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REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: 2011/07680

DATE:14/03/2013

In the matter between:

HYPROP INVESTMENTS LTD...................................................First Appellant

ABLAND (PTY) LTD..................................................................... Second Applicant

and

NCS CARRIERS AND FORWARDING CC …........................First Respondent

NORBERTO JOSE SANTOS COSTA.....................................Second Respondent

JUDGMENT

SPILG, J:

INTRODUCTION

1. The appellants, as the joint landlords of a shopping complex, had validly terminated the first respondent’s lease of commercial premises. They instituted motion proceedings in June 2011 against the first respondent for damages arising from its continued occupation after the agreement was cancelled; a claim commonly described as one for holding over. The second respondent was sued as surety and co-principal debtor.

2. The application was dismissed by Cane AJ on the ground that there was a genuine dispute of fact regarding the quantum of damages claimed. The appellants had contended that the rental payable under the erstwhile lease constituted the market value for the use and enjoyment of the premises. This was met with the defence that the shopping complex as it stood was not capable of supporting the rentals provided for in the lease agreements (Judgment at paras 11 to 13 and 15).

3. The respondents challenge the appellants’ entitlement to rely on the rentals payable under the terminated leases as being equivalent to the market related rental. They do so on two complimentary bases;

a.that the lease agreements were concluded before the complex was completed and therefore the agreed rentals were not necessarily indicative of the amount that the complex, once completed, could actually attain on the rental market; and that

b. since at least the time when the leases were cancelled, the shopping complex has been unable to attract the same rentals because, far from comprising a “high class shopping centre”, it is what the industry describes as a “strip mall”.

4. The appellants contend that the defence is based on fraudulent misrepresentations allegedly made by them to the respondents regarding the quality of the complex at the time the leases were concluded. Since this defence had been rejected by my brother Mokgoatlheng J in the ejectment proceedings brought during 2009, they contended that the respondents were debarred from raising the issue as it was res iudicata. This argument was rejected by Cane AJ (at para 10).

5. The court a quo also considered that not all the ancillary charges claimed constituted rental and that these therefore fell outside the scope of a claim for holding over; for the rest, further evidence would be required (at para 8)

6. The appellants argued on appeal that the learned judge erred in failing to find that;

a. the rental charged in terms of each lease was the market related rental for the period of holding over;

b. the respondents were precluded from raising the condition of the complex as this was “res iudicata” by reason of Mokgoatlheng J’s finding regarding the defence of fraudulent misrepresentation;

c. in any event, there were insufficient allegations to support the respondents conclusion that the rentals charged in terms of the leases were not market related;

d. by reason either of res iudicata or the paucity of rebutting evidence, the respondents had not raised a bona fide defence recognised in law sufficient to defeat the appellants’ claim on motion;

e. the ancillary charges are claimable on motion for holding over;

7. Cane AJ expressly indicated that the court had not precluded the appellants from pursuing a right to claim damages by way of action; only that they could not do so on motion “in the face of the irresoluble factual dispute as to the proper quantification of those damages” (at para 15). The court a quo furthermore mentioned that the appellants had not sought a referral to oral evidence or to trial despite being aware from the earlier ejectment proceedings that the respondents would challenge a claim based on market related rentals and would rely on a report (to which reference will be made later) by a firm of architects, The Cook Lipschitz Partnership.

The matter comes before us pursuant to the court a quo granting leave to appeal.

ISSUES FOR DETERMINATION

8. At the outset; the appellants did not seek damages for breach of a contractual term but damages for holding over. In particular the founding affidavit identified the claim as one for damages suffered because the first respondent had been in “unlawful occupation” which precluded the appellants from reletting the premises. Their heads of argument are equally clear; “... the Applicants are seeking liquidated damages out of the Respondents’ holding over of the leased premises”.

9. If the appellants are correct in basing the remedy on the rental charged under the terminated agreement then the claim would be liquidated and capable of supporting motion proceedings; if not then caedit questio. The determination of this issue and whether the ancillary charges are recoverable under it require an examination of the nature of a holding over claim and its proper characterisation.

10. It will also be necessary to revisit the requirements of a bona fide defence in order to defeat proceedings brought on motion for final relief and to consider whether res iudicata, or more accurately issue estoppel in the present case, operates to defeat the respondents’ defence that the rental provided for in each lease agreement does not equate to a market related rental.

11. Before considering the elements of the appellants’ case, it is advisable to set out the background to the case, the manner in which the appellants formulated their claim and the issues that came to be defined in the papers.

BACKGROUND

12. In 2008 the first respondent concluded two identical lease agreements with the appellants in respect of separate business premises. The premises were in a shopping centre that was still being developed. The one lease was in respect of a “niche restaurant” and the other for a tobacconist shop. It is common cause that the first respondent failed to pay any rental or ancillary charges since taking occupation.

13. During 2009 the appellants launched separate motion proceedings in respect of each lease against the first respondent as lessee and the second respondent as surety and co-principal debtor. The appellants sought orders confirming the cancelation of the two leases, ejectment of the first respondent and for payment against the respondents of arrear rentals and certain ancillary charges (which will be described loosely as “rentals” unless the context otherwise requires).

14. The cases were consolidated and heard by Mokgoatlheng J who delivered a written judgment on 12 April 2010. The learned judge considered the several defences raised based on fraudulent misrepresentations which, it was alleged, induced the conclusion of the leases. The court also considered the defence of ex turpi causa, based on the appellants’ alleged breach of a penal statutory provision. This defence had been pleaded to the claim for arrear rentals. In addition the court dealt with the further argument that the first respondent was entitled to rescind the lease agreements and claim consequential damages because the contracts were either void ab origine or voidable as a consequence of the fraudulent misrepresentations.

15. Mokgoatlheng J held that the defences raised were “legally unsustainable” and granted the orders sought. Aside from confirming cancellation and ordering ejectment, the court directed the respondents to pay jointly and severally the arrear rentals and ancillary charges up to the date of cancelation, which was 3 February 2009.

16. The appellants averred that after judgment was delivered the first respondent “... ceased to operate from the leased premises, but remained in de facto occupation thereof”. The appellants did not explain what they meant by the last phrase.

17. On 27 July 2010, while awaiting the outcome of an application to the SCA for leave to appeal, the present respondents brought an application “to regain full possession”. This resulted in the parties concluding an interim agreement pending the outcome of the leave to appeal application. The agreement was made an order of court at the respondents’ cost (save for one day of hearing). The effect of the order was to;

1. interdict the respondents from trading on the two premises or from removing any items from the premises, save for perishables;

2. nonetheless, permit the respondents limited access to clean and maintain the premises and to show the premises to prospective purchasers of the respondents’ businesses. The order made it clear that the ability to dispose of the businesses remained subject to the appellants’ rights as owners of premises in respect of which the leases had been purportedly cancelled.

18. On14 September 2010 the SCA refused the application for leave to appeal. While it was accepted that the order set out in the preceding paragraph did not permit the first respondent to trade or to exercise effective rights of occupation, the appellants contended that they were effectively unable to relet the premises from the date of cancellation on 6 February 2009 until 14 September 2010 when the SCA refused leave to appeal.

19. This prompted the appellants to launch a fresh application, which is the subject matter of the present appeal, against the respondents (again as principal debtor and surety respectively) claiming liquidated damages in respect of both premises in the total amount of R263 841.34.

FORMULATION OF THE CLAIM AND THE DEFENCES

20. The appellants explain in the founding affidavit that they seek to recover “liquidated damages arising out of a written Lease Agreement”. They contend that the liquidated damages arise from the continued occupation of the premises which has prevented their being re-let and aver that:

“As a consequence of the cancellation ... on 6 February 2009, ... the First Respondent has been in unlawful occupation of the premises.

...in consequence ... the Applicants were unable to re-let the premises until the conclusion of the Appeal process ...and the Applicants’ liquidated damages have been calculated accordingly...

Such damages arise directly as a consequence of the Respondent’s continued occupation of the premises after the cancellation of the Lease Agreement. The (ancillary) charges ... have been calculated in terms of the provisions of the Lease Agreement and constitute fair, reasonable and/or actual costs. (Emphasis added).

21. It is important to recognise that the appellants’ claim is not based on damages arising from cancelling the lease due to breach of the first respondent’s contractual obligation to pay rent. The respondents were obliged to answer only to a claim for holding over based on damages suffered by reason of the first respondent’s continued occupation despite lawful cancellation.

22. The respondents answered accordingly. In particular they raised in limine that the applicants had failed to make out a case for holding over and failed to produce evidence that the rental and ancillary costs in terms of the lease were fair and reasonable; more particularly as the premises were not in a “high class shopping centre”. The respondents averred that the rental had been negotiated on this basis at the time when the centre was still being developed, but that an inferior “strip mall” was in fact built which could only support a much lower rental. In pleading over on the merits the respondents also produced the Cook Lipschitz report used in the ejectment proceedings to support their contention.

23. In reply, the appellants did not claim that the respondents had misconceived the nature of the claim. On the contrary they adopted the classic textbook elements of a damages claim for holding over;

“... the Respondents failed and refused to vacate the premises, as ordered by Mokgoathleng J and such period was therefore a “holding over” period.

During such period the Respondents remained in occupation and the leased premises could not be let to, nor occupied by, anyone else.

The rental claimed, is the market related rental agreed to by the Respondents, as also the actual operating and ancillary costs...

In light of the aforegoing and mindful of the fact that no evidence to the contrary has been tendered ...the first point in limine is without merit ...”

(Vide; Cooper (supra) at 234; “The measure of the lessor’s damages is the market rental value ....In the absence of evidence to the contrary the rental value of the premises is assumed to be the rent paid under the lease.”

See also Sandown Park v Hunter Your Wine and Spirit Merchant 1985(1) SA 248 at 256I and 260A)

The appellants’ heads of argument are in similar vein.

24. Accordingly, in order to support their argument that the claim is liquidated, the appellants rely on the respondents’ alleged failure to produce admissible evidence to gainsay that the rent payable under the lease is market related.

25. The appellants formulated their claim for liquidated damages strictly on the basis of the amounts agreed in the leases for rental and ancillary charges. The ancillary charges included the monthly charges for rates and taxes, refuse and electricity meter reading recoveries, the monthly amounts payable for a parking bay, operating costs and marketing fund contributions (which at the inception of the lease in October 2008 were R285, R710.25 and R627 per month respectively excluding VAT. In terms of the agreement they escalated at 10% per annum).

26. As mentioned earlier, the appellants contend that they were unable to re-let the premises from the time the leases were cancelled in February 2009 until the SCA dismissed the application for leave to appeal in September 2010. While insisting that the market rental value is a liquidated claim, the appellants accept that charges in respect of water consumption, electricity and certain other amounts, including attorney and own client legal costs, constitute unliquidated damages. They indicated that these would form part of a claim to be brought by way of a separate trial action.

27. The respondents answering affidavit raised in limine the point that the appellants’ were claiming rental under a lease agreement which did not support a cause of action for holding over. The respondents argued that the appellants’ could only competently claim, by way of damages, the reasonable rental that could be obtained from letting the premises to a third party.

28. This point was also developed into another preliminary issue; namely that the appellants could not have obtained the rental and operating costs provided for in the lease because the premises let were not in a “high class shopping centre” but rather in a “strip mall” which was only capable of attracting a much lower rental.

29. In pleading over on the merits the respondents raised a number of denials based on the principal assertion that the rental under the agreement was not a reasonable rental for a “strip mall”.

30. In particular the respondents;

3. denied that the damages claim was liquidated; thereby challenging that motion proceedings could be competently brought for what amounted to an illiquid claim for fair and reasonable market related rentals;

4. denied that the appellants had produced any evidence of a fair and reasonable market related rental or that the amounts in the lease agreement could be so considered;

5. contended that as a strip mall, the premises could not command the same rentals as a high class shopping centre; and

6. challenged that the marketing fund contributions and certain other ancillary charges could form part of the damages claimable under proceedings for holding over as they do not constitute rental.

31. In support of their underlying contention that the shopping centre lacked the character of a high class shopping mall the respondents produced the Cook Lipschitz Report (“the Report”).

32. The respondents also sought a referral to trial on the quantification of damages, which would include the need to determine through vive voce evidence the true character of the shopping centre and whether it could support the rentals provided for under the leases.

CHARACTERISING THE CLAIM FOR HOLDING OVER

33. The right infringed is clear enough: It is the landlord’s right to free and undisturbed possession unless the occupier can justify his or her continued occupation on legal grounds.

34. In my view the appropriate starting point is to distinguish the nature of damages pursuant to a holding over from those which arise when the lease is cancelled due to the tenant’s breach. Leaving aside legal characterisations for the moment, they are fundamentally different for at least two reasons which are dealt with in the following paragraphs.

35. Firstly: Continued occupation of the premises is irrelevant to a claim for damages arising from cancelling a lease due to the tenant’s breach.

In such a case the measure of damages is the rent for the unexpired portion of the lease post-cancelation (and suitably discounted if the full period has not matured by date of judgment) less the amount actually received from subsequently reletting the premises to a new tenant, or which ought to have been received had the landlord taken reasonable steps to mitigate its damages. See Hazis v Transvaal and Delagoa Bay Investment Co Ltd 1939 AD 372 at 388; Desmond Isaacs Agencies (Pty) Ltd v Contemporary Displays 1971 (3) SA 286 (T) at 290F-H and Soar h/a Rebuilds for Africa v JC Motors en ‘n Andere 1992 (4) SA 127 (A) at 135A-F. The relevance of the erstwhile tenant remaining in occupation is to preclude it from contending that the landlord was able to mitigate its damages during the period.

The term landlord is used in order to cover both an owner and a person entitled to lease out the premises with the owner’s consent or agreement.

40. In Cooper’s Landlord and Tenant (2^nd ed) at 233 the author notes under the subject of “Holding Over” that the lessor is entitled to be placed in the position he would have been had the lease been properly performed. Reliance is placed on Sandown Park at 253A-B. In my view Sandown Park is authority for the contrary proposition and Cooper appears to have conflated the substantive law principle set out in the judgment, that damages are measured by the market rental value, with the evidence that might be led to demonstrate it.

41. Secondly: A damages claim for cancelation due to the tenant’s breach relies on the breach of a term of the lease which has resulted in its premature termination. However the rental clause cannot survive the termination of the lease unless specifically provided for.

Accordingly even a claim for holding over founded ex contractu requires damages to be determined by reference to the amount which the landlord could obtain if he had been able to relet but for the continued occupation of the erstwhile tenant. Where the tenant continues to occupy after valid cancellation, thereby depriving the landlord of his ability to give possession to a new lessee, the claim will not arise from the initial breach giving rise to the cancelation but arises from the “holding over”.

42. A claim for holding over is founded on a breach of the contractual obligation to give vacant possession on termination as required by the relevant clause in the lease agreement or as an incidence of the common law (eg, Sandown Park at 250I – 251A and see generally (1956) 73 SALJ 14; “The Case of the Diehard Tenant”- anonymous).

Nonetheless the lease is at an end and therefore the amount claimable is not rental but damages, which according to settled law is the market rental value of the premises. See Sandown Park at 256I and the cases referred to.

43. In the vast majority of cases this method of determining damages obviates the necessity of deciding whether to formulate the claim in contract or delict and rely on a breach or wrongfulness respectively, nor are damages reduced to the lesser of the benefit to the occupier or the loss to the landlord as would be the case under an enrichment action. The reasons appears to be that;

1. under contract, the breach is the failure to restore possession on termination and the remedy of ordinary damages for holding over (ie, market related rental) arises by reason of the landlord being deprived of the use and enjoyment of the property because the erstwhile tenant has remained in occupation. See Kerr in The Law of Sale and Lease (3^rd ed. 2004) at p 421;

2. in delict the continued occupation without a legal right to do so is per se a wrongful act and the loss to the landlord of a market related rental (as a class of damages) is regarded in law as reasonably foreseeable. See Lillicrap, Wassenaar & Partners v Pilkington Bros (SA) (Pty) Ltd 1985 (1) SA 347 (A) at 496I-497C. Additional amounts for actual loss may only be recovered provided, in addition to being reasonably foreseeable, they are not too remote (eg. See Sea Harvest Corporation (Pty) Ltd v Duncan Dock Cold Storage (Pty) Ltd 2000 (1) SA 827 (SCA) at 839D-E). In passing there may also be a distinction drawn, coincidentally or otherwise, where a heightened degree of fault if deliberate (as opposed to a bona fide but incorrect view of a right to remain in occupation) may account for damages greater than market related rentals being awarded in some cases (see Cooper (supra) at p234)

44. Furthermore a claim under unjust enrichment is also viable (See (1956) 73 SALJ 14 supra). However a damages claim under an unjust enrichment stands on a different footing because it is calculated as the lesser of the benefit derived by the occupier and the loss sustained by the landlord. Although it is likely that the result will be equivalent to a market related rental, it is conceivable that this is not inevitably so as the outcome is not dependant on a single source enquiry but a comparison of two separate sets of calculations. See Wouter De Vos, Verrykingsaanspreeklikheid in die Suid-Afrikaanse Reg (1987 3^rd ed) at p 329; and Daniel Visser Unjustified Enrichment (2008) at 159-161.

45. Accordingly, in the usual case where the landlord sues for a market related rental, the claim may be formulated either in contract or in delict. In both cases damages will be the market rental value (unless there is a rental survival clause in the contract). Although viable, an unjust enrichment action is cumbersome because of the method for computing damages with the risk of recovering less than a market related rental.

46. In Sandown Park the plaintiff claimed in contract based on the defendant’s failure to vacate in breach of its contractual obligation to do so (at 250I-251A). In allowing the claim Nestadt J (at the time) said at 256H-I;

“...the normal measure of damages claimable by the lessor, whether ex contractu or ex delicto from a lessee for wrongful holding over... (is) ...the market related rental value of the premises for the period of the latter’s unlawful occupation” .

Although the learned judge used the term “unlawful”, the basis for the decision remained one under contract (eg. at 257A the court used the term “as a result of the breach”).

47. In a leading case on holding over, Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd 1954(4) SA 345, Ogilvie-Thompson J (at the time) allowed a claim based on a wrongful and unlawful refusal to vacate (at 347F-G). The plaintiff may have relied on this formulation because the occupancy had been converted to one of a statutory tenancy under the prevailing Rents Act and because the damages claim was not for a market related rental but for a far larger sum based on consequential damages. In the main judgment the learned judge upheld a delictual claim against the erstwhile tenant based on its wrongful conduct in continuing to occupy without a legal right (Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd 1955 (3) SA 249 (C) at 253H-254A). However during the course of the judgment several contractual principles were applied.

48. It is evident that a holding over claim can be made out either in contract or in delict and that the result will remain the same provided the ordinary measure of damages is claimed (Sandown Park). In summary; the simple fact that the occupier has no lawful right to remain in occupation after the lease expires is an incidence of contractual law and is also per se a wrongful act under delict. In both cases the measure of damages is identical (market related rental) because they flow naturally from the breach and are also reasonably foreseeable as a consequence of the wrongful act.

The general distinction between a damages claim arising out of contract and one arising in delict was dealt with in Lillicrap at 496I – 497C

49. The question of whether a party must expressly plead the essential elements of a contractual or delictual cause of action in my respectful view is answered by reference to Lillicrap, Wassenaar and Partners v Pilkington Brothers 1985 (1) SA 465 (A) where, in drawing the distinction between a contractual and delictual claim (at 496I – 497C), the court remained hesitant to hold a litigant bound by the formulation of the cause of action relied upon. The court said at 496G-H that;

“.. our law also acknowledges that the same facts may give rise to a claim for damages ex delicto as well as one ex contractu, and allows the plaintiff to choose which he wishes to pursue.... The mere fact that the respondent might have framed his action in contract therefore does not debar him from claiming in delict. All that he need show is that the facts pleaded establish a cause of action in delict. That the relevant facts may have been pleaded in a different manner so as to raise a claim for contractual damages is, in principle, irrelevant”

50. A legal purist pleading in terms of Lillicrap, may require the landlord to allege that;

3. The occupier had a right to occupy which was lawfully terminated on ...;

4. Despite such termination the occupier remained in occupation until....;

5. The failure to vacate is wrongful alternatively is a breach of the occupier’s express or implied contractual obligation.

6. As a result of such continued occupation, which constituted a holding over the landlord has suffered damages.

7. The damages suffered are the market rental value of the premises calculated at RX per month being equal to the rental payable in terms of the terminated lease for the duration of the holding over period, which amount totals RY.

51. In this case, once the point in limine had been dealt with by the appellants in the manner set out in para 23 of this judgment, no further issue was taken to the framing of the claim. In my view it is sufficient to label the claim as a “holding over”, provided of course that the damages are limited to a market related rental, disbursements and those ancillary charges which are liquidated. This is so because the outcome in such cases would be the same whether formulated in delict or in contract.

It should also be borne in mind that in cases of a liquidated demand, the simple summons need only indicate the cause of action in the most general terms; it is a mere label (Standard Bank of South Africa Ltd v Hunkydory Investments 194 (Pty) Ltd and Another (No 1) 2010 (1) SA 627 (C) at 630C)..

52. Accordingly it does not appear to be strictly necessary to plead the allegations set out in (c) of paragraph 50 above to support a damages claim based on a market related rental. Claims for special damages or consequential damages may however stand on a different footing because there will no longer be a commonality of features; special damages requires the claimant to allege that such damages were within the parties’ contemplation at the time of contract, and foreseeability of the particular class of harm which may not be too remote is required under delict. These allegations cannot be inferred by law as is otherwise the case with ordinary damages under either contract or delict

It is unnecessary to plead that the damages flow naturally and probably from the breach, alternatively were reasonably foreseeable, as a consequence of the holding over since they are the natural incidence of holding over (see Harms ADP in Amler’s Precedents of Pleadings (7^th ed) at pp121, 261and 288; in contract, under the lex aquilia and for motor vehicle accidents respectively).

53. Harms in Amler at 255 adds that the landlord “must show at least prima facie that the premises were lettable” in order to prove the market related value. This does not appear to be a necessary element of pleading a holding over, but rather an evidential fact as to whether the premises actually command the rental value claimed. This appears to be the import of Sandown Park at 259I on which Amler relies.

54. Damages claimable for holding over are not confined to the market rental value. The term “holding over” is no more than a convenient label attached to the conduct or act which affords a remedy in damages. It does not address or circumscribe the category of damages recoverable; in much the same way as negligence causing bodily injury does not purport to limit the damages recoverable to only medical expenses or precludes a claim for emotional shock to a bystander in appropriate circumstances. Damages for holding over, consistent with other forms of contractual or delictual liability, are limited by the circumstances contemplated by the parties where a case is made out for special damages under contract or by foreseeability and wrongfulness (and remoteness if not considered in the enquiry into wrongfulness in a delictual case brought under the lex Aquilia – see eBotswana (Pty) Ltd v Sentech (Pty) Ltd and Others [2012] ZAGPJHC 231 at paras 2 and 46)

55. By way of comparison, Cooper (supra) at p234 admits a claim for;

“...such pecuniary loss which flows from, and is the natural, reasonable and probable consequences of, the lessee’s unlawful conduct”.

(citing Du Toit v Vorster 1928 TPD 385 at 389 and Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd 1955 (3) SA 249 (C)).

The terminology used in Cooper is hybrid; it introduces the requirement under contract law of the contemplation of the parties test in order to prove special damages (eg. Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977(3) SA 670 (A) at 687) while also adopting the term “unlawfulness“ which is not a requirement for contractual damages but is more consonant with either the element of wrongfulness or fault necessary to support delictual liability.

56. The market rental value formula for determining damages therefore does not address the situation where other damages are claimed for holding over. In such cases it becomes necessary to determine whether they are in the nature of special damages (if formulated in contract) or consequential damages (if formulated in delict) since the requirements and hence the outcome may differ. This was the difficulty confronting the court in Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd 1955 (3) SA 249 (C). The landlord did not seek a market related rental but loss of trading profits by reason of its inability to extend its own trading operations and put merchandise on the floor of the premises where the defendant was holding over. The court allowed the claim on the basis that these were consequential damages which were not too remote as they were the natural, reasonable and probable consequence of the “wrongful holding over” (The court’s analysis attracted criticism in “The case of the Diehard Tenant” (supra)).

57. The court went through the genesis of holding over claims in both our law and that of England but found many of the historic routes problematic. It should also be recalled that in Phil Morkel the occupier had been a statutory tenant under the then Rents Act 1950 and had been given proper notice to vacate but refused, thereby possibly extending the reach of the relief to include “unlawfulness”. See Phil Morkel Ltd v Lawson & Kirk (Pty) Ltd 1954(4) SA 345 where the pleadings are set out. Ogilvie Thompson J characterised the claim for holding over as amounting to the erstwhile tenant being “in mora with his obligation to restore the premises at the termination of his tenancy” and described the continued occupation as “a continuing wrong towards the landlord whom he thus deprives of possession of his property” (at pp253H-254A).

58. It will also be necessary to select a cause of action where an extraordinary claim for damages is unlikely to satisfy the requirements of proving special damages in contract because it was not within the parties’ contemplation when the contract was concluded, but may be recoverable under delict provided wrongfulness is demonstrated and the damages are not too remote.

59. There appear to be a number of features which may be distilled from well over a century of case law. They are;

1. The ordinary measure of the amount payable for holding over is the “market rental value” and not the rental that would be payable under the cancelled lease (Sandown Park at p 256I and 260A);

2. While courts have regard to the rental payable under the erstwhile lease, that exercise is not conducted as part of the substantive law element of a cause of action. The rental payable under the lease is introduced only for the purposes of constituting evidential material, under adjectival law, to determine the market related rental (Sandown Park at pp258H and 260A-B). For this reason the damages claim does not only arise out of contract.

With respect, Harms ADP in Amler puts it succinctly at p255;

“The plaintiff must allege and prove the market rental value of the premises for the period of the unlawful occupation and must show at least prima facie that the premises were in fact lettable” (relying on Sandown Park)

3. Other forms of pecuniary loss, including liquidated charges and disbursements, are recoverable. This is considered in the following paragraphs. According to Cooper at p234 losses claimable by the landlord as damages consequent on a holding over include “such pecuniary loss which flows from, and is the natural, reasonable and probable consequences of, the lessee’s unlawful conduct”; although a clear reference to delictual claims, the corollary under contract is equally self-evident.

60. An analysis of case law reveals that damages claimable for holding over are not confined to the rental market value. Cooper at p234 provides a number of illustrations. Some of the cases mentioned should be treated with circumspection as they are not true holding over cases (such as Nicholson v Myburgh (1897) 14 SC 384 which was an invasion of a real right by trespass).

61. In cases where the unlawful occupier continues to trade there is no reason in principle why costs such as management and other levies, electricity, water and light for which the landlord is liable in respect of the premises, and other operational costs including marketing costs, should not be recoverable.

62. There are however cases which have been classified as falling within the ambit of a holding over claim but on analysis are not. In the present case Mr Nowitz sought support from Sapro v Schlinkman 1948(2) SA 637 (A) where the rental provided for in the agreement was determined as the amount claimable. In my view Kerr correctly distinguishes the case on the basis that it does not involve a failure to restore the property at the proper time (compare Kerr at pp 417-418 with pp421-424).Cooper similarly draws a distinction between damages for holding over (at p233-235) and the situation of a lessee remaining in occupation after purportedly cancelling the lease (at 163-167).

63. In Sapro the parties agreed to allow occupation although the material terms of the contract were never finalised. Cases which fall within this category have in common that the lessee continues to occupy as if there is a continuation of the lease. In all these cases the correctness of the rental charge was never in issue.

MARKET RENTAL VALUE: LIQUIDATED OR ILLIQUID DAMAGES

64. On ordinary principles a damages claim for a market related rental would be illiquid. The appellants nonetheless contend that “in the absence of evidence to the contrary, the rental value of the premises is assumed to be the rental paid under the lease”.

According to the submission, the fact that the respondents had agreed to the rental demonstrated that it was market related and it is to be assumed that the rental provided for in the lease (including the annual escalation provision) is the proper measure of the value for continued occupation after the date when the lease had been cancelled. Reliance was placed on Sandown Park at 260A-B ).

65. However Nestadt J pointed out (in the same passage) that there is a significant qualification to applying the lease rental figure, namely: “It is only in the absence of evidence to the contrary that the rental value of the premises is assumed to be the rental paid under the lease (Cooper at 208)” - the reference is to Cooper The South African Law of Landlord and Tenant (see now 1994, 2^nd ed at p234) and the cases there cited. If there is evidence to the contrary then the claim is illiquid with the result that it cannot support motion proceedings.

66. The rental provided for in the agreement accordingly is no more than evidential material as to market related rental for the purposes of a holding over claim; unlike a damages claim for cancelation due to a breach where the claim is for the actual agreed rental for the unexpired portion of the lease while the premises remain unlet. See Sandown Place at 256H-I.

67. Unlike most cases where the liquidity or otherwise of ordinary damages is classified by reference to the claim made, the liquidity of a holding over claim for a market value rental is dependent on the pleaded response. The reason is to be found in the effective deeming of a market rental value to be the same as the rent provided for in the agreement unless there is evidence to the contrary.

68. If there is no legally effective challenge to the landlord’s allegations that the rental provided for in the lease is the market rental value, then the damages are readily ascertainable and therefore liquidated. This appears to be the most sensible approach because without countervailing evidence the agreement struck by the parties reflects the amount at which willing and able parties are prepared to conclude their transaction. It also enables a landlord to use the expedited processes of motion proceedings and summary judgment to pursue a damages claim based on holding over.

69. Where however there is a legitimate challenge to the rental provided for in the lease being equivalent to the market rental value, then on Sandown Park authority, the basis for relying on the lease to render the damages claim liquidated fails, thereby rendering the claim illiquid.

70. In my view the appellants’ claim in the present case would be liquidated if the respondents are unable to challenge the legal assumption ( per Sandown Park) that the rental provided for in the lease is market related. It becomes necessary to examine how Sandown Park is to be applied in motion proceedings which require a “real, genuine or bona fide defence” to be raised in order to defeat a claim for final relief (see Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634I).

71. It therefore appears that the present case is to be resolved as follows; if the respondents did not set out a bona fide then there is no countervailing evidence regarding market related rental and per Sandown Park the actual rental charged for the holding over period will be the only acceptable evidence. If that is so then the amount is liquidated; otherwise it is illiquid and incapable of supporting motion proceedings.

BONA FIDE DEFENCE

72. The appellants sought final relief on motion. In order to succeed they must rely only on the facts presented by the respondents, including those admitted of the appellants’ case, unless of course the defence is not bona fide or there is some other acceptable basis for rejecting the respondents’ version as explained in Plascon-Evans at 634H-635B.

73. The appellants have pertinently challenged the respondents’ testimony on the grounds that it lacks bona fides and is incapable of supporting a legitimate defence because of issue estoppel. These will be considered separately.

74. I am indebted to my brother Boruchowitz J for reminding me that Room Hire Co. (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T) is the locus classicus on what constitutes a bona fide defence. The court in Room Hire was pertinently required to consider the appellant’s submission that the case could not be decided on motion, and if it could, that the “evidence adduced by the respondent was insufficient to establish upon a balance of probabilities the alleged improper use of the premises”.(at 1156).

75. The Full Court held that the case could be decided on motion (at 1159-1162). In doing so the court was required to consider the correctness of the earlier Full Court decision in R. Bakers v Ruto Bakeries (Pty) Ltd 1948(2) SA 626 (T).

76. In Bakers Dowling J on behalf of the court confirmed that the only test to be applied was whether or not there existed a bona fide dispute on a material fact (see Room Hire at 1160) and, protected by this procedural safeguard, a respondent is generally entitled “... to record a bare denial on material averments without evidence unless the petitioner is able to show that on the papers as a whole such denial is male fide and unsupportable (at 633 of Bakers- emphasis added) and concluded (at 634) that: “A respondent for reasons we have indicated ....may properly by a bare denial raise a bona fide defence”. See Room Hire at 1160 .

The ratio in Room Hire regarding what constitutes a bona fide defence should therefore be understood by reference to the very low threshold test expressed in Bakers.

77. The response to the Bakers’ extracts commences at 1162infra of Room Hire, where the court expresses its fundamental position:

“ The crucial question is always whether there is a real dispute of fact. That being so, and the applicant being entitled in the absence of such dispute to secure relief by means of affidavit evidence, it does not appear that a respondent is entitled to defeat the applicant merely by bare denials such as he might employ in the pleadings of a trial action, for the sole purpose of forcing his opponent in the witness box to undergo cross-examination. Nor is the respondent’s mere allegation of the existence of the dispute of fact conclusive of such existence.”

Murray AJP proceeded (at 1163) to cite the following passage of Watermeyer CJ in Peterson v Cuthbert & Co., Ltd 1945 AD 420 at 428:

“ In every case the Court must examine the alleged dispute of fact and see whether in truth there is a real issue of fact which cannot be satisfactorily determined without the aid of oral evidence; if this is not done, the lessee, against whom the ejectment is sought might be able to raise fictitious issues of fact and thus delay the hearing of the matter to the prejudice of the lessor”.

78. The court in Room Hire proceeded to identify at 1163 the principal ways in which a dispute of fact arises. In my respectful view they may be broadly summarised as follows;

8. Where the respondent denies all material allegations “.. and produces or will produce, positive evidence by deponents or witnesses to the contrary”. It is accepted that the illustrations given suggest that the affidavit itself will explain why evidence cannot be readily obtained;

9. Although admitting the applicant’s evidence, the respondent may allege other facts which the former disputes;

10. Where the respondent claims lack of knowledge and puts the applicant to the proof, but produces evidence, or indicates that he intends leading evidence, to demonstrate the unreliability of the applicant’s averments and that certain essential facts are untrue.

79. The court also dealt with the situation where the respondent indicates an inability to lead any evidence to dispute the applicant’s statements because they are peculiarly within the latter’s knowledge and requests a referral to oral evidence. This scenario was then dealt with at pp1163-4.

80. It is appropriate, in the context of the present facts, to repeat the court’s observations regarding the type of case where a dispute of fact arises under (c). At p1163 Murray AJP said;

“The absence of any positive evidence possessed by a respondent directly contradicting applicant’s main allegations does not render a case such as this free of a real dispute of fact” (my emphasis)

81. It is also evident that the court was concerned with the qualifications for a “genuine “ or “bona fide” defence (see at p1166 where both terms are used in paras (a) and (b)). In Plascon-Evans the then Appellate Division, as mentioned earlier, considered the circumstances where a dispute would not be considered bona fide. In completing the present analysis regarding the genuiness of a dispute of fact that has been raised, it is worthwhile repeating the contents of 634H-635C:

“It is correct that, where in proceedings on notice of motion disputes of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent, together with the facts  alleged by the respondent, justify such an order. The power of the Court to give such final relief on the papers before it is, however, not confined to such a situation. In certain instances the denial by respondent of a fact alleged by the applicant may not be such as to raise a real, genuine or bona fide dispute of fact (see in this regard Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T) at 1163 - 5; Da Mata v Otto NO 1972 (3) SA 858(A) at 882D - H). If in such a case the respondent has not  availed himself of his right to apply for the deponents concerned to be called for cross-examination under Rule 6 (5) (g) of the Uniform Rules of Court (cf Petersen v Cuthbert & Co Ltd 1945 AD 420 at 428;Room Hire case supra at 1164) and the Court is satisfied as to the inherent credibility of the applicant's factual averment, it may proceed on the basis of the correctness thereof and include this fact among those upon  which it determines whether the applicant is entitled to the final relief which he seeks (see eg Rikhoto v East Rand Administration Board and Another 1983 (4) SA 278 (W) at 283E - H). Moreover, there may be exceptions to this general rule, as, for example, where the allegations or denials of the respondent are so far-fetched or clearly untenable that the Court is justified in rejecting them merely on the papers (see the remarks of BOTHA AJA in the Associated South African Bakeries case, supra at 924A).”

82. I turn to consider whether the respondents raised a genuine dispute of fact in their answering papers. It will be recalled that the first substantive dispute of fact raised concerned whether the rental contained in the cancelled lease agreement constituted a market related rental. Moreover the respondents sought to rely exclusively on the Report; a report which the appellants contended was materially deficient. Accordingly it is appropriate to now consider the Report.

THE COOK LISCHITZ REPORT

83. The Cook Lipschitz report was not verified under oath in these proceedings by Mr Cook who was responsible for the factual findings, reasons for the opinion and conclusions contained in the document. .The failure to file a confirmatory affidavit by Mr Cook was not raised in the replying affidavit nor was an application to strike out the report brought on that ground. It is common cause that in the earlier ejectment proceedings Mr Cook had deposed to an affidavit confirming the contents of the report.

84. The report sets out the experience and qualifications of its compiler sufficient to qualify its contents as receivable as expert opinion. The report is based on three separate site inspections held on 8 May, 26 May and 15 June 2009 and contains some 14 pages of observations. Each inspection note is signed by Mr Cook. The firm’s letterhead which appears on each of the inspection notes and the report itself identifies Mr Cook as a qualified architect and valuer holding B Arch, Pr. Arch, Pr. Valuer and FA Arb qualifications. He is one of the partners in the architectural firm of The Cook Lipschitz Partnership.

85. The appellants failed to challenge the admissibility of the report for want of a confirmatory affidavit and they dealt with it at some length in reply in the present proceedings. The point should have been taken before the matter was heard in the court below and if it had there is little doubt that the respondents would have produced Mr Cook’s confirmatory affidavit as occurred in the earlier ejectment proceedings. The appellants were not prejudiced and the belated challenge on appeal to the failure to file a confirmatory affidavit should not be allowed.

86. There is no reason to doubt the veracity of Mr Cook’s credentials or those of the firm. The report itself is comprehensive and runs to 23 pages. It is also signed by Mr Cook and is based on the observations he noted at the site inspections. In the report Mr Cook sets out his reasons for concluding that, in his opinion;

11. the brochure advertising the development which was to become the shopping centre and on which the respondents alleged they relied does not fairly depict the structure and appearance of the centre that was actually built. He specifically identifies fundamental departures from the brochure;

12. the departures are significant and alter the character of the centre from what was represented as a “high class shopping mall” to a “strip mall”. The deviations include the standard of finishes and the general work and appearance of the centre which is of a low standard and quality;

13. the plans for the area where the first respondent’s restaurant was to be located provided for a roof over the entire external dining patio area. The roof was not constructed in this manner resulting in the area being rendered unusable during inclement weather.

87. It should be observed that the report was tendered for a different purpose in the ejectment proceedings and in light of Mokgoatlheng J’s judgment cannot be used to support any defence based on misrepresentation. However the report is tendered for a different purpose in the current proceedings; namely to demonstrate that the rental provided for in the agreement does not constitute a market related rental since one would not be comparing apples with apples. The disparity does not require to be founded on a misrepresentation or the parties state of mind at the time when the agreement was concluded (being the lis between the parties in the ejectment proceedings) but on an alleged objectively determinable and de facto disparity between the basis upon which the rental in the agreement was determined and the rental the shopping complex can command by reason of its actual attributes. Where the elements coincide they are fortuitous but Mokgoatlheng J was not required to, nor did the learned judge, engage in an enquiry as to whether the rental was indeed market related.

88. Moreover, as a consequence of the thrust of the report, it did not set about to determine the market related rental for the appellants’ mall or set out the disparity in rentals between the two types of shopping malls. Nor did the respondents produce such evidence to compliment the report.

89. This brings me to the question of whether issue estoppel applies. In order to answer this question it is necessary to establish the ratio of Mokgoathleng’s decision, ie the actual reasons for his decision.

ISSUE ESTOPPEL

90. Mr Nowitz on behalf of the appellants contended that the respondents could not rely on Mr Cook’s report because it was premised on there being a misrepresentation as to the character of the centre, an issue which was res iudicata .by reason of the judgment of Mokgoathleng J. The appellants clearly intended to rely on issue estoppel (see eg. Kommissaris van Binnelandse Inkomste v ABSA Bank Bpk 1995 (1) SA 53 (A)) and the respondents are not prejudiced by the incorrect nomenclature. They argue that in order to reach its decision in the earlier ejectment proceedings the court had to consider and in fact made a determination as between the same parties with regard to whether there had been a misrepresentation, and that the finding that there was not meant that the building was correctly represented as a “high class shopping mall” .

91. The judgment of my brother Mokgoatlheng J does not deal with the Report’s findings that the centre as a fact is not a high class shopping mall but a strip mall nor did the appellants suggest in those proceedings that the rental charges were anything other than based on those a high class shopping mall could command. On the contrary the issue of misrepresentation raised in the ejectment proceedings relied more on whether or not any express representations were made by the appellants and the binding nature of having signed a non-variation and non-representation clause. That court was not concerned with and did not consider the expert opinion contained in the Report as to the character and other attributes of the Mall.

92. Accordingly, and as Mr Nowitz properly conceded, that court did not concern itself with the market value for the use and enjoyment of the premises during the period of the holding over. The period of holding over commenced on 6 February 2009 and lasted for a period of 2 ½ years until February 2010. The lease agreement was signed in October 2008 and rental escalated at a predetermined 10% per annum.

93. If the rental had been determined when the structure was already being let one may argue that, barring any unforeseen eventuality, the rental agreed upon might be a fair yardstick. However in the present case it is common cause that the rental was determined “off-plan”. It is difficult to imagine how a rental predetermined before development of the centre was completed can be relied upon to determine the fair market value during the period of the actual holding over when different tenants are on the premises, when the hoped for anchor tenants did not materialise and, in respect of a large shopping centre the effect of the quality of its management, its marketing, the tenant mix and actual pedestrian custom as well as supervening external factors such as the economy.

94. In my respectful view Cane AJ was correct to reject this point on the ground that the Report in the context of the issues to be determined in the present case had nothing to do with misrepresentations and everything to do with the rentals that the appellants’ Mall could attract on the open market during the holding over period.

BONA FIDE DEFENCE TO MARKET RELATED RENTAL CLAIM

95. The appellants argued before the court a quo that in the absence of evidence to the contrary, market value of the use and enjoyment of the premises for the holding over period is assumed to be the rental paid under the lease.

96. Once the Report is admissible and issue estoppel does not arise then only two further issues raised by the appellants require consideration: The first is that it is entitled to persist with damages based on the lease rental and secondly, that nowhere in the Report does Mr Cook claim that the market related rental for a high class shopping Mall is any different to a strip mall, nor does the Report state the rental that was attainable at a strip Mall.

97. Cane AJ in identifying the dispute said at para 11 of the judgment:

“The respondents’ version is that the lease agreements were signed when the shopping centre had yet to be completed and that it is a “strip mall” and not a “high class shopping centre” as represented to it prior to the conclusion of the lease agreements. They attach a report by “The Cook Lipschitz Partnership “which describes the shopping centre as a “strip mall and not a high class shopping centre” and lists many other problems which appear to plague the centre. The respondents dispute that the applicants would have been able to achieve the rentals and other charges as in the lease agreements, on the open market. On this basis the respondents’ dispute that the applicants’ damages equal the amounts listed.”

98. Mr Nowitz for the first time raised on appeal a provision contained in clause 31 of the lease agreement which he argued entitles the appellants to the lease rental as liquidated damages. It reads;

31. DISPUTED OCCUPATION

While for any reason .... the TENANT occupies the premises and the LANDLORD disputes the right to do so, the TENANT shall, pending the determination of such dispute ... continue to pay an amount equivalent to the monthly rental ... and the LANDLORD shall be entitled to accept and recover such payments and the acceptance thereof shall be without prejudice to ... the LANDLORD’s claim of cancellation ...

Should the dispute be determined in favour of the LANDLORD, the payments ... shall be deemed to be amounts paid by the TENANT on account of damages suffered .... by reason of the cancellation ....or the unlawful holding over by the TENANT”.

99. A similar clause was considered in Sandown Park and a similar argument was rejected. I respectfully adopt the reasoning at 258A-G. The provision simply allows the landlord to appropriate the amounts paid towards damages but does not equate the payments made with a market rental value.

100. In considering the particularity expected in a respondent’s answering affidavit, regard must be had to the manner in which the appellants’' case was pleaded. It will be recalled that the respondents were required to raise a point in limine challenging the lack of particularity, and in particular the basis of the amount claimed. Accordingly only after the answering affidavit was delivered did the appellants in their replying affidavit indicate that they were claiming the rental amount stipulated for in the agreement on the basis that it was market related. The appellants’ failure to identify the basis upon which they were entitled to claim the lease rental for holding over in their founding affidavit cannot enure to their benefit.

101. Nor is a respondent expected to make out a case for the applicant. Mr Karinos on behalf of the respondents pointed out that the appellants were alive to the challenge that the lease rental did not equate with a market related rental. The respondents were required to raise this dispute in a bona fide manner and as appears from the contents of the Report they did so. It was enough in the present case to demonstrate that the characteristics of the mall were consistent with a low end strip mall and not a high end one bearing in mind that the appellants had consistently disputed that theirs was a strip Mall. The respondents did not have to set out actual figures (having regard to the nature of the dispute in the present case) which then may have provided the appellants with a figure to support a reduced claim. It is also noteworthy that the appellants did not in reply attempt to demonstrate that there would be no difference in rental between the two classes of Malls or that there is no such distinction.

102. The contents of the Report in my view demonstrate that the defence raised to the lease rental equalling a market rental value is bona fide even though it was not again verified under oath by its author and does not give the Rands and cents difference between a high class mall and a strip mall. It more than adequately satisfies the bona fides test referred to in paras (a) and (c) of Room Hire (at 1163 referred to in para 78 supra) as read with Plascon-Evans.

ANCILLIARYCHARGES

103. There is no reason to preclude ancillary charges from being claimed as damages simply because it is not a “rental”. The right infringed entitles the landlord to claim damages, whatever its source, provided the requirements for ordinary or special damages in contract are satisfied or they are foreseeable and not too remote in delict. See Cooper at p234 cited above in para 55 .

104. However, when claiming such charges on motion they must at least be liquidated and actually have been incurred. I respectfully support Cane AJ’s finding on this point; namely that on the paucity of facts presented by the appellants it is “difficult to accept without more, that they would represent the “rental value “of the premises during the holding over period. Further evidence would be requires to establish the applicants’ damages in such amounts. (See Van der Merwe v Erasmus and Another 1945 TPD 97 at 102-103). Even in relation to those items that are in the nature of “rent”, the rental value of the premises for the holding over period is only assumed to be the rent paid under the lease in cases where there is no evidence to the contrary. See Cooper The South African Law of Landlord and Tenant (2^nd Ed) at 2334; Sandown Park v Hunter Your Wine and Spirit Merchant supra ( 1985(1) SA 248) at 260A-B”

ORDER

105. It is for these reasons that I am in respectful agreement with the judgment of Cane AJ dismissing the application with costs. In the result the appeal is similarly dismissed with costs.

___________________

SPILG J

COPPIN J

I agree

____________________

COPPIN J

BORUCHOWITZ J

I agree and it is so ordered

_____________________

BORUCHOWITZ J

_____________________________________________________________

DATE OF HEARING: 22 NOVEMBER 2013

DATE OF JUDGMENT THURSDAY, 14 MARCH 2013

LEGAL REPRESENTATIVES:

FOR APPELLANTS: ADV M NOWITZ

NOWITZ ATTORNEYS

FOR RESPONDENTS: ADV V KARINOS

JURGENS BEKKER ATTORNEYS

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