IN THE HIGH COURT OF SOUTH AFRICA (WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No 14549/11
In the matter between:

MURRAY & ROBERTS STEEL

CAPE TOWN IRON AND STEEL WORKS

and
NATIONAL SCRAP METAL CAPE TOWN

MUREC CRUSHING AND MILLING

JUDGMENT

GRIESEL J:

[1 ] The applicants - all members of the Murray & Roberts Group of companies - have applied as a matter of urgency for the eviction of the respondents from certain industrial premises described as the Remainder of Erf 5926 Kuils River, 20,25 hectares in extent, registered in the name of the first applicant, Murray & Roberts Limited.

[3] The respondents refuse to vacate any part of the premises which they occupy, relying on an express oral lease - allegedly concluded between representatives of the respective parties at a meeting that took place at Johannesburg Airport sometime between 19 June 2008 and 5 August 2008 - which entitles them to occupy the premises for a period of at least ten years from 1 November 2010.

[4] In reply, the applicants strenuously denied the existence of the purported oral lease on which the respondents rely, stating bluntly that 'there was no such meeting and no such agreement'. Faced with this factual dispute on a material issue counsel for the respondents, not surprisingly, contended that there are 'real and genuine disputes of fact between the parties as to the first respondent's right of continued occupation of the premises'. They accordingly asked that the application be dismissed with costs.

Factual background

[8] The acquisition of the shredder featured prominently in these proceedings. It is common cause that the applicants were keen to obtain a shredder so as to increase their output of scrap metal. At a board meeting of NSM held on 19 June 2008, the acquisition of a shredder by NSM at a cost of approximately R45 million was discussed. The minutes record:

'The board has agreed to go ahead with the installation of this shredder on condition that a long term lease agreement be entered into with Cisco where the shredder is to be erected.'

[9] According to the respondents, it was after this board meeting, and before the next board meeting, held on 5 August 2008, that Mr Michael Movsas and Mr Dave Kassel of NSM met with Mr Robert Noonan, who was a director of each of the applicants and also a director of NSM, and concluded the disputed oral lease.

The disputed 2008 oral lease
[10] The evidence adduced on behalf of the respondents in support of the disputed oral lease is contained in the answering affidavit of Movsas, who states:

'To the best of our recollection the meeting took place at the Johannesburg airport. . . . Noonan" s demeanour and conduct at this meeting was assertive. . . Noonan reiterated:

"We (a reference to the Murray & Roberts Group) can't be in the hands of our opposition (a reference to SA Metal) for the supply of shredded scrap and if you (a reference to the first respondent, which Kassel and I [i.e. Movsas] were representing at the meeting) won't purchase a shredder, we will."

'Kassel and 1 [Movsas] advised Noonan that as he was aware, the board of [NSM] had resolved to proceed with the purchase of a shredder on condition that a long term lease agreement be entered into with the third applicant in respect of the premises where the shredder was to be located and provided that Noonan agreed on behalf of the applicants that a long term lease would be entered into we (on behalf of the first respondent) would, in accordance with the directors agreement [at the 19 June 2008 NSM board meeting] confirm that the first respondent would purchase and install a shredder to meet the Murray & Roberts Group's requirements as detailed above.

'Noonan immediately responded by saying that Murray & Roberts (ie a reference to the applicants) was prepared to let the premises to the first respondent for a further period of !0 years following 31 October 2010. During the discussion, Kassel and I made it plain to Noonan that the first respondent would not invest in the massive capital commitment for the shredder unless the terms of a long term lease were agreed, a fact of which Noonan was well aware. After a brief discussion, Noonan (representing the applicants) and Kassel and [Movsas] (representing the first respondent) agreed that following the expiry of the existing lease on 31 October 2010, the first respondent would continue in occupation of the premises (including the premises in which the Shredder would be installed) on the same terms and conditions as those recorded in the existing lease and that such occupation would be for a period of at least 10 years commencing 1 November 2010. The rental was to be on the basis of the built in escalation in the existing lease over the 10 year period. He agreed with us that all was in order and we responded by stating that on this basis, the first respondent would proceed with the purchase of the shredder, which it did.

'following this meeting. I advised the remaining board members who were not Murray & Roberts appointees that agreement had been reached with Murray & Roberts as to the terms which would govern the first respondent's continued occupation of the premises (which was now to include the shredder portion) and we proceeded with the purchase of the shredder.'

The applicants' version

Discussion
[12] When evaluating these competing and mutually inconsistent versions, one is struck, first of all, by the vagueness of the respondent's version regarding time and place: 'to the best of [their] recollection' the meeting took place at the Johannesburg airport. Time-wise, it could have been any day after 19 June 2008 and before 5 August 2008, i.e. a period spanning more than six weeks. One is also struck by the inherent improbability that an agreement of such magnitude and with such far-reaching consequences for both groups of companies would have been concluded in such a cavalier and informal manner - all the more so when one learns that no record of the disputed oral lease is to be found anywhere. Thus, there is not a single item of correspondence or any document emanating from any of the parties which supports or confirms the existence of the purported oral lease, let alone refers to such a lease in terms. To the contrary, as pointed out by the applicants, the existing documentation is inconsistent with, and in many instances destructive of, the respondents' version.

[13] Moreover, the purported oral lease was also not discussed at any subsequent board meeting of either NSM or any of the applicants. Given the importance of the purported oral lease for NSM, it is inconceivable that there would have been no reference to it at a board meeting of NSM or Cisco, had such an agreement actually been concluded. Again, copies of the minutes of various board meetings of NSM, held between December 2009 and December 2010, indicate repeatedly - and with an increasing note of urgency on the part of NSM - that a new lease agreement must be 'concluded' with Cisco; in other words, no oral lease was yet in place.

[17] Moreover, it also does not make business sense to fix the same rental that applied in respect of the 'rental portion' for the much larger premises, including the shredder portion. The rental allegedly in terms of the disputed oral lease is so unrealistic that it could not seriously be suggested that Noonan would have agreed to it, especially bearing in mind that the rental payable for the leased portion under the lease agreement was nominal when compared to rentals payable for similar properties in the Kuils River industrial area. Such rental was not only well below market value, but did not even cover the electricity bills which Cisco was contractually obliged to pay in respect of NSM's electricity consumption in terms of the lease agreement.

[ 18] The suggestion that Noonan would have consented to that rental w ithout even deferring to the boards of directors of any of the applicants or referring to the terms of the existing lease is even more far-fetched.

[19] A further aspect concerning the disputed oral lease that does not make business sense is the fact that a long-term lease agreement was dependent on the existence of a long-term supply agreement between Cisco and NSM, and the terms of the latter would determine what could be agreed for the former. It was thus imperative that clarity first be obtained as to what was permitted under the Competition Act as the Competition authorities had already found that the previous relationship between Cisco and NSM involved the commission of prohibited practices. This requirement had not been met in 2008 - or at any stage prior to the expiry of the lease agreement and the supply agreement on 31 October 2010. There is still no new supply agreement, and none is likely to be concluded in the future. NSM resolved its competition issues only in December 2010 when the Competition Tribunal approved a settlement agreement between NSM and the Competition Commission; while the competition complaint against the Murray & Roberts Group is still outstanding. It therefore defies belief that, sometime around the third quarter of 2008, Noonan would have allegedly committed the applicants to a long-term lease from 1 November 2010 to 31 October 2020.

The alleged 42-month notice period

"A periodic lease continues until it is terminated by notice given by either party. In the absence of agreement to the contrary, notice must be given a reasonable time before the date on which a party desires to terminate the lease. The period of such notice must be such that the lessor has a reasonable opportunity of letting his premises or the lessee of finding other premises.
A day's notice is considered reasonable in the case of a daily lease; a week's notice in the case of a weekly lease, and a month's notice in the case of a monthly lease; but there is no fixed ratio between the period of the lease and the notice period. Consequently, a year's notice is not required to terminate a yearly lease; three months' notice has been held to be reasonable notice."

[25] I agree with the submission by counsel for the applicants that the notion that a tacit month-to-month lease could potentially have a notice period of forty-two months is absurd. It appears from the respondents' own papers that it is only in relation to the shredder portion that a longer period of notice is required; the respondents appear to concede that it is possible for them to vacate the rest of the property well within the notice period of three months that they had been afforded. However, as pointed out earlier, the services site as a whole (including the shredder portion) has been regulated by the Murec agreement since 2003, and has continued to be governed by that agreement since 1 November 2010, rather than by any purported oral lease. That agreement provides for termination on no less than six calendar months, i.e. on 31 December 2011.

[27] In these circumstances, I am satisfied that the period of notice given to the respondents was adequate. It follows that the tacit lease as well as the Murec agreement have been validly terminated.

Conclusion

Conclusion

[30]    For the reasons set out above, an order is granted:
(a) Evicting the first respondent, its employees, and sub-contractors, ordering the first respondent, its employees, and sub-contractors to vacate, and ordering the first respondent to remove all machinery, equipment, stockpiles and office structures under the first respondent's control from the Remaining Extent of Erf 5926; Township: Kuils River (Registration Division: Stellen-bosch RD) situated in the Province of the Western Cape, being the premises situated off Fabriek Street, Kuilsrivier ('the premises'), in particular from the areas labelled the Teased portion' (labelled 'B') and the 'Shredder portion' on the site map annexed to the notice of motion marked 'NOM1' ('the map'), with effect from 8 August 2011;
(b) Declaring that the waste removal and disposal agreement concluded by the third applicant, the first respondent and the second respondent on or about 17 October 2003 ('the Murec agreement') has been validly cancelled by the applicants with effect from 31 December 2011;
(c) Evicting the second respondent, its employees, and subcontractors, ordering the first respondent, its employees, and subcontractors to vacate, and ordering the second respondent to remove all machinery, equipment, stockpiles and office structures under the second respondent's control from the premises, in particular from the area labelled 'Services Site' on the map, with effect from 31 December 201 1;

(d) Authorising the sheriff to take all steps and do all things necessary to give effect to paragraphs (a) and (c) above in the event of the respondents, their employees and sub-contractors failing to comply with the orders in the said paragraphs;

(e) Ordering the respondents jointly and severally to pay the costs of the application on the scale between attorney and own client, including the costs of the interlocutory proceedings on 31 August 2011 and 13 September 2011, as well as the costs of two counsel (where so employed).

B M GRIESEL
Judge of the High Court