Roelof Louis Barry Slabbert NO & 3 Others v Ma-Afrika Hotels (Pty) Ltd t/a Rivierbos Guest House

The Venezia Trust (represented by the appellants as trustees) purchased a property in Stellenbosch from the respondent Ma-Afrika Hotels for R15,500,000 on 8 October 2018. The property was leased back to the respondent to operate a guesthouse business. The lease agreement, concluded on 12 February 2019, was a triple net lease for 10 years with rental payable monthly in advance without any deduction or set-off. The respondent failed to pay rentals from March 2020 onwards, allegedly due to the Covid-19 pandemic and government regulations that prohibited or restricted its business operations. By 31 December 2020, the respondent was in arrears for R872,266.98. Despite months of correspondence and attempts to resolve the matter, the Trust cancelled the lease on 7 December 2020 and sought eviction and payment of arrear rentals. The respondent defended on the basis of impossibility of performance due to Covid-19 regulations, claiming it was not obliged to pay rent during alert levels 5, 4, and 3 when it could not trade, and was entitled to partial remission during alert levels 2 and 1 when trading was restricted. The respondent's last rental payment was on 7 September 2020.

• Whether the cancellation clause in the lease agreement was unfair or unreasonable in the context of the Covid-19 pandemic
• Whether the Covid-19 regulations constituted supervening impossibility of performance (vis major) relieving the respondent from its obligation to pay rent
• Whether the principle of reciprocity and the exceptio non adimpleti contractus applied to the lease agreement
• Whether the respondent was entitled to withhold payment of rent based on an alleged entitlement to remission of rent
• Whether the lease was validly cancelled entitling the Trust to evict the respondent

1. The appeal was upheld with costs. 2. The high court order was set aside and replaced with: (a) an order evicting the respondent from the premises; (b) authorization for a writ of ejectment to be issued forthwith; (c) an order that the respondent pay the costs of Part A of the application. 3. The cross appeal was upheld with costs. 4. The determination of Part B (arrear rental claim) was remitted to the high court for adjudication.

The binding legal principles established are: (1) Where a lease agreement stipulates that rent is payable monthly in advance without any deduction or set-off, the principle of reciprocity is excluded and the lessee's obligation to pay rent is not reciprocal to the lessor's obligation to provide beneficial occupation. (2) Even where a lessee may be entitled to remission of rent due to supervening impossibility of performance, if the amount of remission is not promptly ascertainable, the lessee must pay the full rent and thereafter reclaim the remitted amount from the lessor - the lessee may not simply withhold payment. (3) Where a lease agreement contains a clear cancellation clause entitling the lessor to cancel upon failure to pay rent on the due date, the lessor is entitled to enforce that clause in accordance with the principle of pacta sunt servanda. (4) The fact that a contractual term is unfair or operates harshly does not by itself lead to the conclusion that it offends constitutional values or is against public policy. (5) For impossibility of performance to discharge a party from liability, the impossibility must be the direct and immediate cause of the failure to perform, not merely an indirect or remote cause.

The Court made non-binding observations that: (1) It acknowledged the catastrophic effect of the Covid-19 pandemic on lives and livelihoods worldwide and was not oblivious to that impact. (2) The Court noted that it was unnecessary to decide whether the restrictive Covid-19 regulations during the period 26 March 2020 to 20 September 2020 constituted supervening impossibility of performance that discharged the respondent from liability to pay rent, as the respondent failed to pay rent beyond 20 September 2020 when no government-imposed bar to trading existed. (3) The Court observed that even if remission of rent for the period up to 20 September 2020 were factored in, the respondent was still in arrears at the date of cancellation. (4) The Court noted that considerations of fairness and good faith dictate that the hardships suffered by the Trust due to non-payment of rent (including having to service mortgage bond repayments from a loan) be taken into account. (5) The Court commented that the issues raised in the cross-appeal were not complex and did not warrant the engagement of two counsel.

This case establishes important principles regarding the application of lease agreements during the Covid-19 pandemic in South Africa. It affirms the doctrine of pacta sunt servanda and confirms that parties are bound by clear contractual terms even in the face of extraordinary circumstances like a pandemic. The judgment clarifies that: (1) contractual provisions requiring rent to be paid in advance without deduction or set-off exclude the principle of reciprocity and the exceptio non adimpleti contractus; (2) even where supervening impossibility may justify remission of rent, a lessee cannot unilaterally withhold payment but must seek court determination of the remission amount; (3) commercial parties who freely enter into agreements with clear cancellation clauses will be held to those terms; (4) hardship or unfairness alone does not render a contractual term contrary to public policy or constitutional values; and (5) impossibility of performance due to government regulations must be the direct and immediate cause of non-performance, not merely an indirect or remote cause. The case is significant for commercial lease disputes, particularly those arising from the Covid-19 pandemic, and reinforces the sanctity of contract in South African law.