Youngleson Investments (Pty) Ltd v South Coast Regional Rent Board and Another; Graham Properties Ltd v South Coast Regional Rent Board and Another

• Jurisdiction: South Africa
• Judge: Van Blerk ACJ, Rumpff JA, Wessels JA, Potgieter JA and Corbett AJA
• Judgment Date: 17 November 1970
• Citation: 1971 (1) SA 405 (A)
• Hearing Date: 22 September 1970
• Court: Appellate Division

Wessels, J.A.:

Inasmuch as the two appeals were heard together, F it is convenient to deal with them both in this judgment. I shall refer to the appellants as Youngleson and Graham respectively, and to the respondents as the Rent Board and the Control Board respectively.

Youngleson is the owner of premises at 80 Aliwal Street, Durban. During the years 1958 to 1960 a building was erected on the site, and during the year 1962 substantial alterations were G effected thereto. The building is known as King's Hall and it consists of two wings, referred to as the main wing and a rear wing. The first two floors of the main wing and the five floors of the rear wing are occupied as shops, commercial premises, a parking garage and servants' quarters. The top 13 floors of the main wing contain 180 flats, of which 52 are one-bedroomed H flats and 128 so-called bachelor flats.

Graham is the owner of premises situated at the south-eastern corner of Smith and Board Streets, Durban. The building complex on the site consists of:

(a)

Graham Buildings, a seven-storey industrial building, with a floor area of approximately 7,150 square feet per storey.

(b)

A double-storey commercial building, with a floor area of approximately 3,200 square feet per storey.

Wessels JA

(c)

A warehouse, to the rear of the above-mentioned double-storey building, which is interconnected with Graham Buildings. It comprises three floors of approximately 3,300 square feet per floor. On the roof of this building there has been constructed servants' quarters and boxrooms in extent A approximately 2,000 square feet. There is also an area for drying laundry. The servants' quarters, box-rooms and drying area serve the building referred to in para. (d) hereunder.

(d)

A building known as City Heights, the erection of which was completed in the year 1965. The ground floor, said to be 9,895 square feet in extent, was let as shops. The top of 14 floors, in extent 81,950 square feet, were let as flats. There is a B lift motor-room in extent 493 square feet.

Prior to 31st May, 1966 none of the above-mentioned premises was subject to the provisions of the Rents Act, 43 of 1950, as amended. The business premises as well as the flats were let at rentals agreed upon between the owners and the individual C lessees. By virtue of Procs. 317 of 4th November, 1966 and 356 of 15th November, 1968, published in terms of sec. 33 (1A) of the Rents Act, the provisions thereof were applied to the flats in both King's Hall and City Heights with effect from 31st May, 1966, and remained applicable thereto at all material times thereafter. In terms of the provisions of sec. 33 (1A) (d) of the Act, the rents charged on 31st May, 1966 for the flats in D question were deemed to be rents determined by the Rent therefor. The provisions of the Rents Act were, however, at no time applied to the remainder of the premises. It follows that as from 31st May, 1966 the flats in King's Hall and City Heights became "controlled premises" as defined in sec. 1 (iii) of the Act, each flat constituting a "dwelling" as defined in E sec. 1 (iv) thereof.

During July, 1968 both Youngleson and Graham separately applied to the Rent Board in terms of the provisions of sec. 5 (1) (b) of the Act for authority to charge for their controlled premises rents higher than those which could validly be charged in terms of sec. 2 (1) thereof, on the ground that such rents F were not reasonable rents within the meaning of the Act. The applications, and objections thereto, were heard by the Rent Board during September, 1968. Thereafter, on 17th October, 1968, the Rent Board made determinations of reasonable rents in respect of the controlled premises in both King's Hall and City Heights. Both Youngleson and Graham were aggrieved by these G determinations, and applied in terms of sec. 12 of the Act to have them reviewed by the Control Board. The Control Board thereafter confirmed the determinations made by the Rent Board. Thereupon both Youngleson and Graham separately instituted review proceedings in the Durban and Coast Local Division, each claiming, inter alia, an order setting aside the H above-mentioned determinations made by the Rent Board and the confirmation thereof by the Control Board. The respondents opposed the grant of the relief claimed. The two matters were argued together before HENNING, J., who dealt with them both in one judgment. The learned Judge dismissed both applications with costs, holding that neither applicant had been prejudiced notwithstanding the fact that the respondents had erred in a fundamental respect in their approach to the determination of reasonable rents for the controlled premises in

Wessels JA

question. Both Youngleson and Graham now appeal to this Court against the judgment of HENNING, J.

It is common cause that the approach followed by the Rent Board, and confirmed on review by the Control Board, in A determining a reasonable rent for the controlled premises, i.e., the flats in King's Hall and City Heights, was broadly speaking as follows:

1.

The Rent Board determined the reasonable rent value of the whole premises as if the provisions of the Rents Act applied to such premises as a whole.

2.

Having made this basic determination of the B reasonable rent value of the whole premises, the Rent Board proceeded to determine a reasonable rent for such premises, again as if the provisions of the Rents Act applied to the whole premises.

3.

Having so determined a reasonable rent for the whole premises, the Rent Board proceeded C to an allocation thereof as between the controlled premises (the flats) and that portion of the premises to which the provisions of the Rents Act did not apply (the business premises). It determined that the rent in fact being charged for the business premises was a reasonable quid pro quo therefor, and accordingly allocated that amount to the business premises.

4.

D The amount of the rental thus allocated to the business premises was then deducted from the amount of the reasonable rent determined for the whole premises, the balance constituting the reasonable rent for the totality of the controlled premises (i.e., the flats as a whole).

5.

E Thereafter the Rent Board completed its task by determining a reasonable rent for each flat in King's Hall and City Heights by allocating to each flat a portion of the reasonable rent determined in respect of the totality of controlled premises.

After considering the approach of the Rent Board, as outlined above, HENNING, J., concluded that it had neither disregarded F the provisions of the Rents Act nor acted arbitrarily in any manner whatsoever in the determination of a reasonable rent for the controlled premises by first making the determinations detailed in paras. 1 and 2 above. The learned Judge a quo proceeded to a consideration of the further determinations made G by the Rent Board, as summarised in paras. 3 and 4 above, and concluded that, in this respect, the Rent Board had acted arbitrarily. The correctness of this conclusion was not challenged on appeal before this Court by counsel appearing for the respondents, and I am satisfied that counsel acted with due propriety in conceding that the Rent Board had erred in this respect in seeking to determine a reasonable rent for the controlled premises in question. Having regard to the H provisions of the Rents Act relating to the determination of a reasonable rent for controlled premises, on the one hand, and the factors which operate in the determination by agreement between a lessor and a lessee of the rent for "uncontrolled" premises, on the other hand, the rent actually being charged for the "uncontrolled" portion of composite premises could hardly ever be a relevant consideration in the determination of a reasonable rent for the "controlled" portion thereof. In the case of "uncontrolled" premises, considerations arising from the economic laws of

Wessels JA

supply and demand usually operate decisively in the determination by agreement of the rent to be charged therefor. If the lessor bargains from a position of strength (e.g., because there is a shortage of the kind of premises in question), the rent agreed upon will, save in exceptional circumstances, tend to be far higher than would be the case A where circumstances favour the lessee (e.g., where the availability of premises of the kind in question exceeds the demand therefor). It necessarily follows from the method employed by the Rent Board that, in the case of composite premises, the lessor will not retain, as he is entitled to, the financial benefit derived from the "high" rental income yielded by the "uncontrolled" portion thereof; such benefit will B unjustifiably be passed on to the lessees of the "controlled" portion thereof. In the converse case, the lessees of the "controlled" portion would unjustifiably be called upon to pay a higher rent and so compensate the lessor for the relatively low rent charged for the "uncontrolled" portion.

C The learned Judge concluded, however, that in the particular circumstances the above-mentioned arbitrary approach on the part of the Rent Board had not resulted in prejudice to either Youngleson or Graham, and this led him to dismiss both applications. In so far as the Youngleson matter is concerned, the judgment of HENNING, J., reads as follows:

"In this case, however, there are consideration which persuade D me that the eventual determination of the Rent Board of the rents for the flats should not be disturbed.

As part of the information which accompanied the application for an increase in rent for the flats, there was a statement by a firm of architects setting forth the area in square footage of the flats and of the business premises, and other portions of the building. It is not possible to determine with...