Benlou Properties (Pty) Ltd v Vector Graphics (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Hoexter JA, Van Heerden JA, Kumleben JA, FH Grosskopf JA, Kriegler AJA
• Judgment Date: 18 September 1992
• Hearing Date: 31 August 1992
• Court: Appellate Division

Van Heerden, JA.:

On 3 August 1988 the parties entered into a written agreement in terms of which the appellant let certain premises to the respondent. They were the first and second floors and portion of the third C floor of a building in Johannesburg. The initial period of the lease was five years, and in terms of clause 1.7 the respondent had to pay a fixed, but escalating, rent for each of those years. Clause 8.5 provided that should certain 'charges' be increased during the currency of the lease, the appellant would be entitled to recover 74,4 % of such increases from the respondent.

D During October 1990 the respondent initiated motion proceedings against the appellant in the Witwatersrand Local Division. It sought an order declaring the lease to be invalid. In the founding affidavit the respondent relied mainly on the provisions of clause 8.5. It contended that the amounts which might become payable in terms of that clause constituted additional rent; that such amounts were neither determined in E nor determinable from the written agreement; that clause 8.5 was consequently void, and that it was not severable from the other provisions of the lease. The appellant filed a brief opposing affidavit which in the main traversed the respondent's legal contentions.

The application was heard by Weyers J. He held that a number of the F provisions of clause 8.5, read with certain other clauses, were invalid. As regards severability, Weyers J merely said that it was common cause that if those provisions were invalid the lease in its entirety was of no force and effect. He accordingly granted the declaratory order sought by the respondent and directed the appellant to pay the costs of the application. With the leave of this Court the present appeal is directed G against those orders.

In so far as clause 8.5 is material, it reads as follows:

'8.5

. . . if any of the charges payable for any of the items listed below are or have . . . been increased so as to exceed those in force at, or are imposed after, the date of commencement of negotiations, the landlord shall be entitled to recover from the tenant . . . the H tenant's proportionate share of such increases or impositions, which the tenant agrees shall be equal to 74,4 % of such increases:

8.5.1

rates, taxes or other charges of any nature whatsoever payable by the landlord to any authority in respect of the premises, the building or the property or for service rendered in respect thereof;

8.5.2

wages and other payments of any nature whatsoever (including I contributions to unemployment insurance and pension funds and medical aid schemes) in respect of cleaning, gardening and security services provided to the building and/or the property;

8.5.3

insurance premiums payable by the landlord in respect of the property and/or the building;

8.5.4

any charges relating to the maintenance, repair and upkeep of J the building and/or the property including, without limiting the

Van Heerden JA

A generality of the aforegoing, amounts paid to third parties in respect of lift maintenance, air conditioning or other maintenance contracts or other services rendered;

8.5.5

any levies, taxes or other charges in respect of the building or the premises or the property not in force at the date of commencement of negotiations but subsequently imposed by any authority;

8.5.6

B the cost of electricity, water, gas, sanitary fees, refuse removal charges, domestic effluent or other charges used in or relating to the common areas;

8.5.7

all costs incurred in regard to the management, administration and letting of the building.'

C Reference must also be made to clauses 5.3, 28 and 29. Clause 5.3 provides that in the lease 'common area'

'shall mean those portions of the building and property other than those actually let or capable of being let to individual tenants as determined by the landlord in its sole discretion'.

Clause 28 provides: D

'The landlord shall take all such steps as it may consider necessary in its sole and absolute discretion for the maintenance and operation of the common areas.'

And the material portion of clause 29 reads:

'The nature of the services to be provided to the premises or the E building or property by the servants of the landlord or its agents, directors, . . . independent contractors or representatives shall be at the sole discretion of the landlord.'

Weyers J found that clauses 8.5.2, 8.5.3, 8.5.4, 8.5.7, as well as clause 8.5.6 read in conjunction with clauses 5.3 and 28, were invalid. His reasoning was that those clauses confer on the appellant a discretion F to determine various costs and charges, a substantial portion of which will have to be borne by the respondent. By way of example he pointed out that if the appellant decides to pay increased wages covered by clause 8.5.2, it may recover 74,4 % of such increases from the respondent.

As will appear, our old authorities were of the view that a lease is invalid if the rent is to be determined by the lessor - or the lessee - G in his unfettered discretion. Likewise a sale is void if the price is to be fixed by either party. It has often been said that these results flow from the application of the broader principle that contractual obligations must not be vague or uncertain (cf Westinghouse Brake & Equipment (Pty) Ltd v Bilger Engineering (Pty) Ltd 1986 (2) SA 555 (A) at 574, and Genac H Properties Jhb (Pty) Ltd v NBC Administrators CC (previously NBC Administrators (Pty) Ltd) 1992 (1) SA 566 (A) at 576). There was some debate before us as to whether the increased expenditure recoverable under clause 8.5 forms part of the rent payable by the respondent. Although it does not appear to me that the answer has any real bearing on the outcome of this appeal, I shall assume that, as contended for by the respondent, I that portion of the increased expenditure payable by the respondent is a component of the rent.

Weyers J relied heavily on the decision of a Full Bench of the Transvaal Provincial Division in Kriel v Hochstetter House (Edms) Bpk 1988 (1) SA 220 (T). In that case it was common cause in the Court below that certain J clauses in a lease were invalid. The dispute between the parties related

Van Heerden JA

A solely to the severability of those clauses. The Court of first instance held that they were severable. On appeal the Full Bench of its own accord examined the meaning of the relevant provisions. It came to the conclusion that the Court of first instance - and the parties - had correctly construed the clauses in question as conferring upon the landlord ''n B absolute diskresie . . . om die omvang van die teenprestasie wat . . . vir die gebruik van die verhuurde perseel betaal moet word te bepaal' (at 226G). It is apparent that on appeal the appellant in that case did not argue that the clauses were nevertheless valid. The Full Bench accordingly said no more (at 226G) than that it is 'geykte reg dat 'n huurkontrak ongeldig is indien die partye ooreenkom dat een van hulle die huurgeld kan vasstel'.

C The provisions of the lease considered in Kriel differ in a number of respects from those of clause 8.5 of the present lease, and no purpose would be served by examining the former in any detail. It suffices to say that on the approach adopted by the Full Bench clauses 8.5.2, 8.5.3, 8.5.4, 8.5.6 and 8.5.7 of the present lease would also be invalid because D they confer upon the appellant the power to 'determine' the extent of additional rent payable by the respondent.

Weyers J also relied upon an unreported decision of Labuschagne AJ. This decision has, however, since been overruled by this Court on the ground that the lease in that case provided a mechanism for the objective determination of the reasonableness of additional amounts payable by the E tenant: Proud Investments (Pty) Ltd v Lanchem International (Pty) Ltd 1991 (3) SA 738 (A) at 751. It was not held or suggested, however, that in the absence of provision for such a mechanism the impugned clauses would necessarily have been invalid.

The lease under consideration in Genac provided for payment by the tenant of 'rental' as well as (in clause 6) a portion of the landlord's F actual and reasonable maintenance and running expences such as wages, insurance premiums, the cost of maintaining lifts and air conditioning, etc. It was argued that the amounts payable in terms of clause 6...