Transarc Investments (Pty) Ltd v DKM Healthcare (Pty) Ltd

The parties concluded a ten-year lease agreement on 13 March 2023 for erf 435 in Mthatha, with a monthly rental of R237,103 subject to 7% annual escalation. The premises were to be used as a medical services facility. The defendant failed to make regular rental payments, making only sporadic payments and remaining in arrears despite numerous notices. The plaintiff sought summary judgment for arrears of R968,449, cancellation of the lease, and eviction. The defendant admitted non-payment but claimed to have subsequently paid arrears. The defendant alleged that the premises lacked the requisite zoning for a medical services facility, which the plaintiff knew or should have known, constituting breach of contract or delict. The defendant claimed losses of R8,050,598 for March to September 2024 due to inability to operate and sought to set off any amounts owing against this loss.

• Whether the defendant had a bona fide defence to the summary judgment application
• Whether the plaintiff's alleged failure to ensure proper zoning constituted a breach of contract or delict
• Whether the defendant was entitled to withhold rental payments based on alleged lack of proper zoning
• Whether clause 11.5 of the lease agreement (no-warranty clause) was contrary to public policy
• Whether the plaintiff had waived its right to cancel the agreement through previous forbearance
• The interpretation and enforceability of contractual clauses allocating responsibility for zoning and licensing to the tenant

Summary judgment granted. The lease agreement concluded on 13 March 2023 was cancelled with effect from 1 July 2025. The defendant was evicted from erf 435 Mthatha effective 1 July 2025. The defendant was ordered to pay the plaintiff's costs of suit on an attorney-and-client scale, including costs for the postponement on 14 January 2025.

A defendant resisting summary judgment must genuinely raise a triable issue by fully disclosing facts which, if proven, would constitute a good defence; vague or incomplete allegations that fail to plead the essential elements of a defence will not suffice. In commercial lease agreements between parties with equal bargaining power, courts will enforce contractual terms allocating responsibility for zoning, licensing, and regulatory compliance to the tenant, including no-warranty clauses, unless such terms are shown to violate specific constitutional values or public policy. A tenant cannot withhold rental payments based on alleged breaches by the landlord where the lease agreement expressly prohibits such withholding. The principle of pacta sunt servanda will be applied unless the party seeking to avoid enforcement demonstrates, with proper reasoning based on the facts, that enforcement would violate constitutional values or public policy.

The court noted that the lack of requisite zoning raised questions about whether the defendant properly investigated the feasibility of operating a medical services facility before concluding the agreement, especially given the substantial contractual protection afforded to the plaintiff. The court observed that while constitutional values have infused South African contract law and courts must exercise resourcefulness in developing the common law, they must also exercise restraint and develop new doctrines incrementally as facts require, with prudent and disciplined reasoning to ensure certainty of law. The court granted a longer eviction period (until 1 July 2025) than the 21 days requested by the plaintiff, considering the nature of the defendant's healthcare business and potential prejudice to healthcare users, demonstrating the court's discretion to consider public interest factors even when granting judgment.

This case clarifies the operation of summary judgment procedures under the amended Rule 32 of the Uniform Rules of Court, emphasizing that a defendant must genuinely raise a triable issue and not merely file a sham defence. It reinforces the principle of pacta sunt servanda in commercial lease agreements between parties with equal bargaining power, particularly regarding no-warranty clauses that allocate risk and responsibility. The judgment provides important guidance on the interpretation of lease provisions allocating responsibility for zoning, licensing, and regulatory compliance to tenants, and confirms that such clauses will be enforced absent a clear violation of constitutional values or public policy. It also applies the Tudor Hotel principle that contractual provisions prohibiting withholding of rent will be enforced even when the landlord is alleged to be in breach. The case demonstrates the high threshold required to establish that a contractual term offends public policy under the Barkhuizen framework, requiring specific identification of constitutional values that are violated.