Slims (Pty) Ltd and Another v Morris NO

• Jurisdiction: South Africa
• Judge: Corbett JA, Botha JA, Van Heerden JA, Nestadt JA and Nicholas AJA
• Judgment Date: 10 November 1987
• Citation: 1988 (1) SA 715 (A)
• Hearing Date: 07 September 1987
• Court: Appellate Division

Nicholas AJA:

This appeal concerns two leases. The one, which was E concluded in September 1984 between Slims (Pty) Ltd as lessor and Juan Ignacio Marsal as lessee, related to the Phoenix Hotel in Chapel Street, Port Elizabeth, and Phoenix Hotel Off-Sales in Prince Alfred Road, Port Elizabeth. The other, which was concluded in April 1980 between Progessive Holdings (Pty) Ltd (the name of which was later changed to F Rebel Discount Liquor Stores (Eastern Cape) (Pty) Ltd) as lessor and Marsal as lessee, related to the Swartkops Hotel with off-consumption authority in Swartkops, Cape.

The same questions arise in regard to both of the leases, and counsel were agreed that the Court's decision in regard to the Swartkops Hotel G lease should follow the decision in regard to the Phoenix Hotel lease. Consequently only the Phoenix Hotel lease falls to be considered.

Slims (Pty) Ltd is itself the lessee of the properties concerned from Offit Chapel Street (Pty) Ltd and Offit Prince Alfred Road (Pty) Ltd respectively.

The preamble to the lease recited that Slims (Pty) Ltd

H 'conducts business as an hotelier at the Phoenix Hotel, Chapel Street, Port Elizabeth, and Phoenix Hotel Off-Sales, Prince Alfred Road, Port Elizabeth (hereinafter referred to as the "lessor")'

and that Juan Ignacio Marsal

I '(hereinafter referred to as the "lessee") wishes to lease the business conducted by the lessor and the premises in which such business is conducted subject to certain terms and conditions'.

Under clause 1 the lessor agreed 'to sublet the properties leased from Offit Chapel Street (Pty) Ltd and Offit Prince Alfred Road (Pty) Ltd on which the business of an hotel and off-sales are conducted respectively'. Clause 24 provided that the agreement was 'subject to J permission being granted

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A to transfer the licences by all relevant authorities'. Under clause 4 it was agreed that the lessee 'shall hand back the properties at the termination of the lease in the same good order and condition as at the effective date of the agreement...'. And in terms of clause 21:

'In the event of the termination of this agreement, the lessee shall do all things as may be necessary to ensure that the relevant trading B licences are transferred back to the lessor but in any event shall sign a power of attorney authorising the lessor to apply for such transfers as may be necessary....'

Thereafter the liquor licence was transferred to Marsal on the application of the lessor; and Marsal duly entered into occupation of C the Phoenix Hotel and Phoenix Hotel Off-Sales, where he conducted the business on his own account until 2 July 1985. On that date his estate was provisionally sequestrated. The order was made final on 6 August 1985. Mr David Morris was appointed as provisional trustee and later, on 17 September 1985, as trustee in Marsal's insolvent estate. Through an agent the trustee continued the business until the termination of the lease. D

The trustee did not give notice determining the lease in terms of s 37(1) of the Insolvency Act 24 of 1936, and he did not, within three months of his appointment, notify the lessor in terms of s 37(2) that he desired to continue the lease on behalf of the estate. The trustee was accordingly deemed to have determined the lease at the end of such E three-month period.

The trustee then vacated the premises, but refused to take any steps to retransfer the liquor licence to the lessor. He contended that, although the leased premises reverted to the lessor by reason of the termination of the lease, the licence vested in and belonged to Marsal's insolvent estate. He as trustee was not bound by the terms of the lease F providing for the restoration of the licence to the lessor on the termination of the lease, nor was he bound by any term prohibiting or restricting transfer of the licence to third parties. He claimed that he was entitled to realise the licence as an asset in the insolvent estate.

G Slims (Pty) Ltd as first applicant and Rebel Discount Liquor Stores (Eastern Cape) (Pty) Ltd as second applicant then made an application against the trustee as respondent in the South Eastern Cape Local Division of the Supreme Court. They claimed:

'(ii)

An order directing respondent, within a time to be fixed by this honourable Court, to take all steps necessary and to sign all H documents necessary to:

(a)

transfer to first applicant or its nominee, the hotel liquor licence with off-consumption authority pertaining to the Phoenix Hotel, Chapel Street, Port Elizabeth, Cape, the off-consumption authority being conducted under the name of I Phoenix Hotel Off-Sales, at Prince Alfred Road, North End, Port Elizabeth, Cape;

(b)

transfer to second applicant or its nominee, the hotel liquor licence with off-consumption authority pertaining to the Swartkops Hotel, Main Road, Swartkops, Cape;

J and failing compliance therewith,

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(iii)

A an order authorising and directing the Sheriff of this honourable Court or his lawful deputy to take all such steps and sign all such documents on respondent's behalf.

(iv)

Granting alternative relief.

(v)

Directing that the costs of this application be paid by the respondent, or alternatively that first and second applicants' B costs of suit be costs in the sequestration of the insolvent estate of Juan Ignacio Marsal.'

The application was heard by Kannemeyer J, who held that the licences had vested in the insolvent estate; and that clause 21 of the lease gave the lessor merely a jus in personam, which could not be enforced against C the insolvent estate. Judgment was accordingly granted for the trustee with costs, including those occasioned by the employment of two counsel. Subsequently the learned Judge granted leave to appeal to this Court, and directed that the costs of the application for leave be costs in the appeal.

The question for decision is res nova. There has been no reported D case, in South Africa at any rate, in which it has been considered by a Court. This is a matter for surprise, because the occasions for disputes in this regard must have been frequent. The absence of any reported case would seem to suggest that it has been generally accepted that, in circumstances such as those in the present matter, the licence does not fall into the insolvent estate. But this is by the way.

E The nature of a retail liquor licence, and the extent to which the rights conferred by it can be parted with, were discussed in three early decisions of this Court. In Fick v Woolcott & Ohlsson's Cape Breweries Ltd 1911 AD 214 Innes J said at 229 - 30:

'Now, such a licence authorises the sale of liquor by the holder upon F specified premises, for consumption there. It is a privilege granted to a particular person to sell liquor at a particular place. And the law attaches the greatest importance, and provides for the strictest supervision, in regard to both these elements.... Moreover, the privilege which he enjoys is purely personal; it involves the exercise by the authorities of a delectus personae, so that he would have no power to assign his licence, were there no statutory provision for its G transfer. He can only deal with it in such a manner as the ordinance prescribes.... And the law provides that the transfer of a licence can only be effected by the authority which sanctioned its issue. Contractual undertakings on the part of a holder to transfer his licence to some other person on the happening of certain contingencies are of frequent occurrence. But the expression, though convenient, is inaccurate. No holder can transfer his licence; that is the sole H prerogative of the Licensing Court. So that the only way to give any effect to such an undertaking is to treat it as an agreement by the promisor to exercise in favour of the promisee such right to apply for a transfer as the statute gives him, and to do all things necessary on his part to enable the Licensing Court to deal with the application. And that is what, in my opinion, an agreement to transfer a licence amounts to.'

And in Pietermaritzburg Corporation v South African Breweries Ltd 1911 I AD 501 Innes J pointed out at 517 that, although a licence operates only on the specified premises, it can be separately held and dealt with, and it has a commercial value apart from the premises to which it relates. See also Receiver of Revenue, Cape v Cavanagh 1912 AD 459 at 463.

Relying on these cases, Van Zyl JP held in Solomon v Registrar of Deeds 1944 CPD 319 at 325 that a liquor licence is not merely a J privilege, but is

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A a right which has a potential commercial value which may sometimes be very considerable. And it is a right which is alienable and can be sold.

Finally on this aspect, reference may be made to Weintraub & Weintraub v Joseph and Others 1964 (1) SA 750 (W). In that case the applicants were the joint owners of certain premises on which a beer hall had been B conducted for many years by virtue of a wine and malt licence. They had let the premises in terms of a lease which in clause 3(g) provided inter alia that the lessee was not to transfer the licence to other premises or persons without the consent of the applicants; and that at the termination of the lease the licence was to be transferred to the applicants, to facilitate which the lessee was obliged to grant them a C power of attorney. Unbeknown to the applicants, the lessee had in breach of these provisions obtained from the liquor licensing board, which was the second respondent, authority permitting the transfer of the licence and its removal to other premises. The applicants now applied for an order setting aside the authority. In that part of the judgment which is presently relevant, Vieyra J said (at 754): D

'Although in some reported cases the lessor in the position of the...