THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 149/10

SAVVAS SOCRATOUS

Appellant

and

GRINDSTONE INVESTMENTS 134 (PTY) LTD

Respondent

________________________________________________________________

Neutral citation:
Socratous v Grindstone Investments (149/10) [2011]
ZASCA 8 (10 March 2011)

CORAM:

Navsa, Ponnan and Shongwe JJA

HEARD:

22 February 2011
DELIVERED:
10 March 2011

SUMMARY: Cancellation of lease agreement ─ proliferation of litigation
concerning cancellation on alternative bases ─ defence of lis alibi pendens
wrongly rejected by court below ─ courts are a public resource under severe
pressure ─ congested court rolls prejudiced by repeated litigation involving the
same parties, based on the same cause of action and related to the same subject
matter ─ court ought not to have decided the merits.

______________________________________________________________

________________________________________________________________
ORDER
________________________________________________________________

On appeal from:
Eastern Cape High Court (Mthatha) (Dukada AJ sitting as
court of first instance).
1.
The appeal is upheld with costs on the attorney and client scale.
2.
The order of the court below is set aside in its entirety and substituted as
follows:
‘a.
The applicant’s application to strike out succeeds with costs.
b.
The proceedings are stayed pending the determination of either case
464/08 in the Magistrates’ Court for the district of Mount Currie or case 522/09 in
this court.
c.
The applicant is to pay the respondent’s costs of these proceedings on the
attorney and client scale.’
________________________________________________________________
JUDGMENT
________________________________________________________________

NAVSA JA (Ponnan and Shongwe JJA concurring)

[1] This is an appeal against a judgment of the Mthatha High Court
(Dukada AJ), in terms of which it granted an order confirming the cancellation of
a lease agreement in respect of commercial property and ordered the appellant’s
eviction from the premises. The appellant was ordered to pay the costs of the
application on an attorney and client scale. The appeal is before us with the leave
of the Mthatha High Court.

[2] In November 2006 the respondent company, Grindstone Investments 134
(Pty) Ltd (Grindstone), concluded a lease agreement with the appellant,
Mr Savvas Socratous (Mr S), in terms of which it let to him, for a period of twelve
years, certain premises situated at 107 York Road, Mthatha. The property was
used to conduct a supermarket business under the style of a national

supermarket chain. Clause 14 of the agreement provides that in the event of the
destruction of or damage to the property to the extent that it was  ‘untenantable’,
either party was entitled to declare the lease cancelled by giving written notice to
the other to that effect by pre-paid registered post within 30 days.

[3] Clause 18 of the agreement provides that in the event of the lessor
cancelling the agreement and the lessee disputing the cancellation and
remaining in occupation, the lessee shall, pending the resolution of the dispute by
litigation or otherwise, continue to pay to the lessor an amount equivalent to the
monthly rental. Clause 23 of the agreement provides that in the event of the
rental or any other amount remaining unpaid the lessor shall be entitled, after
giving notice to remedy the breach, to cancel the lease forthwith and retake
possession of the property, without prejudice to its right to claim arrear rentals
and any damages it might have sustained as a result of the lessee’s breach. The
agreement provides that in the event of legal action being taken against the
lessee the latter shall be liable for costs on the attorney and client scale.
Importantly, clause 18 provides that in the event that the dispute is resolved in
favour of the lessor the amounts paid by the lessee shall be deemed to be
amounts suffered by the lessor on account of damages suffered by it as a result
of cancellation of the lease and/or the unlawful holding over.

[4] It is undisputed that during September 2008 a fire broke out at the
premises. Whilst the parties agreed that the damage caused by the fire was
extensive they disagreed on whether the premises were, as a result,
‘untenantable’. On 28 September 2008 Grindstone purported to cancel the lease
agreement on the basis that the property had been destroyed and was
‘untenantable’. The response by Mr S to the cancellation was that the premises
could still be partially used and the lease agreement provided that in those
circumstances it was not liable to be cancelled.

[5] This dispute precipitated much litigation. During March 2009 Grindstone
instituted action against Mr S in the Mthatha High Court, in terms of which it

sought an order declaring the lease agreement cancelled by virtue of the notice
given in terms of clause 14 of the lease, referred to in para 2 above. Grindstone
also sought the eviction of Mr S. It did not in that action claim any amount for
arrear rental or for holding over.

[6] On 3 April 2009 Grindstone wrote to Mr S demanding payment of arrear
rental in an amount of R262 020 for the period March 2008 to September 2008,
when the fire broke out. It also claimed an amount of R439 692 for the period
September 2008 to April 2009 on the basis that Mr S continued in occupation
after the cancellation referred to in paragraph 4. Grindstone stated that in the
event of these amounts not being paid it would cancel the lease agreement in
terms of clause 23. That demand went unheeded. During May 2009 Grindstone
brought the application that led to this appeal. In its founding affidavit it relied for
its right to cancel on the destruction of the property and for failure to pay arrear
rental and the amounts it considered due to it for the continued occupation by Mr
S after the fire and subsequent to the cancellation. Significantly, in its founding
affidavit, Grindstone referred to the action instituted by it, referred to in para 5
above, and stated the following:
‘There is accordingly pending litigation between the parties to determine the right of the applicant
to cancel the lease.’

[7] Mr S opposed the application on several bases. First, that at the time that
it had brought the application Grindstone had unlawfully resorted to self-help and
had physically retaken possession of the property. Thus, Mr S contended, the
application for eviction was misconceived. The spoliation by Grindstone had
caused Mr S, in separate proceedings, to apply to the High Court on an urgent
basis for the restoration of the property. The accusation by Mr S of spoliation on
the part of Grindstone is unchallenged.

[8] Furthermore, Mr S brought it to the attention of the court below that during
June 2008, before any high court proceedings had been instituted, Grindstone
had commenced litigation in the Magistrates’ Court for the district of Mount Currie
for an order cancelling the lease agreement and his eviction. Grindstone’s

response to this disclosure by Mr S was to submit that those proceedings related
to arrear rentals due at that time and it should be considered to be distinct from
the application proceedings leading up to the present appeal, which was for
cancellation based on non-payment of rental for a different period and on the
destruction of the property. If this litigation cocktail has not yet had a dizzying
effect, there is more. It appears that as early as March 2008 there had been
litigation between Grindstone and Mr S in relation to the lease and that it involved
the alleged failure to pay stamp duties and the provision of a bank guarantee. At
the time that the application in the court below was heard all these proceedings
had not been disposed of and were still pending. It was contended by Mr S that
all those proceedings were between the same parties based on the same cause
of action and related to the same subject matter. Put simply, Mr S raised the
defence of lis alibi pendens.

[9] On the merits of the application in relation to the damage or destruction of
the property Mr S relied on the provisions of clause 14, which, over and above
the provisions referred to above, states that in the event of the lessor failing to
give notice to cancel it would be obliged to proceed expeditiously with rebuilding
the premises and for the period that the premises are ‘untenantable’ the lessee
would not be liable for rental. Clause 14 also provides that in the event that the
premises are partially tenantable the rental would be abated pro-rata to the
beneficial use. In his opposing affidavit, Mr S states contradictorily, that since the
fire the premises are tenantable and that he has been ‘forced to close the doors’.
Clause 14 provides that when a dispute arises concerning the extent of the
abatement of rental the dispute should be settled by arbitration. Mr S contended
that the application by Grindstone was premature. Mr S also relied on a
counterclaim he instituted against Grindstone which is the subject of the
proceedings in the action instituted by the latter in the high court. In the
counterclaim Mr S sought to hold the lessor liable for the national supermarket
chain withdrawing its franchise rights from him.

[10] In deciding the matter in the court below Dukada AJ was dismissive of the
spoliation complaint. He stated that Mr S had retaken possession of the premises
and that if the court held the basis for cancellation to be well-founded the eviction
order could be executed. The learned judge went on to consider the
requirements for a successful plea of lis pendens, namely, that there must be
litigation pending between the same parties based on the same cause of action
and in respect of the same subject matter. He rightly discounted the action in the
magistrates’ court relating to unpaid stamp duties and the failure to provide a
bank guarantee. Dukada AJ had regard to the submission on behalf of
Grindstone, that cancellation on the basis of clause 23 of the lease agreement for
failing to pay the rental, after Mr S remained in occupation subsequent to the fire,
was a separate and distinct cause of action. Thus, he considered the
proceedings in the magistrates’ court for the district of Mount Currie to be based
on a different cause of action. He reached the same conclusion in relation to the
high court action. He took the view that even if he had erred in relation to the
question of lis pendens he had a residual discretion which he would have
exercised in favour of Grindstone.

[11] Having dismissed the points in limine the court below went on to decide
the merits against Mr S. In respect of the allegations by Mr S concerning his
counterclaim the court below decided to grant Grindstone’s application to strike
them out on the basis that they were irrelevant. The court below confirmed the
cancellation of the lease agreement and ordered the eviction of Mr S. The court
appears to have held that the cancellation was justified on the basis of both the
destruction of the property as well as for the non-payment of rental. It should be
borne in mind that the litigation in the court below did not involve a determination
of the amount owing in respect of the arrear rental or continued occupation after
the fire or cancellation.

[12] It is necessary to record certain events that unfolded subsequent to the
judgment of the court below which are matters of concern. By the time the
application for leave to appeal was argued in the court below the eviction order

had already been executed. It appears that the court below was not informed of
this fact. Furthermore, pending the appeal, the buildings on the property had
been rebuilt by Grindstone and let to someone else. We were informed by
counsel representing Grindstone that this was done against his advice. He rightly
accepted that this conduct was deserving of censure. He assured us that since
the premises in question were let to a fully owned subsidiary a decision of this
court in favour of Mr S could be executed. These are troubling aspects to which I
will return.

Conclusions

[13] It is necessary to consider the underlying principle of the defence of lis
alibi pendens. In Nestle (South Africa) (Pty) Ltd v Mars Inc 2001 (4) SA 542
(SCA) para 16 this court said the following:
‘The defence of lis alibi pendens shares features in common with the defence of res judicata
because they have a common underlying principle, which is that there should be finality in
litigation. Once a suit has been commenced before a tribunal that is competent to adjudicate
upon it, the suit must generally be brought to its conclusion before that tribunal and should not be
replicated (lis alibi pendens). By the same token the suit will not be permitted to revive once it has
been brought to its proper conclusion (res judicata). The same suit between the same parties,
should be brought once and finally.’
This principle has been stated and repeated by the authorities over a period of
more than a century.1

[14] The proceedings in the Magistrates’ Court at Mount Currie, instituted in
June 2008, indisputably concerned cancellation of the lease agreement based on
non-payment of rental. The action instituted in the high court which preceded the
application which is the subject of the present appeal was based on the

1 Voet 45.2.7 Gane’s translation vol 6 at 560:
‘Exception of lis pendens also requires same persons, thing and cause. The exception that
a suit is already pending is quite akin to the exception of res judicata, inasmuch as, when a suit is
pending before another judge, this exception is granted just so often as, and in all those cases in
which, after a suit has been ended there is room for the exception res judicata, in terms of what
has already been said. Thus the suit must already have started to be mooted before another
judge between the same persons, about the same matter and on the same cause, since the place
where a judicial proceeding has once been taken up is also the place where it ought to be given
its ending.’

destruction of the premises. The application that is the subject of this appeal was
based on both. It is no answer to the defence of lis pendens in this case to say
that part of the claim for arrear rental is for non-payment of rental for the period
after the fire and that it is regulated by clause 23, the relevant parts of which are
set out in para 3 above. It misconceives clause 23 and the effect of a prior
cancellation for non-payment of arrear rental with amounts that may be due
because of continued occupation. Clause 23 does not have the effect of reviving
a prior cancellation and the court below was wrong to accept the submission that
this distinguished the present litigation from the preceding litigation. Importantly,
as pointed out in para 6 above, the claim for cancellation in the application that is
the subject matter of the present appeal is based on non-payment of rental for a
period that overlaps with the period on which the claim for cancellation was
based in the Mount Currie proceedings.

[15] There can, of course, be no doubt that the high court action sought
confirmation of a cancellation based on the destruction of the property, which is
one of the bases advanced in the application. One might rightly ask how many
times a cancellation must occur to take effect. It is disingenuous to suggest that
the litigation is distinguished on the basis that cancellation is sought on the basis
of non-payment of arrear rental for a different period. Had the Mount Currie
litigation been allowed to run to its conclusion the cancellation of the lease and its
termination would have been decided. Likewise, if the high court action had
proceeded to a conclusion it would have decided whether the lease had rightly
been terminated. These are the same two questions the court below was asked
to consider. As stated in para 6 above, Grindstone, in its founding affidavit, itself
stated that there is pending litigation in the high court concerning its right to
cancel the lease agreement.

[16] Courts are public institutions under severe pressure. The last thing that
already congested court rolls require is further congestion by an unwarranted
proliferation of litigation. The court below erred in not holding that against
Grindstone when it dismissed the defence of lis pendens without due regard to

the facts and on wrong principle. The court below ought not to have proceeded to
consider the merits. Furthermore, in my view, Grindstone’s failure to disclose in
its founding papers that it had despoiled  Mr S and to fully disclose all of the other
litigation referred to above was deserving of censure, at least to the extent of a
punitive costs order (see Trakman NO v Livshitz & others).2 It had come to court
with unclean hands. The court below ought to have taken a dim view of that fact.

[17] The failure by each counsel representing the respective parties to inform
the court below at the time that the application for leave to appeal of the
execution of the eviction order is baffling. I have little doubt that had the high
court been appraised of that fact it would have refused the application.
Grindstone’s conduct before and subsequent to judgment in the court below
makes it liable to a punitive costs order on appeal. The same applies to its
conduct in bringing the application in the court below. One final aspect remains.
Strictly speaking the allegations struck out by the court below were irrelevant.

[18] The following order is made:
1.
The appeal is upheld with costs on the attorney and client scale.
2.
The order of the court below is set aside in its entirety and substituted as
follows:
‘a.
The applicant’s application to strike out succeeds with costs.
b.
The proceedings are stayed pending the determination of either case
464/08 in the Magistrates’ Court for the district of Mount Currie or case 522/09 in
this court.
c.
The applicant is to pay the respondent’s costs of these proceedings on the
attorney and client scale.’

_________________
M S NAVSA
JUDGE OF APPEAL

2 1995 (1) SA 282 (A) at 288E-H.

APPEARANCES:

For Appellant:
A R Duminy

Instructed by

Elliot & Walker Kokstad

Naudes Inc Bloemfontein

For Respondent:
T J M Paterson SC

Instructed by

Bate Chubb & Dickson Inc East London

Honey Inc Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
10 March 2011
Status:
Immediate
Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal

On 10 March 2011 the Supreme Court of Appeal handed down judgment in Savvas
Socratous v Grindstone Investments 134 (Pty) Ltd, upholding an appeal against an
order of the Mthatha High Court, in terms of which the appellant was evicted from
premises from which he had conducted a supermarket business under the style of a
national supermarket chain. During September 2008 a fire had broken out at the
premises causing extensive damage. The lease agreement between the parties
provided that if the property was destroyed and proved ‘untenantable’ either party
was entitled to cancel by giving written notice to that effect.

The parties were in dispute about whether or not the building was ‘untenantable’.
The respondent gave notice in terms of the agreement. The appellant refused to
vacate. This precipitated much litigation in various courts, including litigation in terms
of which the respondent sought confirmation of cancellation of the lease and the
eviction of the appellant. The Mthatha High Court rejected the submission on behalf
of the appellant that there was litigation pending involving the same parties, based
on the same cause of action and related to the same subject matter. This court held
that the Mthatha High Court had erred in this regard.

In upholding the appeal the court said the following:
‘Courts are public institutions under severe pressure. The last thing that already congested court rolls
require is further congestion by an unwarranted proliferation of litigation. The court below erred in not
holding that against Grindstone when it dismissed the defence of lis pendens without due regard to
the facts and on wrong principle. The court below ought not to have proceeded to consider the
merits.’

The SCA also took a dim view of the respondent’s failure to disclose material facts to
the court below, including the fact that it had resorted to self-help to retake
possession of the premises at the time that it had proceeded to seek the appellant’s
eviction in the high court.

Additionally, the SCA expressed is displeasure at the actions of the appellant
pending the appeal. It had retaken possession of the premises and had let it to a
subsidiary company. The court, however, was assured that because the premises
had been let to a subsidiary company a decision in favour of the appellant could be
executed. The appeal was upheld and the eviction order was set aside. The
respondent was ordered to pay the appellant’s costs on the attorney and client
scale.