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IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

NOT REPORTABLE Date: 6 July 2007

Case Number: 31851/2000 (B)

In the matter between:

OCV INVESTMENTS (PTY) LTD Plaintiff

and

SOUTH AFRICAN BREWERIES LIMITED Defendant

______________________________________________________________

JUDGMENT

______________________________________________________________

SOUTHWOOD J

[1] In this action the plaintiff claims the following relief –

(1) An order declaring that the defendant is liable as lessee, to the plaintiff, in regard to the property known as the Remainder Sub 1 of Lot 6201, Durban, situated in the city of Durban, and the Remainder of Lot 6201, Durban, situated in the city of Durban (collectively ‘the property’), in accordance with all of the terms and conditions reflected in the lease agreement dated 20 February 1991 and originally entered into between the UBS Group Pension Fund as lessor, and Scotts Retail (Pty) Ltd (Registration No 54/02412/07) as lessee, as if the defendant were successor in title to Scotts Retail (Pty) Ltd as lessee as from 1 April 1996;

(2) An order declaring that, no agreement having been reached between plaintiff and defendant in regard to the rental payable as from 1 October 1999 and in regard to the annual escalation rate for the following two years subsequent to and including 1 October 1999 up to 30 September 2002, and in regard to the rental payable from 1 October 2002 and in regard to the annual escalation rate to apply up to 30 September 2005, KR Davies of the firm Davies Bristow & Associates of Suite 110, Musgrave Park, 18 Musgrave Road, Durban, alternatively such person as may be determined by the Court, is hereby appointed to act as referee in terms of clause 5 of the said lease agreement for purposes of the determination of the monthly rental, and escalation, payable by the defendant to the plaintiff for the stated period up to 12 October 2004, alternatively, such person is to be nominated by the President for the time-being of the Institute of Estate Agents of South Africa;

(3) An order that leave be granted to the plaintiff to approach the Court on the same papers, suitably supplemented, after the referee has determined the monthly rental and escalation in terms of paragraph (2), for an order for:

(i) payment of the rental payable by the defendant for the period since 1 October 1999 and up to 12 October 2004 with interest; and

(ii) payment of compensation for loss of rental and the ancillary charges payable in terms of clauses 6, 8.1 and 10.5 of the lease agreement for the period as from 12 October 2004 to 30 September 2005.

(4) An order that the defendant pay to the plaintiff the sum of R1 058 306, 47.

[2] At the commencement of the trial an order was made it terms of Rule 33(4) that the issues of liability and quantum be decided separately. The question of liability involving primarily the existence of the tacit agreement alleged by the plaintiff is therefore the subject of this hearing.

[3] The agreement referred to in the first paragraph was entered into on 20 February 1991 between UBS Group Pension Fund and Scotts Retail (Pty) Ltd (‘Scotts Retail’). In terms of the agreement UBS Group Pension Fund leased the property to Scotts Retail for a period of 12 years, commencing on 1 October 1993 and terminating on 30 September 2005, and it was recorded that Scotts Retail was already in occupation of the premises in terms of an existing lease which would expire on 30 September 1993. The building on the property, ‘Scotts House’, was used as the headquarters of Scotts Retail. This agreement will be referred to herein as ‘the agreement’.

[4] The agreement contains detailed provisions governing rental and the escalation of rental during each three year period (clause 4); the determination of rental payable in each three year period, commencing on 1 October 1996, 1 October 1999 and 1 October 2002, the so-called ‘rent reviews’ (clause 5); the lessee’s responsibility for maintaining, renovating and replacing damage to the premises (clause 6); the lessee’s obligation to obtain the prior written consent of the lessor to alterations and additions to the premises (clause 7); the lessee’s liability for charges and levies in respect of the premises (clause 8) and assignment and sub-letting (clause 13).

[5] During 2000 a dispute arose as to whether the defendant is liable to the plaintiff as lessee in terms of the agreement. This is the primary issue to be decided in this case. In about May 2004, because the defendant refused to acknowledge that it is the lessee in terms of the agreement and refused to pay the rent, the plaintiff gave notice to the defendant that the plaintiff cancelled the agreement. For this purported cancellation the plaintiff relied on the defendant’s failure to pay rental and the defendant’s repudiation of the agreement. Notwithstanding the plaintiff’s allegations that the defendant is liable as lessee in terms of the agreement it is common cause that the agreement (between the plaintiff and Scotts Retail) has not been cancelled and that there has not been a cession or assignment of Scotts Retail’s rights and obligations under the agreement to the defendant. The plaintiff relies on a tacit agreement in terms of which the defendant bound itself as lessee to the plaintiff in terms of the agreement. According to the plaintiff the defendant’s liability exists in tandem with that of Scotts Retail.

[6] In its final amended particulars of claim the plaintiff alleges that during the period April 1996 to May 2000 the plaintiff represented by L.R. van der Vyver and/or S.J. Oberholster and the defendant represented by F.J. Haupt and/or S.J. Rudolph and/or N.J. Larché and/or B.E. Oxley and/or L.T. Redfern and/or F.W. Stark, entered into a tacit lease agreement the salient provisions of which were that –

(1) the parties adopted the terms and conditions of the agreement (a copy of which is annexure A to the plaintiff’s particulars of claim) on the basis that, with the exception of the parties reflected therein as lessor and lessee, the agreement would otherwise govern their relationship in that –

(i) the plaintiff would be the lessor;

(ii) the defendant would be the lessee;

(iii) the provisions of annexure A would be operative only as from 1 April 1996 and would apply for the balance of the term for which it provides in all respects as if (and although this was not in fact the case) the defendant had been the lessee since the commencement date mentioned in clause 3.1 of annexure A, but provided that the defendant would not be liable for any rentals or other obligations pertaining to the period prior to 1 April 1996.

For the conclusion that the parties entered into the agreement the plaintiff relies on conduct which is set out in ten paragraphs of its particulars of claim. One paragraph alleges that the defendant conducted business in the premises under the name and style of ‘Scotts, a Division of South African Breweries Ltd – Reg No 69/16025/06’.

[7] The defendant denies the tacit agreement alleged by the plaintiff. The defendant deals comprehensively with the occupation of the premises situated on the property during the period 1996-2000. As already mentioned it is common cause that the agreement was not ceded or assigned to the defendant. That issue was decided against the plaintiff on exception.

[8] Regarding the legal principles pertaining to a tacit contract both parties referred to The Law of Contract in South Africa by R.H. Christie 5 ed (‘Christie’) at 81-90. In argument the plaintiff’s counsel sought to apply the test relevant to a contract concluded by quasi-mutual assent. As Christie points out at 82-83 there is a clear difference between the two enquiries:

‘An inquiry into whether a contract has been concluded by conduct differs from an inquiry into whether a contract has been concluded by quasi-mutual assent. In the quasi-mutual assent situation it is accepted that there is no true consensus ad idem. The one party says “But I never agreed”, to which the court replies “Quite so, but your conduct led the other party reasonably to believe you agreed, so you will be treated as if you had agreed”. The inquiry is concerned with the effect of the one party’s conduct upon the other as a reasonable person. In the tacit agreement situation the one party says “But we truly agreed; our (or my, or his) conduct proves it”, and the inquiry is concerned with the proper inference to be drawn from the proved facts.’

[9] A tacit contract is established by conduct. The court infers the existence of the contract from the conduct of the parties – see Bremer Meulens (Edms) Bpk v Floros 1966 1 PH A56 (A). The conduct of the parties must be such that it justifies an inference that the parties actually agreed. There must be evidence of conduct of the parties which justifies an inference that the parties intended to, and did, contract on the terms alleged, or, in other words, that there was consensus ad idem – see Gordon Lloyd Page & Associates v Rivera 2001 (1) SA 88 (SCA) at 95J-96A; Frame v Palmer 1950 (3) SA 340 (C) at 345; Vaughan-Spink v Blignaut 1952 2 PH A41 (E); Salisbury Municipal Employees Association v Salisbury City Council 1957 (2) SA 554 (SR) at 557; Salisbury Bottling Co (Pvt) Ltd v Lomagundi Distributors (Pvt) Ltd 1965 3 SA (SR) at 512. For many years this has been a fundamental requirement. In Merriman v Williams 1881 Foord 172, Maasdorp J formulated the test as follows –

‘In order to constitute a valid tacit contract, the conduct of the parties must not only be such as to be consistent with consent, but such as will allow of no other interpretation according to the rules of common sense’.

[10] An inference must be based on properly proved objective facts otherwise it is simply speculation – see S v Mtsweni 1985 (1) SA 590 (A) at 593E-F; Caswell v Powell Duffryn Associated Collieries Ltd [1939] 3 All ER 722 (HL) at 733E-F. The inference sought to be drawn must comply with the first rule stated in R v Blom 1939 AD 188 at 202-3: i.e. ‘It must be consistent with all the proved facts. If it is not, the inference cannot be drawn’ – see AA Onderlinge Assuransie Assosiasie Bpk v De Beer 1982 (2) SA 603 (A) at 614H. Generally, where more than one inference is possible on the objective proved facts the court may, by balancing probabilities, select a conclusion which seems to be the more natural, or plausible, conclusion from amongst several conceivable ones, even though that conclusion is not the only reasonable one. In this context ‘plausible’ means ‘acceptable, credible, suitable’ – see Govan v Skidmore 1951 (1) SA 732 (N) at 734C-D; Ocean Accident and Guarantee Corporation Ltd v Koch 1963 (4) SA 147 (A) at 159C-D; AA Onderlinge Assuransie Assosiasie Bpk v De Beer (supra at 614H-615B); Spes Bona Bank Ltd v Portals Water Treatment South Africa (Pty) Ltd 1983 (1) SA 978 (A) at 981A-D.

[11] The Appellate Division has formulated two conflicting tests for inferring the existence of a tacit contract. In Standard Bank of South Africa Ltd v Ocean Commodities 1983 (1) SA 276 (A) at 292B-C the court formulated the test as follows –

‘In order to establish a tacit contract it is necessary to show, by a preponderance of probabilities, unequivocal conduct which is capable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on the terms alleged. It must be proved that there was in fact consensus ad idem.’

In Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd [1984] ZASCA 4; 1984 (3) SA 155 (A) at 164G-165G the court, after pointing out that the correctness of this formulation had been questioned, as it seemed to indicate a higher standard of proof than that of a preponderance of probability, formulated the following test –

‘… it is stated that a court may hold that a tacit contract has been established where, by a process of inference, it concludes that the most plausible probable conclusion from all the relevant facts and circumstances is that a contract came into existence.’

[12] Where the explanation for the parties’ conduct is that they erroneously believed that they were already bound by a contract, no tacit contract will be found to exist – see Rand Trading Co Ltd v Lewkewitsch 1908 ES 108 at 115; Willoughbys Consolidated Co Ltd v Copthall Stores Ltd 1913 AD 267 at 288-289; Thorne v Union Government 1936 NPD 443; Biloden Properties (Pty) Ltd v Wilson 1946 NPD 736 at 748 and Landmark Real Estate (Pty) Ltd v Brand 1992 (3) SA 983 (W) at 986E-G.

[13] The evidence must be considered against the following background:

(1) On 20 February 1991 the UBS Group Pension Fund and Scotts Retail entered into the agreement in terms of which the Pension Fund leased the property to Scotts Retail for a period of 12 years commencing on 1 October 1993 and terminating on 30 September 2005;

(2) When the agreement was concluded Scotts Retail already occupied Scotts House pursuant to an agreement entered into in 1978 and conducted business as a retailer of clothing and footwear at about 130 stores in Durban and elsewhere in South Africa. Ms Juele Larché was a director of Scotts Retail and was responsible for property matters including property leasing;

(3) Pursuant to the takeover of the United Building Society by Absa Bank the property was transferred to the Absa Group Pension Fund;

(4) On 16 April 1993, at an extraordinary general meeting of Scotts Retail, its sole shareholder, Amalgamated Retail Ltd (‘Amrel’) resolved that Scotts Retail enter into an agreement with Amrel whereby Scotts Retail would dispose of its trading assets and liabilities to Amrel in terms of the agreement with effect from 31 March 1993 and would cede all its rights and obligations to Amrel in terms of all agreements, contracts and other legal documents signed by Scotts Retail prior to 31 March 1993;

(5) As already mentioned, Scotts RetaiI did not cede or assign its rights and obligations in terms of the agreement to Amrel;

(6) In April 1993 Absa Group Pension Fund sold the property to the plaintiff and on 24 September 1993 transferred the property to the plaintiff. The plaintiff thereby became the lessor in terms of the agreement;

(7) The agreement between Scotts Retail and Amrel contemplated by the resolution taken on 16 April 1993 has not been placed before the court and it is not clear that the agreement was concluded. However, from November 1993 the plaintiff’s letters addressed to Scotts Retail (ie pertinently addressed to Scotts Retail (Pty) Ltd) in connection with the agreement and the property were answered on the letterhead of ‘Scotts. A Division of Amalgamated Retail Limited’. The first of these letters reflected the following names at the bottom: R L Logan CA (SA) Chairman; LT Redfern Managing; B E Oxley; M Pio; I McManus; C du T Harvey; M J Larché. All these people are reflected as directors in the minutes of the directors meetings of Scotts Retail. As from August 1994 the same list appears on the letterhead preceded by the words ‘Divisional Directors’;

(8) The minutes of Scotts Retail during the period October 1990 to May 1993 reflect that these people attended directors meetings of Scotts Retail and from May 1993 to November 1994 divisional directors meetings of ‘Scotts. A Division of Amalgamated Retail’. The minute of the meeting held on 10 May 1993 (i.e. the first meeting held after 16 April 1993) and all subsequent minutes up to November 1994 are headed ‘Scotts. A Division of Amalgamated Retail’. During this period Ms Larché continued to report on property matters. There is no suggestion that Ms Larché (or anyone else) considered that an assignment of the agreement to Amrel was necessary;

(9) Scotts Retail ceased trading at the end of February 1994. According to its financial statements for 1996, 1997, 1998 and 1999 the company did not trade in 1995, 1996, 1997 or 1998;

(10) In about March 1996 the defendant acquired the business known as ‘Scotts. A Division of Amalgamated Retail Limited’ from Amrel and commenced using Scotts House as its head office to conduct the business which was merged with another business called ‘Select-a-Shoe’. From May 1996 the plaintiff received letters in connection with the agreement and the property on the letterhead of ‘Scotts. A Division of the South African Breweries Limited’. At the foot of the letterhead the ‘Divisional Directors’ are reflected as F J Haupt (Chairman); S F Rudolph (Managing); M J Larché; B E Oxley; L T Redfern and F W Stark. These names are clearly distinguished from the names of the defendant’s directors which also appear at the bottom of the letterhead. In the first letter dated 29 May 1996, signed by M J Larché as Divisional Director, the plaintiff was informed, as a matter of courtesy, that ‘Scotts. A Division of the South African Breweries Limited’ intended to make alterations to their offices to accommodate the Johannesburg head office of ‘Select-a-Shoe’ which was relocating to Durban. During the period May 1996 to September 1996 Ms Larché, in her capacity as Divisional Director, addressed five letters to the plaintiff in connection with matters related to the agreement. There is no suggestion that Ms Larché (or anyone else) considered it necessary to arrange for the cession or assignment of the agreement from Scotts Retail or Amrel to ‘Scotts. A Division of South African Breweries Limited’ or to the defendant. It is common cause that no cession or assignment took place;

(11) On 18 February 1997 Mr Rudolph, the Divisional Managing Director, addressed a letter to the plaintiff on a new letterhead ‘Scotts. Select-a-Shoe’ to inform the plaintiff that Ms Larché was leaving the division and that Mr Gordon Edmond was appointed ‘Group Property Executive’ with immediate effect. Thereafter, the plaintiff’s directors addressed letters to ‘Scotts Group’, ‘Scotts’ and ‘Scotts Retail’ for the attention of Mr G Edmond. During the period February 1997 to November 1998 Mr Edmond addressed a single letter (on 28 April 1998) to the plaintiff in connection with the agreement. This related to a sub-tenant and was on the new letterhead. There were no other letters from ‘Scotts. Select-a-Shoe’;

(12) On 24 October 1998 the defendant sold its business ‘Scotts. Select-a-Shoe’ to Europe South Africa Investment Corporation Ltd (‘ESIC’) with effect from 31 October 1998. The employees of ‘Scotts. Select-a-Shoe’ were permitted to retain their employment if they chose to do so. Mr Rudolph retained his position as Managing Director and Mr Edmond retained his position as the Property Executive. They therefore became employees of ESIC. The management of ESIC continued to use Scotts House as its head office. The agreement in terms of which ESIC acquired the business from the defendant made provision for the assignment of all leases from the defendant to ESIC. These included the agreement. As already mentioned the agreement was not assigned;

(13) In April 2000 ESIC successfully applied to the Johannesburg High Court to have itself wound-up;

(14) In May 2000 a dispute arose between the plaintiff and the defendant as to whether the defendant is liable to the plaintiff as lessee in terms of the agreement;

(15) In November 2000 the plaintiff instituted this action against the defendant claiming an order in the following terms -

‘It is declared that Defendant is liable, as lessee, to Plaintiff, as lessor, in regard to the property known as the Remainder of sub 1 of Lot 6201, Durban, situated in the city of Durban, and the Rem of Lot 6201, Durban, situated in the city of Durban, in accordance with all of the terms and conditions reflected in the lease agreement dated 20 February 1991 and originally entered into between the UBS Group Pension Fund as lessor, and Scotts Retail (Pty) Ltd (registration number 54/02412/07) as lessee.’

The particulars of claim set out the basis for this relief in paragraph 10.1 as follows:

‘During or about March 1996 and pursuant to a merger, alternatively, amalgamation, alternatively restructuring, the details of which is unknown to the plaintiff, the obligations of Scotts in terms of the lease were taken over by defendant with the consent of the plaintiff’.

The particulars of claim make it clear that Scotts is Scotts Retail (Pty) Ltd and the lease is the agreement entered into between the UBS Group Pension Fund and Scotts Retail (Pty) Ltd on 20 February 1991.

There is no reference to a tacit agreement in the particulars of claim;

(16) After the defendant objected to the particulars of claim the plaintiff introduced an alternative claim based on an alleged tacit agreement in terms of which the defendant bound itself to the plaintiff under all of the terms of the lease agreement including the 12 year lease period and the escalation provisions. The plaintiff did not amend the declaratory relief sought;

(17) The defendant successfully excepted to the plaintiff’s claim based on the assignment of the agreement from Scotts Retail (Pty) Ltd to the defendant on the ground that the plaintiff did not allege that it had given its prior written consent to the assignment as required by clause 13 of the agreement;

(18) Thereafter, the defendant unsuccessfully sought leave to appeal against the judgment upholding the exception from the High Court and the Supreme Court of Appeal;

(19) The plaintiff has amended its particulars of claim on a number of occasions;

(20) In the penultimate particulars of claim the plaintiff claimed the following declarator –

‘It is declared that Defendant is liable, as lessee, to Plaintiff, as lessor, in regard to the property known as the Remainder sub 1 of Lot 6201, Durban, situated in the city of Durban, and the Rem of Lot 6201, Durban, situated in the city of Durban, in accordance with all of the terms and conditions reflected in the lease agreement dated 20 February 1991 and originally entered into between UBS Group Pension Fund as lessor, and Scotts Retail (Pty) Ltd (registration number 54/02412/07) as lessee, as if the Defendant were the successor in title to Scotts Retail (Pty) Ltd as lessee as from 1 April 1996’

In support of this relief the plaintiff alleged that –

‘During or about April 1996, the plaintiff, represented by L.R. van der Vyver and/or S.J. Oberholster, and defendant, represented by F.J. Haupt and/or S.J. Rudolph and/or N.J. Larché and/or B.E. Oxley and/or L.T. Redfern and/or F.W. Stark, entered into a tacit lease agreement’

And that the parties agreed they would adopt the terms and conditions of annexure ‘A’, the agreement, so that the plaintiff would be the lessor and the defendant the lessee and that the agreement would be operative between them as from 1 April 1996 and that the agreement would apply for the balance of the term and that the defendant would not be liable for any rentals or other obligations pertaining to the period prior to 1 April 1996;

(21) In the particulars of claim as finally amended just before the trial commenced the plaintiff claims the same declarator but relies on the following allegations in support thereof –

‘3.1 Through the course of conduct of the parties (particulars of which are set out in paragraph 6 below) during the period commencing about April 1996 and up to early May 2000, a lease agreement came into existence between the plaintiff represented by L.R. van der Vyver and/or S.J. Oberholster, and defendant represented as set out in paragraph 3.2 below;

2. The defendant was thus represented:

3.2.1 by S.J. Haupt and/or S.J. Rudolph and/or N.J. Larché and/or B.E. Oxley and/or L.T. Redfern and/or F.W. Stark, and/or any or all of them acting jointly as members of the Divisional Board of Directors established by Defendant with responsibility for the operation of the Scotts Division, including such persons, whose identity are not within the knowledge of the plaintiff, who from time to time may have succeeded any of the persons named above to that Board or who may have been appointed by Defendant to that Board; and

2. G. Edmond, in his capacity as Defendant’s Group Property Executive having been appointed on or about 18 February 1997 by the said Rudolph (acting as Defendant’s Divisional Managing Director), as Defendant’s representative with whom the plaintiff could liaise on matters relating to the leased property’.

[14] The plaintiff called as witnesses its two directors, Messrs Oberholster and Van der Vyver, Mr Gavin Kruger, a partner of Deloitte & Touche and Mr Fasal Sarlie, an Operational Risk Manager employed by Standard Corporate Investment Bank. The defendant called Mr Haupt, Mr Rudolph and Prof Wainer, an accounting expert.

[15] Mr Kruger testified about certain formal matters relating to Scotts Retail and Mr Sarlie testified about the source of rental payments made to the plaintiff in terms of the agreement. Mr Sarlie did not complete his evidence as the parties agreed on the payments made which are set out in exhibit ‘O’. There is no reason not to accept the reliability and veracity of these two witnesses. None was suggested.

[16] Mr Van der Vyver was admitted as an attorney at the age of 22. He practised for about four years until he decided to stop practising and study for an MBA which he completed successfully. Thereafter he entered the business world. He worked for Senbank for two years as a consultant in the Project Finance Division and then left Senbank to pursue his own business interests. He has been a property business consultant and a property developer for a number of years. The property involved in this litigation was one of a number of properties that he was involved with. Mr Van der Vyver is fluent in Afrikaans and English and he testified in Afrikaans. He lives and works in Johannesburg and he obviously chose to address all his letters to the occupiers of the property in English. Mr Van der Vyver is intelligent and articulate. Mr Oberholster has a B Com Cum Laude and majored in economics and accounting. He was employed by Standard Bank as a manager in project finance. He was also employed by Standard Merchant Bank in its treasury department as a designer of specialised projects. Mr Oberholster is also fluent in Afrikaans and English and he testified in Afrikaans. Like Mr Van der Vyver, Mr Oberholster lives and works in Johannesburg and he also chose to conduct his correspondence in connection with the agreement in English. Mr Oberholster is also intelligent and articulate. Mr Van der Vyver and Mr Oberholster were rightly described by defendant’s counsel as sophisticated businessmen. It was clear that they were well-prepared for their evidence. The defendant’s counsel contended in argument that the plaintiff’s case based on a tacit lease agreement is a fabrication.

[17] Mr Haupt has been retired for a number of years. He was the Chief Executive of Amrel and the most senior divisional director of the defendant’s Clothing and Footwear Division. Mr Haupt ceased to be employed by the defendant in late 1998. He is obviously a very experienced businessman and provided useful background to the restructuring of the ‘Scotts. Select-a-Shoe’ Clothing and Footwear Division. Mr Haupt is intelligent and articulate and made a good impression as a reliable and honest witness. He was not involved in the day to day management of the Clothing and Footwear Division or discussions about the agreement. Mr Rudolph was at the relevant time the Managing Director of the defendant’s Scotts Division. He was previously the Managing Director of the ‘Select-a-Shoe’ Division which was incorporated into the Scotts Division. Mr Rudolph has no tertiary education and frankly conceded that he has no knowledge of law or accounting. He obviously rose through the ranks of the business where he was employed and clearly has organizational and marketing skills. Mr Rudolph ceased to be an employee of the defendant and became an employee of ESIC on 31 October 1998 when the agreement between the defendant and ESIC became effective. Although Mr Rudolph was not involved in the day to day management of the leased premises he clearly had knowledge of the lease. It was suggested in argument that Mr Rudolph was not completely honest with the court and tailored his evidence to suit the defendant. As to why he should do this it was argued that old loyalties do not simply disappear. Prof Wainer is a professor of accounting at the University of the Witwatersrand. He was called to testify on accounting issues and there is no reason to doubt the correctness of his evidence on these issues.

[18] The parties have placed a large number of documents before the court. Many of these documents are of a formal nature, such as amendments of pleadings, notices of amendment to pleadings, the exceptions and the judgments given in those exceptions and the appeal proceedings as well as accounting documents and agreements. Although reference was made to other documents the parties concentrated on the documents in exhibit A, particularly the correspondence between the plaintiff and the defendant and the other occupiers of the leased premises. The main witnesses, Messrs Van der Vyver and Oberholster and Mr Haupt and Mr Rudolph all testified against the background of these documents and particularly the correspondence pertaining to the agreement and the leased premises. This correspondence is a contemporaneous record of what passed between the parties at the time and is clearly a very useful means for testing the reliability and veracity of the witnesses, particularly regarding the primary issue of whether the parties entered into the tacit agreement alleged by the plaintiff. The contents of the letters are clearly the most reliable evidence of what took place between the parties some six to twelve years ago. The contents of the letters are important both for what they say and what they do not say.

[19] When considering the evidence it will be borne in mind that the tacit agreement alleged by the plaintiff is not straightforward. The plaintiff does not allege that over a short space of time or in the course of one or two letters one or two people acting on behalf of the parties concluded a simple agreement such as adopt in toto another existing agreement or cancel an existing agreement between them. The plaintiff alleges that over a period of four years, from April 1996 to May 2000, a number of people acting on behalf of the parties tacitly agreed that the defendant would be liable as lessee to the plaintiff in terms of the existing agreement between the plaintiff and Scotts Retail for the remainder of the term of the lease as from 1 April 1996. This occurred while the agreement between the plaintiff and Scotts Retail continued to exist and the plaintiff’s witnesses thought that Scotts Retail was a normal company, had a healthy balance sheet and was a good tenant. According to Mr Oberholster it was only in April 2006 that he (and accordingly the plaintiff) discovered that Scotts Retail had disposed of all its assets and liabilities in about March 1993 and had become a dormant company with no assets.

[20] Against that background it is striking how the plaintiff’s allegations regarding the tacit lease agreement have changed. In November 2000 when the plaintiff instituted this action it did not allege that there was a tacit agreement. It relied solely on an assignment of the agreement from Scotts Retail to the defendant. Then, when the plaintiff did allege a tacit agreement, it was for the entire period of 12 years, not just from 1 April 1996. As already pointed out, the penultimate particulars of claim alleged that the tacit agreement was entered into during or about April 1996 and the final particulars of claim allege that the tacit lease agreement was entered into from about April 1996 until May 2000 and will run from 1 April 1996.

[21] Another striking feature of the case is the significance which a meeting between Messrs Van der Vyver and Oberholster and Rudolph in about April/May 1996 acquired just before the trial commenced: i.e. some 11 years after the event. It was not mentioned in the correspondence or the pleadings until then.

[22] It is also striking that neither Mr Van der Vyver not Mr Oberholster gave evidence in support of the case pleaded in the final particulars of claim. Mr Oberholster insisted that the agreement was the product of a process which continued over a period. According to him it did not come into existence at a particular time. He was not able to say when precisely it came into existence. He did not pertinently state that it was agreed that the agreement would operate from 1 April 1996. Nor did he furnish any facts which would justify the inference that the agreement would operate from 1 April 1996. Mr Van der Vyver was far more positive. He repeatedly testified that there was no doubt in his mind that the new lessee in terms of the agreement was ‘Scotts. A Division of the South African Breweries Ltd’. However he did not explain how this occurred. While he agreed with Mr Oberholster that the conclusion of the tacit agreement was a process, according to Mr Van der Vyver it did not take place during the period alleged in the particulars of claim. He testified that by 9 September 1996 the tacit agreement was a fait accompli and he knew that the defendant was the new lessee in terms of the agreement. He knew this because of the meeting of April/May 1996, the correspondence between the parties, the circular in the press about the takeover and the telephone calls between the parties. Mr Van der Vyver also did not testify that the tacit lease would commence on 1 April 1996 or furnish facts from which this could be inferred. The contradiction or inconsistency between the final particulars of claim and the evidence given by the plaintiff’s two directors, who were the only representatives of the plaintiff to have dealings with the defendant, is not explained in the evidence. Since it must be accepted that the particulars of claim were amended on the instructions of the two witnesses the contradiction or inconsistency reflects on their credibility.

[23] The plaintiff attaches importance to two meeting which took place between Messrs Van der Vyver and Oberholster and Mr Rudolph, the first in April/May 1996 and the second on 26 November 1998. According to Messrs Van der Vyver and Oberholster Mr Rudolph requested the meeting in April/May 1996 to discuss the rental to be paid in the three years commencing on 1 October 1996. The plaintiff and ‘Scotts. A Division of Amalgamated Retail Ltd’ had been negotiating unsuccessfully to determine the rental. Eventually the plaintiff instituted proceedings against Scotts Retail (Pty) Ltd in the Durban High Court for a declarator as to the meaning of a clause in the agreement. On 26 March 1996 the High Court granted the declarator in favour of the plaintiff. In the meantime, on about 15 March 1996, the defendant acquired the Scotts business from Amrel. According to Messrs Van der Vyver and Oberholster, at the meeting, Mr Rudolph introduced himself as the Managing Director of the new Clothing and Footwear Division. He wanted to negotiate the new rental without further litigation but they were not able to reach an agreement. Mr Rudolph conveyed to them that the plaintiff would now be dealing directly with the defendant. According to Messrs Van der Vyver and Oberholster at the meeting in November 1998 Mr Rudolph told them that the defendant was in the process of selling the Scotts. Select-a-Shoe business to ESIC and that the Divisional Property Executive, Gordon Edmond, would communicate with them to arrange for the assignment of the agreement from the defendant to ESIC. Mr Rudolph’s version does not differ much from that of the plaintiff’s witnesses but he does dispute that he conveyed to them that the defendant would be the new tenant. He said that there would have been no need to do so. He agrees that it is possible that he may have mentioned a cession of the agreement at the meeting on 26 November 1998 but clearly has no specific recollection of this.

[24] It is not in dispute that the defendant acquired the Scotts business from Amrel in March 1996: that the business was running at a loss: that Mr Rudolph was made the Divisional Managing Director and was in charge of the Scotts business which incorporated the Select-a-Shoe business which he previously managed and that the defendant had decided to build up the business so that it could be disposed of to best advantage. Mr Rudolph was obviously concerned about keeping the running costs of the business as low as possible. In these circumstances there can be no doubt that Mr Rudolph attempted to negotiate a satisfactory rental for the next three year period commencing on 1 October 1996. However there would be no reason for Mr Rudolph to say (or convey) to the plaintiff’s representatives that the plaintiff was now dealing with the defendant direct. There is certainly no evidence to suggest that Messrs Van der Vyver and Oberholster attached significance to what happened at the meeting or even understood that Mr Rudolph intended to convey to them that the defendant would stand in for the liabilities of the lessee. After the meeting the plaintiff made submissions to the referee, appointed to adjudicate the rental dispute, in which the plaintiff made no reference to the defendant being liable and the plaintiff did not address a letter to the defendant to confirm what had been discussed at the meeting. As already pointed out the plaintiff did not allege that the meeting had any significance until an allegation was made in further particulars for trial just before the trial commenced. The absence of a confirming letter is significant and it is therefore probable that Mr Rudolph did no more than introduce himself as the managing director of ‘Scotts. A Division of the South African Breweries Ltd’ and attempt to negotiate a rental favourable to the Division. The conclusion that whatever Mr Rudolph said to Messrs Van der Vyver and Oberholster did not have contractual significance is reinforced by the contents of the letters between the parties after the meeting. In the two letters from Ms Larché, now the Divisional Director of ‘Scotts. A Division of the South African Breweries Ltd’, to the plaintiff in May 1996 and June 1996 there is no reference to the meeting in April/May 1996 and the letters are concerned with making alterations to the premises to accommodate the head office of ‘Select-a-Shoe’. The plaintiff’s first letter after the meeting was addressed to Ms Larché, the Divisional Director, ‘Scotts. A Division of the South African Breweries Ltd’ in August 1996. It gave consent to requests sought by ‘Scotts. A Division of Amalgamated Retail Ltd’ on 26 October 1995 and 23 October 1995. It made no reference to the meeting of April/May 1996. Subsequent letters also did not refer to the meeting.

[25] The second meeting held in November 1998 took place after the defendant had sold the business to ESIC. It is clear that at that stage the agreement had been concluded and that both Mr Rudolph and Mr Edmond were employed by ESIC. It is therefore improbable that Mr Rudolph would have informed Messrs Van der Vyver and Oberholster that the defendant was negotiating the sale of the business. While it is possible that Mr Rudolph would have mentioned that Mr Edmond would communicate with them about the assignment of the agreement it is improbable that he did so. Up to that time no-one had indicated any awareness of the necessity for assigning the agreement. The plaintiff did not address a letter to the defendant or ESIC to confirm the conversation of November 1998 or that the assignment of the agreement had been discussed and should be effected. When the plaintiff addressed letters to Mr Edmond on 9 December 1998 (A181) and 2 February 1999 (A183) these letters were addressed to Scotts and Scotts Retail respectively and dealt with maintenance to the building and water damage to the property. Finally, on 30 July 1999 after the plaintiff had thought carefully about what had happened at the meeting and attempted to record what was discussed the plaintiff addressed a letter to Scotts Retail for the attention of Mr Edmond and said –

‘During our meeting in December 1999 (clearly 1998) you informed us that the business trading under the name Scotts has been acquired by a third party and this will have an implication on the status of the Lessee.

Previously when Scotts was still part of Amrel, proper notification was given by South African Breweries Ltd (‘SAB’) that Scotts has become a division of SAB and that as a division SAB will act as owner of the business.

We accepted the situation as pointed out in the various circulars. We had no objection and the payments made to us clearly stipulated Scotts, A Division of SAB.

The current disposal of the business of Scotts by SAB does not change the situation unless we specifically agree thereto.

In the case of default we will still hold SAB responsible for payment.’(A208)

This letter does not suggest that either Mr Rudolph or Mr Edmond said or did anything at the November 1998 meeting to indicate that the defendant was the lessee of the premises in terms of the agreement and that the agreement must be assigned from the defendant to ESIC. Significantly the letter does not mention that assignment was discussed at the meeting. It also does not refer to the repeated requests for an assignment from Mr Edmond after the meeting which Mr Van der Vyver testified about. However it suggests that ownership of the business and liability for the rentals payable in terms of the agreement coincide.

[26] It is common cause that Scotts House was occupied by ‘Scotts. A Division of Amalgamated Retail Ltd’ from November 1993 to March 1996; by ‘Scotts. A Division of the South African Breweries Ltd’ from March 1996 to 31 October 1998 and by ESIC from 1 November 1998 to May 2000 and it is also common cause that at all relevant times there was only one written lease agreement, that between the plaintiff and Scotts Retail; ie the agreement. The plaintiff has established that during that period –

(1) The rentals were paid regularly, first by Amrel (from 30 April 1996 to 31 December 1996), then by the defendant (from 1 September 1997 to 2 May 1999) and then by International Retail Fashion Focus (IRFF) on behalf of ESIC (from 1 June 1999 to 1 October 1999);

(2) The plaintiff did not know the source of the payments which are reflected in exhibit O and which are summarised in the previous paragraph and which clearly did not coincide with each period that the various parties occupied Scotts House;

(3) The plaintiff addressed letters to each occupier in turn about matters pertaining to the premises or the agreement: during the occupation by ‘Scotts. A Division of Amalgamated Retail Ltd’ the plaintiff addressed 9 letters to Scotts Retail (Pty) Ltd; during the occupation by ‘Scotts. A Division of the South African Breweries Ltd’, the plaintiff addressed 6 letters to ‘Scotts. A Division of the South African Breweries Ltd’ and 2 letters to ‘Scotts Group’ and during the occupation by ESIC the plaintiff addressed 2 letters to ‘Scotts’ and 3 letters to ‘Scotts Retail’

(4) The plaintiff received one cheque from ‘Scotts. A Division of the South African Breweries Ltd’ dated 23 February 1999 (i.e. after ESIC had taken occupation) to reimburse the plaintiff for an insurance premium which it paid in respect of the premises;

(5) The various occupiers all used Scotts House as the head office of their businesses;

(6) In March 1997 ‘The South African Breweries Limited Clothing and Footwear Division’ entered into a number of lease agreements with subtenants in which it described itself as the lessee in terms of the agreement;

(7) After the liquidation of ESIC the defendant sued the ESIC liquidators on the indemnity in terms of the agreement of sale for compensation for not being released from the lease agreements one of which was the agreement.

[27] The communications between the parties are of vital importance as they will indicate whether the parties intended to enter into a new agreement or not. It is striking that the correspondence which passed between the plaintiff and ‘Scotts. A Division of the South African Breweries Ltd’ during the period April 1996 to November 1998 does not do more than record discussions and arrangements regarding matters pertinent to the agreement or Scotts House. None of the letters evinces an attention to enter into an agreement or confirms expressly or by implication that the plaintiff and the defendant have entered into an agreement. This is of significance in the light of Mr Van der Vyver’s evidence that the tacit agreement relied upon by the plaintiff was entered into during the period April to September 1996 and that by 9 September 1996 he knew that the defendant was the lessee in terms of the agreement. The initial correspondence is consistent with a belief on the part of both parties that ‘Scotts. A Division of the South African Breweries Ltd’ was already the lessee in terms of the agreement. The later correspondence is destructive of the plaintiff’s case that a new agreement had been concluded. The most important of these letters will now be considered:

(1) On 19 September 1996 (i.e. after the tacit lease relied upon by the plaintiff had allegedly been concluded) Ms Larché on behalf of ‘Scotts. A Division of the South African Breweries Ltd’ addressed a letter to the plaintiff requesting the addendum to the agreement for three years commencing 1 October 1996 (A140). In an undated letter Mr Van der Vyver replied to this letter (A141) pointing out that he had had a brief look at the agreement and was not sure which addendum she was referring to. He explained: ‘We have a 12 year lease agreement and the rent will escalate every three years in accordance with the provisions of clause 5’.

This contradicts the plaintiff’s allegation in the particulars of claim that the defendant would be liable in terms of the agreement as from 1 April 1996 (i.e. for a period of 9½ years) and would not be liable for any rentals or other obligations pertaining to the period before then:

(2) On 30 July 1999, Mr Van der Vyver, on behalf of the plaintiff, addressed a letter to Scotts Retail, now owned by ESIC, for attention of Mr Edmond, referring to their meeting in November 1998 and pointing out that the change of parties could have an effect on the lessee (A208). (The contents of this letter have already been referred to in paragraph 24.) The plaintiff concludes the letter by stating that in the case of default the plaintiff would still hold SAB responsible for payment.

This letter does not state how the defendant could be liable in terms of the agreement and does not suggest that the defendant is the lessee. If Mr Van der Vyver’s evidence that by September 1996 he knew that the tacit lease agreement had been concluded is to be believed, it is inconceivable that he would not have said so. This letter clearly contradicts the plaintiff’s allegation that the defendant was liable as principal.

(3) On the same date Mr Van der Vyver on behalf of the plaintiff addressed another letter to the defendant ‘For attention: The Director/Secretary Corporate Affairs’ attaching a copy of its letter dated 30 July 1995 to Scotts Retail (A207). The heading of the letter is ‘Notification: Lease Agreement OCV Investments/Scotts Retail’. After referring to the letter to Scotts Retail it says ‘The letter is self-explanatory and we are hereby placing on record that in the case of default on the part of the tenant we will hold your company liable for payment’.

This letter draws a clear distinction between the tenant and the defendant. If the parties had already concluded a tacit lease in terms of which the defendant was liable as lessee it is inconceivable that Mr Van der Vyver would not have said this in the letter. The plaintiff would have stated simply that the defendant is liable as lessee and why. It is also striking that the plaintiff does not explain the basis on which it would be entitled to hold the defendant liable.

According to Mr Van der Vyver he wanted to record that there was a lease agreement between the plaintiff and the defendant. Clearly he did not do this.

(4) On 2 May 2000, on being notified that ESIC had been liquidated, Mr Van der Vyver, on behalf of the plaintiff, addressed a further letter to the defendant (A244). Under the heading ‘Scotts Retail – In Liquidation. Lease agreement between OCV Investments and Scotts Retail (Pty) Ltd’ he annexed a copy of the letter dated 30 July 1999 and said –

‘We have been notified that the activities of Scotts have been placed in liquidation.

We have a lease agreement with Scotts and should the obligations of this lease not be fulfilled we have no alternative but to demand payment from SAB.

We will endeavour to collect or recover from the Tenant what is due under the lease agreement in order to curtail our damages. We invite you to support or partake in these efforts.’

On the same day, Mr Van der Vyver addressed another letter to the defendant (A246) which reads as follows:

‘Re: LEASE AGREEMENT: OCV INVESTMENTS (PTY) LTD AND SCOTTS RETAIL (A DIVISION OF SOUTH AFRICAN BREWERIES LTD)

We refer to the sale of the businesses by you to the Dynamo Group trading under the name of Scotts.

We have previously indicated to you that we have received no request from South African Breweries Ltd (‘SAB’), to release or change the lessee in the above agreement.

We have forwarded to you in writing our position herein and that we will hold SAB liable for the fulfilment of all the obligations under the lease agreement.

We have now been informed that the new owners of the business trading under the name ‘Scotts’ have filed for provisional liquidation. The personnel of Scotts have informed us that the liquidators of the business will pay us the rent for May 2000. Thereafter the position is uncertain.

We inform you hereby that since your company is at risk, as previously indicated, we invite you hereby to contact us and participate in the process to curtail our and your damages or to be in agreement in respect of the steps we might take against the liquidated companies.

We trust that with your support in this matter, we could manage the process to ensure a favourable outcome.’

These letters contradict the plaintiff’s case and Mr Van der Vyver’s evidence that by September 1996 there was a tacit lease in terms of which the defendant was liable to the plaintiff as the lessee. The first letter draws a clear distinction between the tenant, Scotts Retail, and the defendant. Although both state that the plaintiff will hold the defendant liable neither states on what basis the defendant could be liable. If the plaintiff believed that the defendant was liable to the plaintiff in terms of the agreement because of a tacit agreement it would have said this clearly and unambiguously.

5. Two days later, on 4 May 2000, Mr Van der Vyver, on behalf of the plaintiff, addressed another letter to the defendant in connection with the agreement (A247). Under the heading ‘Lease Agreement: OCV Investments (Pty) Ltd and Scotts Retail (A Division of South African Breweries Ltd) the plaintiff said –

‘We confirm that you have received our previous notification of the status of the lease agreement and that the position has not been altered.

There is therefore a valid lease agreement between OCV Investments and Scotts Retail (A Division of South African Breweries Ltd).

We confirm that you will now endeavour to have discussions between the liquidators and the management of the Scotts Group to determine the future and also the best possible methods to deal with the lease agreements.’

This is the first time that the plaintiff pertinently alleged an agreement between the plaintiff and Scotts Retail. A Division of the South African Breweries Ltd. It is striking that the letter contains a glaring non sequitur and that plaintiff did not state how the agreement was entered into and when, where and by whom. The plaintiff also did not set out the relevant terms of the agreement.

5. On 15 May 2000, Mr Van der Vyver, on behalf of the plaintiff, addressed another letter to the defendant (A248) again under the heading ‘Re: Lease Agreement: OCV Investments (Pty) Ltd and Scotts Retail (A Division of South African Breweries Ltd)’ and again alleged that the lessee will remain ‘Scotts. A Division of the South African Breweries Ltd’. The plaintiff again did not allege how this agreement came into existence or when, where and by whom it was entered into. Again the plaintiff did not state the relevant terms of the agreement;

5. On 25 May 2000, Werksmans, the defendant’s attorneys, replied to the plaintiff’s letter of 4 May 2000 and denied that the defendant is liable in terms of the agreement (A250). Werksmans stated that Scotts Retail (Pty) Ltd was the party responsible in terms of the agreement and not the defendant.

[28] Despite the fact that Scotts House was occupied by three different parties during the period 1993-2000 (and not the lessee in terms of the agreement) no one appears to have considered that it was necessary that the contractual position accord with the factual position. The plaintiff must have known that Scotts Retail did not physically occupy the building. During the period November 1993 to March 1996 it received letters in connection with the agreement and Scotts House on the letterhead of ‘Scotts. A Division of Amalgamated Retail Ltd’. After it was informed by Mr Rudolph in April/May 1996 that the defendant had purchased the Scotts business, the plaintiff received letters in connection with the agreement and Scotts House on the letterhead of ‘Scotts. A Division of the South African Breweries Ltd’ and addressed its own letters accordingly. After the plaintiff was informed in November 1998 that the defendant had sold the ‘Scotts. Select-a-Shoe’ business to ESIC, which continued to occupy Scotts House, the plaintiff addressed its letters in connection with the agreement and Scotts House to Scotts, Scotts Retail and Scotts Group. Despite these changes the plaintiff did not insist that each occupier of the premises enter into a lease agreement. The plaintiff continued to receive the rentals and the occupiers complied with the agreement. The property was maintained, alterations were effected, subleases were entered into and the plaintiff was reimbursed for insurance premiums which it paid. Where necessary, the occupier sought and was given permission to sublet parts of Scotts House and to do alterations. Mr Van der Vyver conceded that no thought was given to the mechanics of transferring the rights and obligations in terms of the agreement to each successive occupier: i.e. assignment. It is clear from the contents of three of her letters (A58, A63 and A140) that Ms Larché was not knowledgeable about the law relating to leases and contracts generally. At no stage did she approach the plaintiff for an assignment or cession of the agreement or even indicate that she thought it was necessary despite the fact that she managed, in turn, the property portfolios of Scotts Retail, ‘Scotts. A Division of Amalgamated Retail Ltd’ and ‘Scotts. A Division of the South African Breweries Ltd’. After ESIC acquired the ‘Scotts. Select-a-Shoe’ business from the defendant the plaintiff’s directors corresponded with Mr Edmond about the agreement and Scotts House just as they had corresponded with Ms Larche: i.e. as if ESIC was bound by the agreement. Furthermore, in July 1999 (i.e. at a time when he knew that Mr Edmond was employed by ESIC and that ESIC was conducting the business) Mr Van der Vyver negotiated with Mr Edmond about the rental to be paid by ESIC during the three year period commencing on 1 October 1999 (A205). There is no evidence that he attempted to negotiate the new rental with the defendant which he should have done if the defendant was the new lessee. The most plausible inference from all these facts is that all the parties concerned thought that the agreement was binding on whoever conducted the business of Scotts from Scotts House. It was only when it became apparent in April/May 2000 that ESIC would not continue to pay the rental that Mr Van der Vyver on behalf of the plaintiff pertinently alleged, for the first time, that there was a lease between the plaintiff and ‘Scotts. A Division of the South African Breweries Ltd’. Only then was the legal position investigated by a legal practitioner and the defendant was advised and the plaintiff informed that Scotts Retail (Pty) Ltd was bound by the agreement and not the defendant. There was therefore no reason for the parties to enter into another agreement and this cannot be inferred. There is also no evidence from which to infer that the parties agreed on the terms alleged, particularly that the agreement would be operative from 1 April 1996 and that the defendant would not be liable for any rentals or other obligations pertaining to the period prior to 1 April 1996. It therefore cannot be found, on either test referred to earlier in this judgment, that the parties entered into the tacit agreement alleged by the plaintiff or any other agreement.

[29] This conclusion is reinforced by the plaintiff’s failure to allege a tacit agreement at an early stage, its clear recognition of the existence of the agreement at a late stage, the obvious difficulty which the plaintiff had in formulating the terms of the agreement which it eventually relied on and the contradictions or inconsistencies between the pleadings and the evidence.

[30] Messrs Van der Vyver and Oberholster, while attempting to create the impression that they believed that there was a new agreement, gave evidence that was contradicted by the correspondence and in particular letters emanating from the plaintiff. In many respects it was also inherently improbable. Mr Van der Vyver’s repeated assertions that he was satisfied that a new agreement had been entered into and that the defendant was the lessee in terms of the agreement were just that, assertions. He did not explain the legal basis for this belief and the assertions are not consistent with his letters. At the end of the day the impression is left that the plaintiff selected the defendant as its mark because the defendant is obviously able to pay and that the plaintiff carefully constructed a case based on a mountain of documents. However the most important documents do not support the plaintiff’s case.

[31] I do not regard Messrs Van der Vyver and Oberholster as credible and reliable witnesses on the primary issue. As already pointed out their evidence is not consistent with the letters and the probabilities disclosed by the letters. At least two meetings of alleged significance took place without any confirming letter and important matters were discussed without being recorded. I have no doubt that if the things alleged to have been said, were said, this would have been recorded immediately.

[32] The plaintiff’s counsel argued that an adverse inference should be drawn against the defendant because of its failure to call witnesses – the names of Ms Larche, Mr Edmond and Mr Chan Yan were mentioned. In the light of the evidence it is not clear what the adverse inference would be. But in any event it is by no means clear that the first two are available to give evidence and that they could further elucidate the facts. It is also not clear why either person would be regarded as hostile to the plaintiff’s case. It seems to me that if they are available and able to elucidate the facts they would be equally available to the plaintiff and the defendant. If the plaintiff thought that they could assist its case the plaintiff should have called them as witnesses. See eg Elgin Fireclays Limited v Webb 1947 (4) SA 744 (A) at 749-750: Webranchek v L K Jacobs & Co 1948 (4) SA 671 (A) at 681-682. In my view Mr Chan Yan could contribute nothing to the matter and there is no good reason to draw an adverse inference against the defendant.

[33] Messrs Haupt and Rudolph have no particular interest in this matter other than to assist the court. They have long since left the employ of the defendant and were clearly not able to remember the detail of the matter. Mr Haupt could not contribute to the resolution of the primary issue. Mr Rudolph played a peripheral role in the matter and met the plaintiff’s representatives on a few occasions. Not surprisingly, Mr Rudolph was not able to remember with any degree of certainty the detail of meetings which he attended. He was not even sure where the meeting of April/May 1996 took place. However he was sure about company business practices and that he had limited authority to bind the defendant. In so far as he is alleged to have made statements suggesting that the defendant was about to become or was the lessee in terms of the agreement I find his denials convincing particularly in the absence of letters confirming what he is alleged to have said and the parties’ conduct after he made the statements. On these issues there is no reason to prefer the evidence of the plaintiff’s witnesses to that of the defendant’s witnesses. See SFW Group Ltd & Another v Martell et Cie & Others 2003 (1) SA 11 (SCA) para 5.

[34] In view of the finding made with regard to the tacit agreement alleged by the plaintiff it is not necessary to deal with the issue of whether the defendant’s representatives were authorised to enter into the agreement.

[35] This matter was enrolled for hearing in September 2006 but the plaintiff’s attorney overlooked the practice rule that a special arrangement must be made if a matter is to run for more than 5 days. When this was brought to the attention of the plaintiff’s attorney the parties agreed that the matter be postponed and the costs reserved. The plaintiff argued that the costs should be in the cause because the defendant’s attorney also overlooked the rule and continued to prepare for trial even though the matter would obviously last for longer than 5 days. The defendant argued that the plaintiff should bear the wasted costs of the postponement as it wrongly enrolled the matter for hearing when it clearly would not be heard. In my view both attorneys were at fault and the fairest would be that the costs of the postponement be in the cause.

[36] The defendant seeks an order for the qualifying fees of Prof Wainer. I am not persuaded that Prof Wainer’s evidence was necessary or that it contributed to the resolution of the matter. In the defendant’s counsel’s heads of argument Prof Wainer’s evidence gets no more than a passing mention. His qualifying fee will therefore not form part of the costs of the proceedings.

[37] Order

1. The wasted costs occasioned by the postponement of this matter in September 2006 are to be costs in the cause;

2. The plaintiff’s claim is dismissed with costs.

______________________

B.R. SOUTHWOOD

JUDGE OF THE HIGH COURT

CASE NO: 31851/2000

HEARD ON: 8 May 2007 to 23 May 2007

FOR THE PLAINTIFF: ADV. R.J. RAATH SC

INSTRUCTED BY: Mr W Nolte van Strydom Britz Mohulatsi Inc.

FOR THE DEFENDANT: ADV. P.N. LEVENBERG SC

INSTRUCTED BY: Mr Stockwell of Werksmans Attorneys

DATE OF JUDGMENT: 6 July 2007

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