Mining Industry Pension Fund v Fartingale Design (Pvt) Ltd and Letina Undenge

The plaintiff (Mining Industry Pension Fund) and first defendant (Fartingale Design) concluded a three-year lease agreement on 23 March 2009 for ground and mezzanine floors of MIPF House, 5 Central Avenue, Harare, commencing 1 April 2009 and ending 31 March 2012. The agreed rental was US$3,200 per month plus US$990 operating costs. The second defendant stood as surety and co-principal debtor. The plaintiff failed to deliver the premises in good order and repair as required by clause 9.1 of the lease. The first defendant expended US$23,200 renovating the premises between April and September 2009 at the plaintiff's request, as the plaintiff lacked funds. The general manager of the plaintiff's managing agent (Gomba) agreed to either reimburse the first defendant or credit the cost against future rent. The first defendant paid US$30,600 in rentals from April 2009 to March 2010, but payments were often late and incomplete. No rent was paid from April 2010 onwards, though the first defendant remained in occupation. The lease was for use as a shop selling clothing and electrical goods, which contravened City of Harare zoning regulations (special offices zone 164). The plaintiff cancelled the lease on 13 July 2010 and sought arrear rentals, operating costs, ejectment, and holding over damages.

• Whether the first defendant breached the terms and conditions of the lease agreement by failing to pay rent and operating costs timeously and in full
• What quantum of arrear rentals and operating costs and holding over damages the plaintiff was entitled to recover
• Whether the breach of the lease agreement was attributable to the plaintiff's conduct, discretion or consent
• Whether the premises had been condemned by City Council and whether this excused the first defendant from paying rent and operating costs
• Whether the lease agreement was void for illegality due to contravention of municipal zoning regulations
• Whether the court could consider defences raised in evidence but not specifically pleaded
• Whether the first defendant could set off the cost of renovations (US$23,200) against the plaintiff's claims

1. Cancellation of the lease agreement confirmed. 2. First defendant and all occupants evicted forthwith from ground and mezzanine floor MIPF House, 5 Central Avenue Harare. 3. First and second defendants jointly and severally ordered to pay plaintiff US$4,101.97 with interest at 5% per annum from 2 October 2010 to date of payment. 4. First and second defendants jointly and severally ordered to pay holding over damages at US$3,200 per month from 2 November 2010 to date of ejectment with interest at 5% per annum. 5. First and second defendants absolved from the instance from paying holding over damages for operating costs from 13 July 2010 to eviction. 6. First and second defendants jointly and severally ordered to pay plaintiff's costs on legal practitioner and client scale.

1. Where a lease agreement is illegal (mala prohibita) due to contravention of municipal zoning regulations but has been acted upon, the court may intervene if justice and equity deem it proper, particularly to prevent unjust enrichment. 2. A tenant who discovers the illegality of a lease but chooses to remain in occupation and benefit from the premises cannot use the illegality as a defence to avoid payment of rent and operating costs. 3. A landlord has a common law duty to deliver leased premises in good order and repair at commencement of the lease; where the landlord fails in this duty and authorizes the tenant to carry out repairs, the tenant is entitled to set off the cost of such repairs against rent obligations. 4. A court may consider and determine issues that were fully ventilated in evidence at trial even if not specifically pleaded, provided doing so does not prejudice the opposing party. 5. Non-timeous payment of rent constitutes a fundamental breach of a lease agreement entitling the landlord to cancellation. 6. Where a lease provides for referral of disputes to an independent expert, the tenant must initiate the required written declaration of dispute; failure to do so means the landlord is not precluded from bringing court action.

The court observed that it is not the duty of the court to write a contract for parties; it is the duty of tenants to negotiate terms of payment with the landlord. The court also commented that the defendants' conduct in remaining in occupation while knowing of the illegality from December 2009 was reprehensible, justifying costs on the higher (legal practitioner and client) scale. The court noted that the rationale for allocating certain operating costs (such as security and staff costs) to tenants was found in the written lease terms, and tenants could not unilaterally decide which operating costs they would pay. The court also observed that where a bulk meter exists for utilities serving multiple tenants, apportionment based on lettable area percentage is a rational method of sharing costs in the absence of individual meters, and no alternative method was suggested by the defendants.

This Zimbabwean High Court case illustrates important principles applicable to South African law regarding: (1) the treatment of contracts that are illegal but have been performed (mala prohibita), where courts may intervene on grounds of justice and equity to prevent unjust enrichment; (2) the principle that parties who benefit from illegal contracts while knowing of the illegality cannot use that illegality as a shield to avoid payment obligations; (3) the landlord's common law duty to deliver leased premises in good order and repair; (4) the court's discretion to consider issues fully ventilated at trial even if not specifically pleaded, following principles from Robinson v Randfontein Estates and Middleton v Carr; (5) the application of set-off where a tenant has expended funds on the landlord's behalf to remedy the landlord's breach; and (6) the awarding of costs on a punitive scale where a party's conduct is reprehensible. The case demonstrates the balance courts must strike between enforcing contractual obligations and addressing illegality and unjust enrichment.