was in respect of the 526 square metres on the second floor of the Dispatch Building: plaintiff’s property. In spite of this, the plaintiff still failed to furnish the defendant with the invoices relating to the costs incurred on behalf of the defendant.

[20] According to Mr Kruger, it was his understanding that the draft lease agreement would be signed once the period of the lease agreement had been agreed upon and the deposit in the sum of R100 000 paid. He was taken by surprise to receive, almost twelve months later, a letter of demand with regard to the unsigned lease agreement. As he was of the view that no lease agreement was ever signed between the plaintiff and the defendant, he responded thereto by denying the existence of a lease agreement. In the letter he again reiterated defendant’s view that no lease agreement was ever entered into. He again offered to pay for the costs incurred by the plaintiff on behalf of the defendant. He vehemently denies that there was ever any lease agreement entered into between the plaintiff and the defendant. All the previous lease agreements the defendant had with the plaintiff were all in writing. All of them were first given to his legal advisers for advice before signing. The various emails exchanged between the plaintiff and the defendant, culminating in the email of 2 February 2009, all go to show that no agreement was entered into between the plaintiff and the defendant.

[21] In argument, counsel for the plaintiff submitted that as the terms of the agreement were agreed upon on 2 February 2009, there was indeed an agreement between the parties. Counsel relied on the matter of CGEE Alsthom Equipment v GKN Sankey (Pty) Ltd 1987 (1) SA 81 (A), as his authority that the various emails between the parties culminated in an agreement being entered into on 2 February 2009.

[22] In Pitout v North Cape Livestock Co-operative Limited 1977 (4) SA 842 (A) the court pointed out that whether an agreement has been entered into would depend on the facts of each particular case.

[23] In CGEE Alsthom Equipment at 92E the court stated the following –

“Whether in a particular case the initial agreement acquires contractual force or not depends upon the intention of the parties, which is to be gathered from their conduct, the terms of the agreement and the surrounding circumstances …” (Emphasis added)

[24] In the Law of Contract in South Africa, Christie, 5^th Edition at page 107, the author states –

“Once the parties have decided that they will reduce their contract to writing and that they will be bound by their written contract but not by any earlier informal contract, then the contract comes into existence when, and only when, the written document containing it has been signed by both parties.”

See also Goldblatt v Fremantle 1920 AD 123 at 129.

[25] What then does the intention, conduct, the terms of the agreement and the surrounding circumstances in this matter reveal?

[26] Mr Kruger was furnished with a detailed draft written lease agreement for perusal. During this period, the parties had not yet agreed on the duration of the lease agreement and the rental payable in respect of the property. This is clear from the various emails exchanged between the parties. The emails emanating from the plaintiff addressed to the defendant speak of “proposals”. This is common cause.

[27] On 21 January 2009 Mr Kruger responded to plaintiff’s email by indicating that he is still busy with the contract and that he hopes to finalise it as soon as possible. The email addressed by the plaintiff to the defendant amongst other things state that:

“Kindly confirm whether you want to enter into a 3 or 5 year lease as we would like to compile the lease and have it signed before break.” (Emphasis added)

[28] According to the plaintiff the various emails exchanged between the parties resulted in an agreement being entered into on 2 February 2009. However this email from Elsje Naude, Mr Zybrand’s secretary, which according to the plaintiff perfected the agreement, states that Elsje Naude still wishes to amend the contract by clarifying the commencement date and expiry of the lease agreement. Mr Kruger immediately responded to this email confirming the commencement and expiry date of the lease agreement with the proviso that on 1 March 2009, the date of commencement of the lease agreement, the property would be ready for occupation. However, on 1 March 2009, the property was not yet ready for occupation. The local municipality had also not yet issued the plaintiff with a certificate of occupation.

[29] The R100 000 that was payable once the defendant had exercised its option for either a three year or five year lease agreement was also not paid. Neither was payment thereof demanded by the plaintiff.

[30] The previous lease agreements between the parties were detailed and in writing. They were duly signed by the parties. It was only when the property was not ready for occupation by the defendant that the defendant was permitted to occupy plaintiff’s premises on a month-to-month lease agreement. That the occupation of the premises was on the same terms as that of the expired written lease agreement, is beyond question. As early as May 2008, Mr Kruger sent an email to Ms Priscilla Coetzer, Mr Zybrand’s other secretary. In it Mr Kruger states the following –

“I would like to propose that we manage the lease in the short term on a month to month basis from 1 July until the new offices are ready for us, and then sign a three year lease.” (Emphasis added)

[31] From the conduct of the parties, their intention gleaned from the various emails, the terms of the agreement agreed on 2 February 2009 and the previous relationship between them, it is clear that it was the intention of both the plaintiff and the defendant that a written lease agreement would be entered into once same was signed by both parties. It is further undisputed that such signing would be accompanied by payment of R100 000 which was never paid nor demanded.

[32] In the circumstances, I find that no written lease agreement was entered into between the parties. That being the case, I find that the plaintiff has failed, on a balance of probabilities to prove that a partly written and partly oral agreement was entered into between the parties on 2 February 2009.

[33] The costs in respect of the dry-walling, as per the particulars of claim, are in the sum of R71 597,43 plus VAT. According to Mr Zybrand the costs are contained in the bill of quantities. These represent the actual costs paid in respect of the dry walling by the plaintiff. These costs are computed from the final bill of quantities compiled by the quantity surveyor. According to Mr Zybrand, these final figures, from the quantity surveyor, represent the actual costs incurred by the plaintiff on behalf of the defendant.

[34] However, on 13 February 2009 the quantity surveyor sent to Mr Zybrand an email wherein the costs of the dry walling are reflected as R166 568,00 inclusive of painting, contrary to the particulars of claim which reflect the costs of the dry walling as R71 597,43 plus VAT. In argument the costs have now been recalculated. They are reflected as the sum of R63 930,43.

[35] It is not surprising that Mr Kruger queried the costs of the dry walling on receipt of the letter of demand and requested copies of invoices reflecting the actual expenses incurred by the plaintiff on behalf of the defendant. It is in this context that I understand argument by counsel for absolution from the instance in respect of the costs of the dry-walling. The plaintiff must prove to the defendant the actual costs incurred in respect thereof to enable the defendant to settle these costs.

[36] In the result the following order is made –

1. Plaintiff’s Claim A in the sum of R652 605 plus VAT is dismissed with costs.

2. In respect of Claim B, the installation costs with regard to the dry-walling, the defendant is absolved from the instance with costs.

_____________________________

M TSOKA

JUDGE OF THE SOUTH GAUTENG

HIGH COURT, JOHANNESBURG

COUNSEL FOR PLAINTIFF : ADV A J LAMPLOUGH

INSTRUCTED BY : WEBBER WENTZEL ATTORNEYS

COUNSEL FOR DEFENDANT : ADV C ACKER

INSTRUCTED BY : PAGEL SCHULENBURG INC

DATE OF HEARING : 28 November 2011

DATE OF JUDGMENT : 23 February 2012

---