Highlands Inn Limited v Serve Africa (PTY) LTd (842/2018) [2018] SZHC 153 (12 July 2018);

Search Summary: 

Application proceedings –Rule nisi issued challenging applicant to show cause why a land lord’s hypothec cannot be confirmed following Respondent’s failure to pay rentals in line with the lease agreement – Respondent institutes application to anticipate rule nisi –Whether grounds for anticipating rule nisi established –Respondent’s contention seems to be with regards the amount owed than the existence of arrear rentals –Apparent from the facts of the matter that the Directors and shareholders of the company are involved in a dispute that may suggest a deadlock between the Directors or Shareholders –Whether case made for the reliefs sought on the overall –Application dismissed –Respondent to pay the costs of the proceedings.

 

 

IN THE HIGH COURT OF ESWATINI

Held at Mbabane                                                           Cases No.: 842/2018

In the matter between

HIGHLANDS INN LIMITED                                     Applicant

AND

SERVE AFRICA (PTY) LTD                                               Respondent

In Re:

HIGHLANDS INN LIMITED                                     Applicant

AND

SERVE AFRICA (PTY) LTD                                               Respondent

 

 

Neutral Citation:          Highlands Inn Limited  Vs Serve Africa (PTY) LTd  (842/2018) [2018] SZHC 153 ( 12th July 2018)

 

Coram:                                                                Hlophe J.

For the Applicant:                                               Mr M.C. Simelane

For the Respondent:                                           Mr Xaba

Dates Heard:                                                       22nd June 2018

Date Judgement Handed Down:                        12th July 2018               

 

 

Summary

Application proceedings –Rule nisi issued challenging applicant to show cause why a land lord’s hypothec cannot be confirmed following Respondent’s failure to pay rentals in line with the lease agreement – Respondent institutes application to anticipate rule nisi –Whether grounds for anticipating rule nisi established –Respondent’s contention seems to be with regards the amount owed than the existence of arrear rentals –Apparent from the facts of the matter that the Directors and shareholders of the company are involved in a dispute that may suggest a deadlock between the Directors or Shareholders –Whether case made for the reliefs sought on the overall –Application dismissed –Respondent to pay the costs of the proceedings.

 

 

JUDGMENT

 

 [1]    The current application is one in which the Respondent in the main matter seeks an order of court inter alia anticipating the Rule Nisi issued on the 8th June 2018.

 

[2]    The rule nisi that issued on the 8th June 2018 granted the applicant an order in the following terms on an interim basis:-

2.1.    Perfecting the landlords hypothec in respect of all the movable properties of the respondents that are within the premises pending the payment of the arrear rentals amounting to E60000-00 (Sixty Thousand Emalangeni Only).

2.2.    Directing that the written lease agreement entered into by the parties that regulates the relationship be hereby cancelled and lawfully terminated.

2.3.    Directing the applicant to pay the sum of E36 221-00 (Thirty Six Thousand Two Hundred and Twenty One Emalangeni Only) in respect of stock that was found on takeover in terms of the lease agreement.

2.4.    Ejecting the respondent from the premises and selling the movables so attached in order to meet the debt of arrear rentals.

2.5.    Ordering and directing the Deputy Sheriff for the District of Hhohho to.

2.5.1. Forthwith serve this Notice of Application together with all the supporting documents together with the Court order upon the Respondent thereby explaining the full nature and exigency thereof.

2.5.2. Attach and make an inventory of all the movable properties found within the respondent’s premises.

2.5.3. Securing these movable properties and ensuring that they are safely kept and protected.

2.5.4. Make a return to the Applicant’s Attorneys and the Registrar of the above honourable Court on what has been done in execution of this order.

2.6.    That the above orders operate on an interim basis and with immediate effect pending the finalization of the matter.

2.7.    Ordering the respondent to pay the costs of this application at attorney and own client scale.

2.8.    Any further and/or alternative relief.

 

[3]     It is apparent that the application founded on the above prayers was not opposed resulting in this Court per the Honourable Justice Mabuza, granting the above prayers as orders some of which had to operate with immediate effect, pending finalization.  It is upon the Respondent, as personified by one of is Shareholders and Directors, a certain Pius Hotso Mthupha, being dissatisfied with the order concerned that the application to anticipate the rule nisi which this  judgement  is about was made.  I emphasize  the point that this application is of the applicant as personified by Mr Mthupha, because there has not been annexed a resolution of the  company authorizing the filing of the application by the applicant as a company of its own accord to anticipate the rule nisi just as there is none authorizing the opposition of the main application.

 

[4]     I touch on this aspect in the preliminary stages of my judgement because I note that whereas there is no resolution couched on the above stated terms or at all annexed to the application, there is a letter said to have been written by the other one of the shareholders and directors of the company known as Rene Duyvelaar, annexure A to the Replying affidavit, acknowledging the company’s breach of its obligations under the lease and apologizing for the, failure of the Applicant to honour the said terms.  The said letter cited the misunderstanding between the shareholders and directors as the reason for the failure to honour the agreement.

 

[5]    Notwithstanding this disclosure by one of the only two shareholders and directors of the company, Mr Mthupha wants the court to believe that he is acting on behalf of the Respondent company, in moving the application to anticipate the rule nisi which he refers to in Paragraph 5 of his founding affidavit as “my business”.  When challenged to produce a resolution authorizing the application to anticipate the rule nisi and the company’s opposition to the main application, he produces one which pinpoints to have arisen from a meeting attended by him alone in the absence of his colleague Director and Shareholder, Mr Rene Duveylaar.  It purported to remove Mr Duveylaar as a signatory to the Bank Accounts whilst purporting to authorize the proceedings.  How Notices of the purported meeting were communicated is unclear.

 

[6]   I have no doubt that this is not a proper resolution as it seems to have arisen from no meeting at all.  It seems to me that the best approach in this situation might be for any aggrieved party to file for the dissolution of the company on a just and equitable ground in view of the apparent deadlock between the only Directors and Shareholders of the Respondent.  Clearly on this point alone, there could not be a proper authorization of the proceedings to anticipate the rule nisi.  I note though that this was not the central point argued by the parties during the hearing of the matter.

 

[7]    The foundations of the Respondent’s application to anticipate by Mr Mthupha who for all intents and purposes acted individually was that whereas the agreement between the Applicant and the Respondent was that the latter was to pay a sum of E180,000.00 in advance for a 6 months period, commencing in December 2017. It now being contended by the Applicant in the main application that the outstanding amount was a sum of E60,000.00 arrears for the two months of April and May 2018, this was not feasible when taking into account that these alleged arrears were due even before the lapse of the 6 months which formed part of the period to have been paid for in advance.  In other words, if the sum of E180,000.00 had been paid in advance in line with the agreement, It could not be that even before the lapse of that period there was already a sum of arrear rentals amounting to E60,000.00 owing for those two months which are covered in the advance payment referred to in the agreement. 

 

[8]     It was contended therefore that there was a dispute of fact between the parties and that therefore this court should not have issued the rule nisi it did.  Several other contentions were made which in my view were not germaine to the determination of the matter.  I must point out however that what remains glaring in the Respondent’s application, through Mr Pius Mthupha is that it could not testify that there were no arrears outstanding nor could it contend that the agreed advance payment was indeed paid in November 2017 as set out in the agreement.  Mr Mthupha simply wants the Court to infer from nowhere that the said sum was paid in line with the agreement.  Indeed besides claiming to have paid all its rentals, the Respondent as personified by Mr Mthupha could not produce any proof confirming such payment.  There was therefore nothing to contradict the acknowledgement made in annexure “A” to the Replying Affidavit which is the e-mail by the other Director and Shareholder of the company.

 

[9]    The Applicant responded to the application to anticipate the rule nisi by clarifying that although the agreement had talked of a sum of E180,000.00 having had to be paid in advance, that had not happened.  In reality the Respondent had from the inception of the agreement paid monthly rentals and not the agreed advance payment.  This made it possible that as at the end of May, a sum of E60,000.00 was outstanding as arrear rentals for the months of April and May 2017.  It was clarified that at all material times the Applicant had always dealt with Mr Rene Duveylaar who it had always taken to be the Managing Director and not Mr Mthupha.

 

[10]   The facts suggest that the breach relied upon had commenced in March 2018 and extended to April 2018 when the demand as embodied in annexure “B” to the Founding Affidavit was issued.  That letter, which bore the dates of 29 March 2018, suggested that the Respondent had not paid rentals for the months of March and April 2018, which it demanded be paid immediately.  There may be some slight confusion on why arrears for April were found to be allegedly outstanding by the end of March, but that does not detract from the fact that there had been a breach resulting in arrears of whatever amount.  As the months progressed this debt was apparently never settled in full because as at the time of the main application, on the 8th June 2018, the outstanding arrear rentals was a sum of E60, 000.00 for the months of April and May 2018.

 

[11]    It was argued further that although Respondent per Mr Mthupha contended it did pay there was nothing supporting such payment.  It was contended that in terms of the law the Respondent was duty bound to produce proof of payment as the onus to prove that it had paid allegedly lied with it.  I was referred to the case of ABSA Bank Limited and Ebrahim Brian Collier Case No. A314/14 ( C) on this point.  Besides it has been noted from the facts of the matter, which could not be disputed by the Mr Mthupha, that from inception the affairs of the lease in this matter had always been discussed and resolved with Mr Duvylaar and not Mr Mthupha, which is why the latter may not be in a position to dispute anything on the facts surrounding what was paid and was not.

 

[12]    Whatever the accuracy or otherwise of the statement that the onus lies with a debtor to produce proof of a contended payment, one thing is certain in this matter, the Respondent seems to be disputing accuracy of the arrears than that there has been a breach of the lease agreement through failing to pay rentals as and when they fell due.  This position is not only obvious from the Respondent’s founding affidavit to anticipate the rule nisi, but it is also supported by the e-mail letter from the other Director of the Respondent dated the 16th June 2018, where it is alleged, and it can be construed reasonably from the facts, was the one in the know on what had been paid or was outstanding.

 

[13]   The Law on the perfection of a Landlord’s hypothec is about this remedy being granted a party who can show that there has been a breach of a contract of lease resulting in arrear rentals and that such a remedy should be resorted to once there is a breach of the lease agreement in that sense and not necessarily the accuracy of arrears.  The accuracy of the rentals is a matter for the claim of the outstanding rentals, which in its original form was sought through summons and in the practice in this jurisdiction can be sought through a determination on the same papers as the perfection of the hypothec in a case where the matter does not entail disputes of fact and can be decided on the affidavit.  On the contention that perfection of a Landlord’s hypothec thrives on the mere existence of arrear rentals see W.E.Cooper’s Landlord and Tenant Second Edition, Juta and Company Page 192 at Subheadings 5.  See also, Webster V Ellison 1911 AD73.

 

[14]   In so far as the applicant’s contention cannot realistically be disputed that the Respondent is in arrears I cannot fault the issuing of the rule nisi in the manner done earlier by this court on the 8th June 2018.  I am of the view that the appropriate cause would be to dismiss the Respondent’s application to anticipate the rule nisi.  This would have the effect that:-

(1)     The rule nisi is confirmed in terms of prayers 1,2, 5.1, 5.2, 5.4 together with costs, which are to operate with immediate effect.

(2)     The amount of the arrear rentals, the amount of the outstanding stock, the ejectment of the Respondent from the premises together with the question of selling the movables attached are, as questions of disputed facts or because they require evidential material to resolve in so far as they amount only to allegations, referred to oral evidence for determination.

 

                                                                             ______________________

N. J. HLOPHE

JUDGE – HIGH COURT