Dr Levin, a general practitioner, previously leased premises at the Promenade Centre in Camps Bay under a 2014 lease. In 2018–2019, Promenade terminated that lease due to renovations and offered him alternative premises (Shop 5B). Promenade informed Dr Levin that it no longer entered into leases with natural persons in order to avoid the application of the Consumer Protection Act 68 of 2008 (CPA). Dr Levin incorporated a company, Dr Darren Levin Inc. (DDL), which entered into a sublease and then a ten-year lease with Promenade for Shop 5B, commencing 1 October 2020. Before the lease commenced, Dr Levin secured other premises in his personal capacity. DDL failed to pay rent for October 2020, and Promenade cancelled the lease and instituted action for damages against DDL and Dr Levin personally (under s 19(3) of the Companies Act 71 of 2008 and a deed of suretyship). The appellants counterclaimed that the 2020 lease was void under ss 51(1)(a)(i), 51(1)(b)(ii), 51(3) or 4(5) of the CPA, or contra bonos mores under the common law, arguing that Promenade had required a juristic person mid-negotiation to circumvent the CPA. It was common cause that DDL was a large juristic person (asset value or turnover ≥ R2 million) to which the CPA did not apply. The high court dismissed the counterclaim.
The appeal is dismissed with costs, including those of two counsel.
(1) Section 51(1) of the CPA prohibits a supplier from making a transaction or agreement subject to a term or condition that defeats the Act's purposes or deprives a consumer of rights; it does not apply to non-contractual or extra-contractual preconditions imposed before a contract is concluded with a separate juristic person. (2) Section 4(5) of the CPA does not create substantive rights but deals with legal standing and interpretative principles; conduct contrary to the CPA's purposes must be measured against its substantive provisions. (3) A commercial lease concluded with a large juristic person to avoid the CPA is not void or contrary to public policy where the agreement reflects the true nature of the transaction, the natural person is not a vulnerable consumer within the protective scope of the CPA, and the arrangement is not a sham or disguise.
The court observed that there may be circumstances in which insisting on corporate structuring to avoid protective legislation could offend public policy if the agreement is not genuine but is disguised to conceal the true agreement. The court also expressly declined to consider the potential implications if a tenant fell within the category of vulnerable persons the CPA intends to protect.
The case clarifies the narrow scope of ss 4(5) and 51(1) of the CPA and confirms that a supplier's requirement that a natural person contract through a separate large juristic person to avoid the CPA does not automatically render the lease void, provided the final agreement is genuine and the individual is not a vulnerable consumer. It reaffirms that parties may structure their commercial affairs to avoid the application of protective legislation, and distinguishes such structuring from sham transactions. The judgment also underscores that the CPA is aimed at protecting disadvantaged and vulnerable consumers, and that its anti-circumvention provisions are not readily triggered in arm's-length commercial leasing transactions.
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