Spearhead Property Holdings Ltd v E&D Motors (Pty) Ltd

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Mpati P, Mthiyane JA, Lewis JA, Maya JA and Hurt AJA
• Judgment Date: 01 June 2009
• Citation: 2010 (2) SA 1 (SCA)
• Hearing Date: 17 March 2009
• Docket Number: 214/2008
• Counsel: S Mullins SC (with AD Brown) for the appellant. RS van Riet SC for the respondent.

Spearhead Property Holdings Ltd v E&D Motors (Pty) Ltd
2010 (2) SA 1 (SCA)

2010 (2) SA p1

Citation	2010 (2) SA 1 (SCA)
Case No	214/2008
Court	Supreme Court of Appeal
Judge	Mpati P, Mthiyane JA, Lewis JA, Maya JA and Hurt AJA
Heard	March 17, 2009
Judgment	June 1, 2009
Counsel	S Mullins SC (with AD Brown) for the appellant.; RS van Riet SC for the respondent.

Flynote : Sleutelwoorde B

Land — Sale — Option to purchase leased property — Whether binding on lessor's successor in title by virtue of 'huur gaat voor koop' rule — Obligations arising from option to purchase leased property not automatically transferred to purchaser — Lessee to exercise option against grantor (lessor), C not purchaser — Where property transferred with notice of option, lessee generally able to claim transfer of property from purchaser once option exercised.

Landlord and tenant — Lease — Option to purchase leased property — Whether binding on lessor's successor in title by virtue of huur gaat voor koop D rule — Ambit of rule discussed — Obligations arising from option to purchase leased property not, by operation of huur gaat voor koop rule, transferred ex lege to purchaser of property — Lessee seeking to exercise option to do so as against grantor (lessor), not purchaser — Where property transferred with notice of option, lessee generally able to claim transfer of property from purchaser once option exercised. E

Landlord and tenant — Lease — 'Huur gaat voor koop' rule — When applicable — Option to purchase leased property — Whether binding on lessor's successor in title by virtue rule — Obligations arising from option to purchase leased property not automatically transferred to purchaser — Lessee to exercise option against grantor (lessor), not purchaser — Where property transferred with notice of option, lessee generally able to claim F transfer of property from purchaser once option exercised.

Sale — Land — Option to purchase leased property — Whether binding on lessor's successor in title by virtue of 'huur gaat voor koop' rule — Ambit of rule discussed — Obligations arising from option to purchase leased property not automatically transferred to purchaser — Lessee to exercise option G

2010 (2) SA p2

A against grantor (lessor), not purchaser — Where property transferred with notice of option, lessee generally able to claim transfer of property from purchaser once option exercised.

Headnote : Kopnota

The respondent, E&D Motors (Pty) Ltd (E&D), had leased a portion of an immovable property from a company (Quantum). In the lease agreement, B E&D was granted the option to purchase the leased property, together with an additional piece of property adjacent to it. During the subsistence of the lease, Quantum sold and transferred the whole immovable property to the appellant, Spearhead Property Holdings Ltd (Spearhead). After the sale and transfer, but within the period in which, in terms of its lease E&D was entitled to exercise the option, E&D notified Spearhead that it was C exercising the option and tendered to pay the stipulated purchase price for the portion of the property to which the option related. Spearhead contended that it was not bound by the option.

Held, (Maya JA dissenting) that the option to purchase was not an integral part of the lessor-lessee relationship in respect of which the huur gaat voor koop D rule operated to protect E&D's tenure. Disposal of the property to Spearhead did not have the effect of automatically (ex lege) transferring Quantum's obligations under the option to Spearhead. In the circumstances, the option could not be exercised by E&D as against Spearhead. (Paragraphs [57] and [61] at 22B - C and 24B - C.)

Held, further, (Maya JA dissenting) that notwithstanding the sale, Quantum E remained obliged to E&D in respect of the option to purchase. Accordingly, E&D should have given Quantum written notification of its decision to exercise the option, whereupon Quantum would have become obliged to comply with the obligation to deliver the portion of the property subject to the option to E&D. In such a situation the legal prescripts relating to so-called 'double sales' would apply. (Paragraphs [59] - [61] at 23B - 24C.)

F Held, further, (Maya JA dissenting) that in this instance, the explicit reference, in the contract of sale by Quantum to Spearhead, to the existence of the option granted to E&D could not be regarded as creating a written option granted by Spearhead to E&D. Accordingly, written acceptance of the option addressed by E&D to Spearhead did not bring into existence a written contract of sale complying with the formalities prescribed in the G Alienation of Land Act 68 of 1981. (Paragraphs [62] and [63] at 24D - 25E.)

Cases Considered

Annotations

Reported cases H

Administrator, Transvaal, and Others v Traub and Others 1989 (4) SA 731 (A): referred to

Archibald & Co Ltd v Strachan & Co Ltd 1944 NPD 40: discussed and distinguished

Banket Holdings (Pvt) Ltd v Levy 1955 (4) SA 74 (SR): referred to

Boshoff v Theron 1940 TPD 299: referred to I

Bowring NO v Vrededorp Properties CC and Another 2007 (5) SA 391 (SCA): applied

Collen v Rietfontein Engineering Works 1948 (1) SA 413 (A): referred to

Creeser v Smit 1948 (4) SA 302 (T): referred to

De Jager v Sisana 1930 AD 71: referred to

De Wet v Union Government 1934 AD 59: referred to J

2010 (2) SA p3

Genna-Wae Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd 1995 (2) SA 926 (A): applied A

Ginsberg v Nefdt (1908) 25 SC 680: discussed and distinguished

Graham v Local & Overseas Investments (Pty) Ltd 1942 AD 95: referred to

Grant and Another v Stonestreet and Others 1968 (4) SA 1 (A): referred to

Hirschowitz v Moolman and Others 1983 (4) SA 1 (T): referred to

Hirschowitz v Moolman and Others 1985 (3) SA 739 (A): referred to B

Imprefed (Pty) Ltd v National Transport Commission 1993 (3) SA 94 (A): referred to

Johnston v Leal 1980 (3) SA 927 (A): referred to

Kessoopersadh en 'n Ander v Essop en 'n Ander 1970 (1) SA 265 (A): referred to C

Levy v Banket Holdings (Pvt) Ltd 1956 (3) SA 558 (FC): distinguished

Middleton v Carr 1949 (2) SA 374 (A): referred to

Mignoel Properties (Pty) Ltd v Kneebone 1989 (4) SA 1042 (A): applied

Mittermeier v Skema Engineering (Pty) Ltd 1984 (1) SA 121 (A): referred to

Robinson v Randfontein Estates GM Co Ltd 1925 AD 173: referred to

SA Breweries Ltd v Van Zyl 2006 (1) SA 197 (SCA): referred to D

Sandmann v Schaefer 1969 (4) SA 524 (SWA): distinguished

Scrooby v Gordon & Co 1904 TS 937: referred to

Shalala and Another v Gelb 1950 (1) SA 851 (C): discussed and distinguished

Shill v Milner 1937 AD 101: referred to

Thipa v Subramany 1954 (4) SA 126 (N): referred to E

Transvaal Mortgage, Loan and Finance Co Ltd v Aronson 1904 TS 864: referred to

Uys and Another v Sam Friedman Ltd 1935 AD 165: referred to

Van der Pol v Symington 1971 (4) SA 472 (T): discussed and distinguished

Venter v Birchholtz 1972 (1) SA 276 (A): referred to. F

Case Information

Appeal against a decision in the Cape Provincial Division (Zondi J). The facts appear from the dissenting judgment.

S Mullins SC (with AD Brown) for the appellant.

RS van Riet SC for the respondent.

Cur adv vult.

Postea (June 1).

Judgment

Maya JA (dissenting): H

[1] This appeal turns on the enforceability of an option to purchase business premises situate at Shop 1, Ottery Hypermarket Shopping Centre, Ottery, Cape Town (the premises) which was granted to the respondent as lessee by its erstwhile lessor, Quantum Leap Investments 230 (Pty) Ltd (Quantum) in terms of a lease agreement concluded on I 19 February 2003.

[2] During October 2002 Mr MS Adams and his wife, Mrs N Adams, negotiated to hire premises from Quantum on behalf of a company named Expectra 534 (Pty) Ltd (Expectra). Mr Adams was Expectra's managing director. Pursuant to the negotiations, Quantum and Expectra J

2010 (2) SA p4

Maya JA

A concluded an 'offer to lease' which was to remain binding until substituted by a standard lease agreement. To that end, clause 10(b) of the offer to lease provided:

'On acceptance of this Offer the Lessor's standard Agreement of Lease will be prepared and signed by both parties in substitution of this B Agreement within 30 days of date hereof. In the event that both or either of the parties refuse or fail to sign such standard Lease Agreement, then this Agreement shall continue to bind both parties.'

[3] By agreement initiated by Mrs Adams between Quantum and Expectra, the respondent, a Toyota car franchise with, incidentally, the C same three directors as Expectra, substituted the latter as the tenant in the final lease agreement (the lease agreement). The respondent signed it on 19 November 2002 and commenced building alterations to the premises to suit its trading specifications. It took occupation of the premises in February 2003.

D [4] Both the offer to lease and the lease agreement granted the respondent an option to purchase the premises. Clause 16.1 of the offer to lease provided:

'The landlord will provide the tenant with an option to purchase the property for R2 000 000 excluding VAT for a 24-month period from E date of occupation, subject to approval from Pick 'n Pay [the landlord's anchor tenant], approval from the City Council for sub-division and approval from Quantum Leap Investments 230 (Pty) Ltd for reciprocal access and parking agreement (see plan attached).'

These provisions were replicated in clause 7 of the lease agreement, F albeit without the conditions relating to VAT and the various forms of approval from Pick 'n Pay, the City Council and Quantum (I shall deal with the omission of the conditions later) and read:

'Area of Leased Premises

7.1

This lease automatically entitles the tenant with the first option to G ...