Thompson v SMPH Swaziland (ICAP) (424/2018) [2018] SZHC 140 (04 July 2018);

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Early termination of written lease agreement – whether oral termination of such valid

 

                             Held – oral termination of written lease valid

 

 

 

 

 

IN THE HIGH COURT OF SWAZILAND

 

JUDGMENT

                                                                                      

HELD AT MBABANE                                                Case No. 424/2018

In the matter between:

MARTIN FORSYTH - THOMPSON AND

CHRISTINAH FORSYTH - THOMPSON N.O

The trustees for the time being of the Ligwalagwala Trust  Plaintiff

And

 

MSPH SWAZILAND (ICAP)                                                         Defendant

 

Neutral Citation:          Martin Forsyth  Thompson and Christinah Forsyth – Thompson N.O (The Trustees for the time being of the Ligwalagwala Trust v SMPH Swaziland (ICAP) (424/18) [2018] SZHC 140[2018] (4th uly 2018)

 

Coram:                J.S MAGAGULA J

 

Date Heard:         15th June 2018

Date Delivered:    4th July 2018

 

 

Summary:           Early termination of written lease agreement – whether oral termination of such valid

 

                             Held – oral termination of written lease valid

 

                            

[1]            This is an application for Summary Judgment in which the Plaintiff seeks relief as follows:

 

                             “ 1.  Payment of the sum of E60,933-00 in respect of March 2018 rental;

                                      2. Payment of the sum of E60,933-00 per month until expiry of the lease period on 31st August 2018;

                                      3. Interest on all outstanding amounts at the rate of 9% per annum tempore morae to date of payment

                                      4. Costs of suit on the attorney and own client scale including collection commission.”

 

 

BACKGROUND

 

[2]            The Plaintiff and Defendant entered into a three (3) year written lease

                agreement which was to run from the 1st September 2016 and terminate

                on the 31st August 2018.

[3]            On the 12th December 2017 the Defendant gave written notice to the

                Plaintiff that it shall be vacating the leased premises on the 31st January

                2018.

[4]            By letter dated 13th December 2017 the Plaintiff advised the Defendant

                inter arlia that there being no termination clause in the lease agreement,

same was legally binding until the end of August 2018 and that defendant was under obligation to continue paying the rent at the agreed rate. In the same letter Plaintiff also wrote

                                      “ ….We would not want to cause ill-feeling and in the interest of both parties we are endeavoring to find alternative tenants… and would only hold you to the legal agreement until such a time as the premises are occupied again.”

[5]          The Defendant has explained in its affidavit resisting summary judgment that it had to terminate the lease because it is an organization that depends on donor funding and donor funds were no longer forth coming.

[6]     The Defendant further concedes in paragraph 8 of the affidavit resisting summary judgment that the Plaintiff’s representatives contested the notice of termination and “…..insisted that the defendant was bound to the lease agreement until 31st August 2018.”

[7]     The Defendant however goes further and states in its affidavit resisting summary judgment that pursuant to the stance taken by the Plaintiff a meeting was held between the parties on the 24th January 2018 where the Defendant had an opportunity to fully explain its predicament. The Defendant alleges that at this meeting it explained that donor funds were no longer forth coming. Defendant further alleges that after this explanation the parties agreed to the termination of the contract.

[8]     According to the Defendant it was agreed that the contract would terminate at the end of February 2018. Defendant also alleges that “ the Plaintiff’s representatives further asked for assistance regarding the March 2018 rental.” Defendant advised that they would consult their New York office on this request.

[9]     Further contract termination logistics such as payment for security services up to the end of February 2018; payment of water and electricity as well as disconnection of same were discussed. The Defendant then vacated the premises at the end of February 2018 and paid rental for that month. On the 24th February 2018 the Plaintiff advertised the premises as being available for rental.

[10]   Defendant further alleges that on the 28th February 2018 the parties held another meeting which, according to Defendant was for discussion of inter arlia the water and electricity accounts, the March 2018 invoice which Plaintiff had submitted to Defendant and inspection of the building. Defendant states that it was at this meeting that Plaintiff reneged from the termination agreement and maintained that the lease agreement was valid until the 31ST August 2018.

[11]   The Defendant has attached two sets of minutes to its affidavit resisting summary judgment. The meetings are acknowledged by the Plaintiff who however disputes the decisions taken thereat. The Plaintiff particularly denies that it agreed to an early termination of the lease. The Plaintiff maintains that any recording of such agreement in the minutes is a fabrication by the Defendant.

[12]   From the foregoing it is clear that there is a dispute of fact regarding the existence or non – existence of an oral agreement to terminate the agreement. This dispute of fact is material in so far as it goes to the heart of the matter. Had there been a consensus that the parties verbally agreed  to terminate the lease agreement, I would easily dismiss the application for summary judgment. The fact that there is a dispute regarding the existence of such agreement does not however change the finding I have to come to since it means that there is a triable issue.

[13]   Rule 32 (4) (a) provides:

“ unless on the hearing of an application under sub – rule (1) either the court dismisses the application or the defendant satisfies the court with respect to the claim, or the part of the claim to which the application relates that there is an issue or question in dispute which  ought to be tried or that there ought  for some other reason to be a trial of that claim or part, the court may give such judgment for the plaintiff against the defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed.”

[14]   On the meaning of triable issue, Mamba J in the case of SELECT MANAGEMENT SERVICES (PTY) LTD v. SIBUSISO MHLATSI SHONGWE (790/2016) SZHC 228 ( 31 October 2017) stated at paragraph 6 thereof:

“ Case law  is also agreed that for the Defendant to be said to have raised  triable issues, he must have set out material facts of his defence in his affidavit, though not in exhaustive fashion. The defence must be clear, unequivocal and valid.”

I may add that in my view the Defendant must allege facts which if proved at the trial would constitute a defence to the claim and have a potential to defeat the claim.

[15]   In casu, the Defendant has alleged that there was a verbal agreement to terminate the lease. In my view if Defendant could produce evidence to prove such agreement, this would be sufficient to defeat Plaintiff’s triable issue in this matter and on this ground alone Summary Judgment cannot be granted.

[16]   The Plaintiff also contends that an agreement to terminate the lease agreement before its expiry date is or amounts to a variation of the lease agreement. Ms  Van. Der Walt who appeared for the Plaintiff contended that such purported verbal variation of a written lease which contains non – variation clauses is of no force or effect and ought to be disregarded. She maintained that even if such verbal agreement could be proved at a trial in due course it would be of no force or effect.

          Ms Van der Walt drew the court’s attention to clause 28.2.1 of the lease agreement which provides:

“ No addition to, variation or consensual cancellation of this agreement shall be of any force or effect unless in writing and signed by or on behalf of the parties.”

 

[17]   Mr Motsa who appeared for the Defendant however contended that the termination of an agreement is not a variation of same. He therefore maintained that the verbal agreement is valid despite the non – variation clauses.

          In this regard Mr Motsa referred the court to the South African case of OCEAN ECHO PROPERTIES 327 CC v. OLD MUTUAL LIFE ASSURANCE COMPANY (SOUTH AFRICA) LIMITED (288/2017) [2018] ZASCA 09 (1 March 2018) where Ponnan JA  who delivered the unanimous judgment of the Appeal Court, citing with approval the observations of Botha JA in FERREIRA and ANOTHER v. SAPCDC TRADING LTD 3 SA 346 A at  356 stated at paragraph 11:

“…..while an oral agreement varying (at least materially) the terms of a contract of the kind in question is not permissible there is no objection to allowing proof of an oral agreement relating to the cancellation of the contract by which  its terms as such are not placed in issue.”

The learned judge continued in the same paragraph and stated:

“ Accordingly, what is before us on appeal is one question, and one question only, whether the tacit agreement as pleaded  constitutes a cancellation of the lease agreement or merely a variation thereof. If the latter, it would be ineffective according to our law by reason of it not having been reduced to writing and duly signed.”

[18]   Ponnan JA further stated in the Ocean Echo case ( supra) at paragraph [12]:

“ Ferreira was concerned with whether an oral agreement as pleaded constituted a cancellation of a suretyship undertaking or merely a variation of its terms. Botha JA stated ( at 358):

“….the true view, I consider, would be that the oral agreement terminated the operation of the contract, with all its terms, in futurum, so as to preclude the coming into being of any future obligations, while leaving intact obligations that rose from the past operation of the contract with all its terms. In other words the oral agreement would have extinguished the contract as a source of future obligations while keeping alive obligations already accrued by virtue of its operation in the past. This would not in anyway involve a variation of the contract.”

[19]   From the foregoing I am satisfied that a non – variation clause, particularly in a contract that gives rise to continuing obligations such as a lease, cannot preclude the cancellation of such contract. The cancellation will however only be effective in so far as future obligations are concerned. Obligations which arise by virtue of past operation of the contract will remain enforceable. If a party therefore proves that the contract was verbally cancelled despite the non – variation clause which may even mention termination itself as in casu, the verbal cancellation will be enforced and no future obligations will arise.   

[20]   I have already found above that there is a dispute regarding whether or not there was verbal cancellation in this matter. This is a dispute which  I cannot determine on the papers filed by the parties. It can only be resolved through hearing of oral evidence at trial in due course.

          For these reasons the following order is made:

  1. The application for summary judgment is dismissed.
  2. Defendant is granted leave to defend.
  3. Costs of the Summary Judgment Application are awarded to the Defendant.

 

 

 

 

  •  

MAGAGULA J

          For the Plaintiff:                     M.Van der Walt

          For the Defendant:                 K.J Motsa