THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number: 214/2008

In the matter between:

SPEARHEAD PROPERTY HOLDINGS LTD                           Appellant
and
E & D MOTORS (PTY) LTD                                                     Respondent

Neutral citation: Spearhead Property Holdings Ltd v E & D Motors (Pty)Ltd
(214/2008) [2009] ZASCA 70 (1 June 2009)

Coram:
MPATI P, MTHIYANE, LEWIS, MAYA JJA and HURT AJA
Heard:
17 MARCH 2009
Delivered:  1 JUNE 2009
Summary:  Lease – whether an option to purchase leased property is
binding on a lessor’s successor-in-title by virtue of the rule
‘huur gaat voor koop’ – whether lease agreement ought to be
rectified.

_____________________________________________________________

ORDER

On appeal from: Cape of Good Hope Provincial Division (Zondi J sitting
as court of first instance).

The appeal is allowed with costs, such costs to include the costs of
two counsel.
The order of the court below is set aside and the following order
substituted therefor:
‘The plaintiff’s claim is dismissed with costs, such costs to include the costs
of two counsel.’

JUDGMENT
MAYA JA (Dissenting)

[1] This appeal turns on the enforceability of an option to purchase
business premises situate at Shop 1, Ottery Hypermarket Shopping Centre,
Ottery, Cape Town (the premises) which was granted to the respondent as
lessee by its erstwhile lessor, Quantum Leap Investments 230 (Pty) Ltd
(Quantum) in terms of a lease agreement concluded on 19 February 2003.

[2] During October 2002, Mr M S Adams and his wife, Mrs N Adams,
negotiated to hire premises from Quantum on behalf of a company named
Expectra 534 (Pty) Ltd (Expectra). Mr Adams was Expectra’s managing
director. Pursuant to the negotiations, Quantum and Expectra concluded an
‘offer to lease’ which was to remain binding until substituted by a standard
lease agreement. To that end, Clause 10(b) of the Offer to Lease provided:

‘On acceptance of this Offer the Lessor’s standard Agreement of Lease will be prepared
and signed by both parties in substitution of this Agreement within 30 days of date
hereof. In the event that both or either of the parties refuse or fail to sign such standard
Lease Agreement, then this Agreement shall continue to bind both parties.’

[3] By agreement initiated by Mrs Adams between Quantum and
Expectra, the respondent, a Toyota car franchise with, incidentally, the same
three directors as Expectra, substituted the latter as the tenant in the final
lease agreement (the lease agreement). The respondent signed it on 19
November 2002 and commenced building alterations to the premises to suit
its trading specifications. It took occupation of the premises in February
2003.

[4] Both the offer to lease and the lease agreement granted the respondent
an option to purchase the premises. Clause 16.1 of the offer to lease
provided:
‘The landlord will provide the tenant with an option to purchase the property for R2 000
000.00 excluding VAT for a 24-month period from date of occupation, subject to
approval from Pick `n Pay [the landlord’s anchor tenant], approval from the City Council
for sub-division and approval from Quantum Leap Investments 230 (Pty) Ltd for
reciprocal access and parking agreement (See plan attached).’
These provisions were replicated in Clause 7 of the lease agreement, albeit
without the conditions relating to VAT and the various forms of approval
from Pick `n Pay, the City Council and Quantum (I shall deal with the
omission of the conditions later) and read:
‘Area of Leased Premises:
7.1
This lease automatically entitles the tenant with the first option to purchase the
said property as per annexure “E” [the site plan] within 2 years of date of

signature hereof, the property totalling 3445sqm i.e. 1779sqm in addition to the
leased premises.
7.2
The said property referred to in 7.1 above, shall constitute the entire area leased in
terms hereof i.e. 847sqm plus an additional 529sqm for the extension and 290sqm
for the undercover vehicle display, totalling 1666sqm.
7.3
It is further hereby expressly agreed that the tenant will be entitled to upon
signature hereof also utilize the additional space referred to above (819sqm)
which is situated at the front of the leased premises.’

[5] A few days after Quantum signed the lease agreement, on 25
February 2003, it sold the entire shopping centre to the appellant which took
transfer on 15 June 2003. It is clear from the relevant deed of sale concluded
by Quantum and the appellant that the latter had notice of the respondent’s
option at the time of purchase as clause 6.4.2, one of its warranty provisions,
provides:
‘The Seller [Quantum] warrants and undertakes to the Purchaser [the appellant] … no
agreements have been entered into by the Seller whereby any restrictive conditions or
servitudes or other real rights attach to the property or in terms of which any person,
natural or corporate, is entitled to obtain any real rights to the property, save for existing
tenant, Ottery Toyota, [the respondent] who have limited rights to purchase their section
subject to a subdivision of the land.’ (My emphasis.)

[6] Shortly after transfer, during June or July 2003 according to the
pleadings, the respondent sought to exercise the option against the appellant
by way of an undated letter. In correspondence that followed, the appellant
pointed out that the respondent’s option was subject to the conditions
reflected in the offer to lease. This was denied by the respondent. The final
letter from the appellant’s attorneys, dated 28 October 2004, reads:

‘Our client considers that it is bound by the option agreement but that due to an error
common to the parties, the three conditions contained in the offer to rent were not carried
forward into the ultimate lease agreement and that the lease agreement accordingly falls
to be rectified.’

[7] The respondent had, in the meantime, obtained a written undertaking
from Pick `n Pay that the latter did not object to the respondent’s
contemplated purchase of the premises. More correspondence flowed
between the parties but the impasse remained. Consequently, the respondent
instituted action proceedings against the appellant in the Cape High Court.
The basis of its claim, which was pursued in this court, was that the
appellant substituted Quantum and was bound by the option, which was an
integral part of the lease agreement, as Quantum’s rights and obligations
concerning that agreement were assigned to it through the purchase and that
the appellant had accepted and implemented such assignment. It was
alternatively contended that the appellant had acknowledged the option’s
existence and exercise albeit in different terms. The assignment therefore
arose from the rule ‘huur gaat voor koop’ – hire takes precedence over sale
– alternatively clause 6.4.2 of the deed of sale and the appellant’s letters
acknowledging the option.

[8] The appellant raised various defences, including that it had not
become party to the option the purported exercise of which it contended was,
in any event, invalid for failure to comply with the provisions of s 2(1) of the
Alienation of Land Act 68 of 1981 (the Act).1 It also counterclaimed for

1 Section 2(1) of the Act provides: ‘No alienation of land after the commencement of this section shall,
subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation
signed by the parties thereto or by their agents acting on their written authority.’

rectification of the lease agreement to incorporate the disputed conditions in
the event that a finding was made in the respondent’s favour.

[9] The matter was heard by Zondi J, who, on the strength of the
respondent’s submissions, ordered the appellant to procure the approval of
the Cape Town City Council for the subdivision of the premises and effect
transfer to the respondent, but dismissed its counterclaim for rectification.
The learned judge then granted the respondent leave to appeal to this court
only in respect of the validity of the option. Upon further application to this
court, the appellant was granted leave to appeal against the dismissal of its
counterclaim and a directive was issued for all the issues to be determined
simultaneously.

[10]  The issues on appeal2 are (a) whether the option became binding
upon the appellant as a result of its purchase of the premises by virtue of
either the operation of the rule ‘huur gaat voor koop’ or on any other legal
basis; (b) whether the respondent’s exercise of the option against the
appellant gave rise to a valid agreement of sale which met the requirements
of the Act notwithstanding the absence of a new written deed of sale; and, if
the answer to (a) and (b) is ‘Yes’, (c) whether the terms of the option ought
to be rectified as claimed by the appellant in its counterclaim.

[11]  In sum, the appellant’s contentions before us were (a) that the
operation of the rule ‘huur gaat voor koop’ does not, as a matter of law,
result in the transfer from the original lessor to the new owner of the rights

2 Some of the issues argued in the court below and raised in the appellant’s heads of argument in this court
as grounds of appeal were correctly abandoned at the commencement of argument before us.

and obligations contained in an option to purchase immoveable property
reflected in a lease agreement upon the sale of the property; (b) that the said
rights and obligations are not incidents of the lease which can be transferred
to the new owner, and thus remain effective only between the lessee and the
original grantor of the  option; and (c) that the option must be signed by both
the grantor and the grantee to amount to a written deed of alienation as
envisaged by s 2(1) of the Act – one signed by both parties or their agents
acting on their written authority – to be enforceable.

[12]  In considering whether the ‘huur gaat voor koop’ rule is relevant to
the resolution of the issues it is necessary to examine briefly its source and
the development of the principles which relate to it. In that regard, the
following may be gleaned from various texts on our law and decisions of our
courts.3 In Roman law a lessee did not have a real right in the leased
property, but merely enjoyed a personal right against the lessor on the lease
contract. If the lessor sold the property the buyer could generally evict the
lessee as he had no duty to recognise the lessee’s rights of occupation under
the lease, unless he had undertaken to do so.

[13]  As a result of the lessee’s untenable situation and a need to cure the
inequity, the rule evolved from local customs and legislation relating to the
lease of land and housing in parts of the Netherlands and Holland as an
equitable measure to give the lessee security of tenure where the leased

3 Scrooby v Gordon & Co 1904 TS 937; Boshoff v Theron 1940 TPD 299; Archibald v Strachan 1944 NPD
40; J C De Wet ‘“Huur gaat voor koop” and the Proviso to Section 2 of the General Law Amendment Act,
No 50 of 1956’ (1970) 87 SALJ 137; J C De Wet (1944) 8 THRHR 74; W E Cooper ‘Landlord And Tenant’
2 ed p 274; A J Kerr ‘The Law of Sale and Lease’ (1984) p 277; De Jager v Sisana 1930 AD 71; De Wet v
Union Government 1934 AD 59; Thipa v Subramany 1954 (4) SA 126 (N); Kessoopersadh en `n ander v
Essop en ‘n ander 1970 (1) SA 265 (A); Mignoel Properties (Pty) Ltd v Kneebone 1989 (4) SA 1042 (A);
Gennae-Wae Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd 1995 (2) SA 926 (A).

property was alienated. It became part of Roman-Dutch law and, ultimately,
South African law in that form.4 The rule therefore has its origins in
equitable principles and, apart from the fact that it applies to agreements of
the letting and hiring of land and buildings, has never been clearly defined
regarding its precise scope and consequence.

[14]  This much is, however, settled in our law: successors in title to
owners of leased property are bound to recognise the existence of the lease
and an ex lege substitution of the purchaser for the lessor-seller takes place
in the lease upon sale of such property. Thus, the rule relieves the seller of
all rights and obligations flowing from the lease which are transferred to the
buyer on transfer.5 This view found expression in the Mignoel Properties6
decision on which the respondent heavily relied. There, this court said:
‘[O]nce the lessee elects to remain in the leased premises after a sale, the seller ex lege
falls out of the picture and his place as lessor is taken by the purchaser. No new contract
comes into existence; all that happens is that the purchaser is substituted for the seller as
lessor without the necessity for a cession of rights or an assignment of obligations. On
being so substituted for the seller, the purchaser acquires all the rights which the seller
had in terms of the lease, except, of course, collateral rights unconnected with the lease.’
This position has been endorsed in later decisions of this court: Gennae-Wae
Properties7 and SA Breweries Ltd v Van Zyl.8

[15]  A question arises whether it can be accepted on the basis of these
principles that in stepping into Quantum’s shoes in terms of the lease
agreement, the appellant also acquired the obligation relating to the

4 Graham v Local & Overseas Investments (Pty) Ltd 1942 AD 95.
5 See also 14 LAWSA 2 ed para 45.
6 At 1050J-1051A.
7 1995 (2) SA 926 (A) at 937B.
8 2006 (1) SA 197 (SCA)  para 7.

respondent’s option as its counsel urged upon us. An apparent difficulty
which presents is that the case raises a novel issue as none of our courts, and
certainly none of the authorities referred to above, have ever pertinently
determined the extent of the effect of the ‘huur gaat voor koop’ rule on a
lease agreement containing an option to purchase leased immovable
property. By and large, our courts have considered the relevance of the rule
in the context of options to renew, rights of pre-emption and cession.

[16]  There is, nevertheless, persuasive authority to the effect that an
option to purchase may, in appropriate circumstances, be binding on a new
owner. Authors W E Cooper9 and A J Kerr10 are of the view that the proper
approach in determining the applicability of the ‘huur gaat voor koop’ rule
is to ask whether or not the option is an integral part of the agreement, such
as where it was an inducement to contract or its presence had a bearing on
the rent agreed upon, unless it is supplementary to the main agreement – the
question whether the option is separate from the lease agreement largely
depending on the interpretation of the contract as a whole.11 The authors’
reasoning is that if the option impacts on the determination of the rental to
which the new owner is entitled, it must then follow that such new owner is
bound by it as he becomes the lessee’s debtor in toto,12 unless the option
forms a separate contract.

9 Landlord and Tenant 2ed (1994) at 300-302.
10 The Law of Sale and Lease  3ed (2004) at 42.
11 Banket Holdings (Pty) Ltd v Levy 1955 (4) SA 74 (SR) at 76; Uys and another v Sam Friedman Ltd 1935
AD 165 at 166.
12 Scrooby v Gordon & Co (supra) at 945; De Jager v Sisana (supra) at 82; De Wet v Union Government
(supra) at 63; Kessoopersadh v Essop (supra) at 282-3; Creeser v Smit 1948 (4) SA 302 (T); Boshoff v
Theron (supra) at 305.

[17]  In counter – and I shall deal incrementally with each leg of the
argument outlined in para 11 as it developed – counsel for the appellant
started with the submission that only the incidents of the direct relation of
the lessee and lessor ie those arising in relation to occupation, and not those
that may relate to dominium of the property, such as an option to purchase,
are transferred in terms of the ‘huur gaat voor koop’ rule. He relied for this
contention on Shalala & another v Gelb13 and Hirschowitz v Moolman &
others.14 The gist of the remarks of the provincial courts in these decisions,
made in passing as the appellant properly acknowledges, is that an option to
purchase is a collateral obligation undertaken by the original lessor and that
the rule has no application as between competitors for dominium.

[18]  With respect, I do not agree with this approach. It is similar to Prof
De Wet’s view,15 which, as is pointed by Cooper,16 is based on the premise
that a new owner does not become the lessee’s debtor and is obliged only to
suffer the lessee’s rights of use, contrary to the decisions of our courts that a
new owner is bound by all the material terms of the lease and upon transfer
of ownership the lessor is divested of his obligations to the lessee. This view
was roundly rejected by this court in Mignoel Properties.17 There, Friedman
AJA reiterated the view expressed in Kessoopersahd18 that the rule, being a
creature of practical considerations of fairness, is sui generis in nature and is
not subject to a strict application of the law of contract, a factor which he
said De Wet overlooked.

13 1950 (1) SA 851 (C) at 865.
14 1983 (4) SA 1 (T).
15 (8) 1944 THRHR 74; De Wet & Van Wyk Die Suid-Afrikaanse Kontraktereg en Handelsreg 4ed (1978).
16 Landlord and Tenant 2ed (1994) at 302.
17 At 1049B-F.
18 1970 (1) SA 265 (A) at 283B-C.

[19] But, despite my disagreement with Ogilvie Thompson J’s view in the
Shalala v Gelb decision19 that options to purchase are not protected by the
‘huur gaat voor koop’ rule, I nonetheless find his comments on the scope of
the tenant’s right to renew the lease instructive. The learned judge found that
considerations of principle and convenience and our courts’ interpretation of
the rule dictated that the renewal period provided for in a lease, even one of
which the purchaser was ignorant, falls to be included in the protection that
the rule accorded to the tenant.

[20] The basis of this finding – which was limited to the right to renew a
lease because it ‘is an extension of the duration of a tenant’s right of
occupation… which the rule … is designed to protect’ and ‘forms a very
material part of his interest in the land’ – is expressed in the following
remarks:20
‘As regards the conditions of the existing lease, the purchaser is … admittedly bound –
virtually in the position of the landlord vis-à-vis the tenant … Since the tenant must pay
his rent to the purchaser, the original landlord’s right to claim rent in consideration of the
tenant’s occupation is gone; and there is thus much to be said, both on grounds of
convenience and of equity, for the view that the obligation to recognize a renewal of the
lease should likewise pass from the original landlord to the purchaser. The alternative is
to leave the tenant with an action for damages for breach of contract against his original
landlord: but it was to avoid that very result that the Roman-Dutch Law departed from
the Roman Law whereunder the tenant had only a personal right … and applied the
doctrine of huur gaat voor koop to the tenant’s right of occupation.’

19 1950 (1) SA 851 (C).
20 At 862.

[21] The learned judge further took the view that ‘[i]f the innocent
purchaser is to be held bound by the existing lease because, had he enquired,
he would have ascertained that there was a tenant in occupation of the
premises under a lease, the same reason exists for holding him bound by a
right of renewal of that lease which right, had he made a proper enquiry,
would have been revealed to him.21

[22] I see no reason why these considerations should not apply to an option
to purchase, which is a material component of and was a key motivating
factor in the conclusion of the lease agreement. Our courts have made it
clear that if an option to purchase is incorporated in a lease, principles
similar to those on options to renew apply.22 This view was expressed by
this court in Mittermeier v Skema Engineering (Pty) Ltd,23  where Smuts
AJA had to decide the longevity of an option to buy leased premises
contained in an agreement of lease which did not state when it was to be
exercised. He said:
‘It appears to me that where one finds an option to buy leased premises conferred on a
lessee in an agreement of lease, with no mention of the period within which it is to be
exercised, the agreement prima facie, and in the absence of contrary indications, means
that the option is to be exercised before the expiration of the lease. That is the way in
which leases containing a right of renewal without a clear statement of the period within
which the option to renew is to be exercised, have been interpreted in the past … There
appears to be no reason why an option to buy the leased premises should be placed on a
different footing.’

21 At 864.
22 14 LAWSA 2ed para 55.
23 1984 (1) SA 121 (A) at 126D-G.

[23]  Another example is Banket Holdings v Levy24  in which Murray CJ
relied on the judgment of Wessels CJ in Uys & another v Sam Friedman
Ltd25 for his dictum that a determination whether or not an option to
purchase is collateral to the lease depends on the interpretation of all the
terms of the agreement. In Uys, the court considered whether the lease
conferred upon the lessee an option of renewal which had influenced the
rental and said:
‘If the option to renew a lease is a term or condition of the lease, as indeed in law it is,
then it is difficult to see how it can be regarded as severable from the lease more than any
other term of the contract. Indeed the right to renew on the part of the lessee may be a
most important consideration and may very materially affect the rent payable, as we see
at once when we consider the case of a shop where the right to carry on trade in a
particular locality is an important part of the goodwill. The right to renew a lease which
may form so important a part of the contract is no different from any other term or
condition of the lease.’26

[24]  My view is further, fortified by Broome J’s skepticism of the notion
that options to purchase are collateral to a lease, expressed in Archibald &
Co v Strachan & Co27 as follows:
‘The proposition that an option to purchase is not incident to the relation of lessor and
lessee may, for what it is worth, be accepted as in accordance with our law. But the
contracting parties may insert in their contract what terms they please, and those terms,
whether or not they are incident to the relation of lessor and lessee, are manifestly
incident to the contract itself, for the parties have so made them.’

24 1955 (4) SA 74 (SR).
25 1935 AD 165 at 166.
26 At 166. See also Transvaal Mortgage Loan and Finance Co Ltd v Aronson 1904 TS 864 at 866-867.
27 1944 NPD 40 at 43.

[25] I can articulate my conviction that no inequity arises from extending
the protection afforded by the rule no better than was done by Greenberg JP
in Boshoff v Theron.28 In that case the issue was whether a seller of leased
premises was divested of his obligation to provide his tenant with a power of
attorney to enable him to draw water for watering his crops after the sale of
the property. The court held:
‘It does not seem a harsh provision that, in return for protection afforded him by the
maxim, he should be required to look to the purchaser, in place of the seller, for
performance of the lessor’s obligations. In the ordinary obligations owed by a lessor … it
can make little difference to the lessee who his lessor is, in so far as his legal rights are
concerned … [because] as regards the lessor, there is ordinarily no delectus personae; the
property itself generally affords the lessee sufficient security for the performance of the
lessor’s obligations. The position may be different where the lease provides for an
obligation on the lessor which calls for some special quality on his part … It is clear …
that the purchaser is bound by all the “material” terms of a contract of lease  entered into
by his predecessor in title.’

[26]  To further bolster the appellant’s contention, an attempt was made to
conflate the option to purchase with the right of pre-emption. It was argued
that transfer of rights and obligations ex lege cannot take place in the case of
an option to purchase for the same reason that the new owner would not
automatically be substituted for the original lessor in relation to obligations
arising from the right of pre-emption.

[27]  I find no merit in this submission because it ignores the fundamental
difference between the two rights. As was pointed out by the respondent the
right of pre-emption must be offered to the lessee and exercised before a sale

28 1940 TPD 299 at 303-304.

of the leased property to a third party. Where the lessee declines to purchase
the property, the owner may then sell to a third party. This means that by the
time the third party comes on to the scene the pre-emptor has already
disappeared. The right has been extinguished. There is therefore no room for
a substitution and there is no one to replace.

[28]  Neither am I persuaded by the contention that the approach advocated
by Cooper and Kerr, whether or not an option falls within the ambit of the
‘huur gaat voor koop’ rule, must depend upon the facts of each case and on
the severability or otherwise of the right from the main agreement, was
wrong because (a) it improperly sought to import principles applicable to
options to renew a lease contract to options to purchase  and (b) would result
in uncertainty contrary to the objectives of s 2(1) of the Act. Examples given
in support of the latter submission were that a determination of questions
whether the grant of the option influenced the fixing of the rent and the
identity of the party against whom the option could be exercised had the
potential of creating disputes of fact and conflicting interpretations.

[29] As I have said, I have no difficulty with the impugned approach.
Reference must again be made to the sui generis nature of the rule and the
fact that our courts accepted, early on, that the rule was not invariable in its
operation and did not produce the same result wherever it was applied.29

[30]  I have attempted to show in paragraph [22] that the first concern has
no basis as principles relating to options to renew are equally applicable to
options to purchase. The perceived risk of uncertainty is, in my view,

29 See Graham v Local and Overseas Investments (Pty) Ltd 1942 AD 95 at 111.

similarly baseless.  The exclusion in Mignoel Properties30 of ‘collateral
rights unconnected with the lease’ from the rule’s protection, without
specifying what those rights are, indicates a determination of those rights on
a case by case basis. And the relevance of s 2(1) of the Act needs first to be
established before its requirements are imposed on the case. In any event,
our courts have the means and are capable of resolving disputes of fact
wherever they arise.

[31] Mindful of the dangers of arguing by way of analogy, I nevertheless
find resonance in the remarks of Corbett CJ in Administrator, Transvaal v
Traub.31 The remarks related to the doctrine of legitimate expectation which,
albeit a different concept from the ‘huur gaat voor koop’ rule existing in a
different legal sphere, similarly evolved as a concept based on equitable
principles, to promote procedural fairness in administrative decision-making,
from ‘judicial attempts to mediate between individual interests and
collective demands in the modern administrative state’.32 Notably, the
learned chief justice expressed no qualms with the fact that the concept,
which is not well defined, is applied on a case by case basis and merely
sounded this caution:33
‘[W]hereas the concepts of liberty, property and existing rights are reasonably well
defined, that of legitimate expectation is not. Like public policy, unless carefully handled
it could become an unruly horse. And, in working out, incrementally, on the facts of each
case, where the doctrine of legitimate expectation applies and where it does not, the
Courts will, no doubt, bear in mind the need from time to time to apply the curb.’

30 At 1051A.
31 1989 (4) SA 731 (A).
32 Prof Robert E Riggs (1988) 36 American Journal of Comparative Law at 395.
33 At 761E-G.

[32]  In sum, I consider that the answer lies in whether the respondent’s
option was a material part of the lease agreement. There is evidence
available, which was adduced at the trial, from which the parties’ intention
in this regard may be ascertained. I may just point out that the court below
had made adverse credibility findings against the appellant’s witness, Mr
Codron, who had represented Quantum both in the lease negotiations and the
subsequent sale transaction.

[33]  There was, happily, no controversy regarding the evidence relevant
for this part of the enquiry. It seems to me that this issue may be disposed of
shortly by reference to a portion of Codron’s testimony-in-chief. He was
examined as follows:
‘Do you recall when the reference to an option to purchase was first raised?
Prior to signing the offer to lease the issue was raised because of the substantial amount
of money being put in by [the respondent].
…
And it was raised in what context?
If we would consider selling [the respondent] the property in future.
…
And what was your response to the proposal with regard to an option?
I discussed it with my partner who viewed it favourably as long as certain conditions
were adhered to.
Firstly, how did you arrive at the [option] price?
We projected the rental going forward for twenty-four months. That was the R18 000,00
a month [rental] escalating – I can’t recall what the escalations were – but escalating over
twenty-four months. And then applying a rate of capitalization on the asset at that point.
That came to – we were satisfied with R2m plus VAT at that point … amenable to
granting an option, but subject to conditions.’

[34]  It is clear from this evidence that the substantial improvements that
were going to be effected by the respondent on the premises directly
influenced the amount of rental that was to be paid therefor and vice versa. It
further provides ample support for the respondent’s version testified to by
one of its directors, Mr Karriem, that without the grant of the option it would
not have expended R2m towards improving premises that did not belong to
it which it could not recoup at the expiry of the lease, and that without the
option there would have been no lease. Without a shadow of doubt, the
option was intended to be an integral, material part of the lease agreement.34
In my view, it is binding on the appellant.

[35]  It is binding for another reason too. The appellant agreed to clause
6.4.2 in the deed of sale and, upon transfer, engaged in correspondence with
the respondent acknowledging the option. It was, however, argued on its
behalf that the clause was merely intended to put it on guard that Quantum
owed an obligation to the respondent in order to protect it from a claim for
damages in the event that the respondent sought to enforce the option against
it; that it was, in any event, vague and did not indicate which agreement it
referred to, alternatively that it referred to the offer to lease to which the
respondent was not party, because of its mention of ‘subject to subdivision’.

34 There is another debate relating to the view that a new owner is bound by ‘all the material terms’ of the
lease or ‘terms integral’ to the lease. Authors such as W E Cooper Landlord and Tenant  2ed (1994) pp 297
– 300; A S Mathews 1966 Annual Survey 116, De Wet (whose views relating to the scope of the maxim,
have nevertheless, since been dismissed by this court as indicated) (1944) 8 THRHR 241 have, for a variety
of reasons, criticized the view. The reasons include that it may be difficult to determine which terms are
material or non-material and that as the lessor’s substitute, the new owner should be bound by all the terms
of the contract. I do not propose to engage in the debate as none of these concerns arise in the present case.

[36]  I find no ambiguity in the clause. It is so that it does not expressly
refer to any specific agreement. It must, however, be considered that in
terms of clause 10(b) of the offer to lease, Quantum’s ‘standard Agreement
of Lease would be prepared and signed by both parties in substitution’
thereof on acceptance of the offer. The lease agreement therefore superceded
the offer to lease as it had been signed when the deed of sale was concluded
and was the only agreement in existence at the material time. It is only
reasonable to assume that that fact would have been brought to the
appellant’s attention or that it would have itself discovered it in its due
diligence exercise specified in the deed of sale.

[37]  In any event, the clause refers to ‘the existing tenant, Ottery Toyota’.
That is the respondent’s trading name. The reference to it excludes any
possibility that the clause could refer to Expectra, the lessee in the offer to
lease which exited the scene when the lease agreement was concluded. I also
think that nothing turns on the reference to the subdivision of the premises
which was reflected only in the offer to lease. Such condition is, in any case,
implied by law, and it should be noted that the other disputed conditions
(included in the offer to lease but not in the lease itself) are not mentioned in
clause 6.4.2, which points to a reference to the lease itself.

[38]  I am satisfied in the circumstances that the appellant accepted the
validity of the option and its binding effect upon itself albeit, perhaps,35
subject to the disputed conditions. On the assumption that the finding of an
ex lege substitution of the appellant as lessor in Quantum’s place is not
sufficient to meet the requirement of a written option to purchase signed by

35 I deal more fully with the fate of the disputed conditions hereinbelow.

its grantor in terms of the provisions of s 2(1) of the Act, my view is that
Clause 6.4.2 fulfils such requirement.

[39]  In the premises, I find that a valid option agreement exists which was
capable of being exercised and was in fact validly exercised by the
respondent. These findings dispense with the need to consider a further
string to the appellant’s bow, that there is an array of remedies available to a
lessee that it can invoke against the original lessor to protect its interests,
such as a claim for specific performance or damages or an interdict which
divests from the respondent any need for the protection offered by the ‘huur
gaat voor koop’ rule.

[40]  It now remains to consider the appellant’s counterclaim for
rectification. The appellant seeks rectification of the option agreement by the
insertion of the words ‘excluding VAT’ after the option price and, at the end
thereof, the phrase ‘subject to approval from Pick `n Pay, approval from the
City Council for sub-division of the property and approval from Quantum to
a reciprocal access and parking agreement’.

[41]  There was conflicting oral evidence regarding the omission of the
disputed conditions in the lease agreement. According to Karriem, the
respondent successfully negotiated the exclusion of the conditions through
the Adamses and the lease agreement was accordingly prepared by the
appellant to reflect the changes. Codron, on the other hand, denied any
agreement to omit the conditions. He testified that the lease agreement was a
different document from that drawn by the appellant’s agent and furnished to
the respondent for signature, presumably amended unilaterally by the

respondent’s attorneys. He noticed the omission before signing the lease
agreement and contacted Mrs Adams to enquire about the unauthorized
changes. Mrs Adams acknowledged the mistake and they agreed to an
addendum to be drawn by the appellant rectifying the situation. In the
meantime, he signed the lease agreement in its unchanged form to
accommodate the respondent which needed it urgently to secure finance.
Inexplicably, the addendum was never signed and he did not know what
finally happened to it. The court below dismissed Codron’s testimony in this
regard as improbable.

[42]  It was argued before us that the basis for the appellant’s claim for
rectification set out in its pleadings, a bona fide common error, was not
established by the evidence and that the addendum referred to by Codron
was similarly not pleaded by the appellant. Parties should, of course, define
the issues in their pleadings so that they each know what case they have to
meet36 and should, therefore, be limited to such pleadings.37 However, it is
equally trite that since pleadings are made for the court and not the court for
the pleadings, it is the duty of the court to determine the real issues between
the parties, and provided no possible prejudice can be caused to either, to
decide the case on those real issues.38

[43]  Thus, whilst there may be merit in the respondent’s contentions in
this regard, I do not consider myself bound to decide the issue on the basis
of the inconsistent evidence. The reason is that the parties’ intention

36 See, for example, Robinson v Randfontein Estates GM Co Ltd 1925 AD 173 at 178.
37 Imprefed (Pty) Ltd v National Transport Commission 1993 (3) SA 94 (A) at 107G-H.
38 Collen v Rietfontein Engineering Works 1948 (1) SA 413 (A); Middleton v Carr 1949 (2) SA 374 (A);
Shill v Milner 1937 AD 101.

regarding the terms of the lease is readily ascertainable from the option
granted by Quantum to the respondent. I believe that it would be remiss of
this court to ignore such clear, objective evidentiary material which was
fully canvassed at the trial where none of the parties can claim to have been
misled by the state of the pleadings.

[44] The validity of the offer to lease in which the disputed conditions
were contained was not brought into question. As stated above, in terms of its
clause 10, the signed offer had the status of a binding lease until substituted by
a standard lease agreement. Significantly, in the event that a standard lease
agreement did not come into being, the offer to lease would continue to bind
the parties. It could be no clearer from the plain language of this clause that
the intention of the contracting parties was that the provisions of the offer
would be transposed to the lease agreement in their entirety, failing which
they would remain bound by its terms. That being so, it must be accepted that
the disputed conditions were intended to be part of the lease agreement and
that their omission from this document was an error. The appellant is,
therefore, entitled to rectification in the terms it proposes.

[45] In the result, I would dismiss the appeal but order rectification of the
lease agreement as prayed in the counterclaim; each party to pay its own costs
at both tiers of the proceedings in view of the substantial success which they
have both enjoyed.
___________________
MML MAYA
JUDGE OF APPEAL

________________________________________________________________________

JUDGMENT

HURT AJA (MPATI P, MTHIYANE, LEWIS JJA concurring):

[46] I have had the benefit of reading the judgment prepared by my
colleague, Maya JA. Unfortunately, I find myself in respectful disagreement
with her conclusion that a valid agreement of sale resulted from the exercise
of the option.

[47] The background facts have been set out in detail by Maya JA, but it is
convenient to recount those which I regard as particularly pertinent to the
view which I take. For ease of identification I shall refer to the parties as
follows: the original owner of the leased property with which this appeal is
concerned will be referred to as 'Quantum', the appellant as 'Spearhead' and
the respondent as 'E and D Motors'. In October 2002 Quantum let premises
in a shopping centre to a company called Expectra 534 (Pty) Ltd. The
written lease agreement contained a provision to the effect that the tenant
was granted an option to purchase the leased premises plus an additional
area in the shopping centre, within two years, at a price of R2 million,
subject to certain conditions. It was agreed that this lease agreement was in
provisional form and was to remain in force pending the conclusion of a
'final agreement'. [49]
In February 2003 the 'final agreement' was signed,
but, in the interim, it had been agreed that E and D Motors would be
substituted as lessee (E and D Motors having the same directors and
shareholders as Expectra 534 (Pty) Ltd). The existence of the option was
confirmed in this lease agreement (this time the grant being in favour of E

and D Motors) and a plan of the shopping centre was annexed to the lease
showing the area which was to be subject to the option (and which was
approximately twice the size of the premises actually leased by E and D
Motors). No reference was made in this version of the option to the
conditions previously stipulated in the lease signed by Expectra. Shortly
after this 'final lease' was concluded, Quantum sold the shopping centre to
Spearhead. The contract of sale contained a reference to the existence of the
option in terms which will be set out later. At some time shortly after
transfer of the property to Spearhead, E and D Motors exercised the option
in a signed letter addressed to Spearhead, tendering to pay the purchase price
of R2 million. After certain correspondence was exchanged, Spearhead
adopted the stance that it was not obliged to honour the option. E and D
Motors then instituted the action for specific performance, ie transfer of the
property to them against their tender of payment.

[48] In the court below, Zondi J held that Spearhead had purchased the
shopping centre with knowledge of the existence of the option in favour of E
and D Motors. He placed emphasis on correspondence by Spearhead's
attorney after E and D Motors' purported exercise of the option, in which it
was stated that Spearhead was 'bound' by the exercise.39 As to the contention
that there was no compliance with the formalities required for a valid
alienation of immovable property, the learned judge held, as I understand his
judgment, that the principle of huur gaat voor koop had the effect, ex lege,
of substituting Spearhead for Quantum for all purposes of the lease
agreement. These 'purposes' included the grant of the option and, I presume,
the legal consequence of the substitution was that Spearhead was to be

39 It should be noted that the attorney was not authorized in writing to write this letter to E and D Motors.

regarded as the grantor of the option and Quantum's signature of the lease
was to be regarded as that of Spearhead once the property had been
transferred to Spearhead.40 If my interpretation of the findings of the court
below is correct, then I consider that the learned judge overstated the law as
it currently stands with regard to the consequences of the huur gaat voor
koop principle.

[49] In argument before us, the primary contention by Mr Mullins, for
Spearhead, was that his client was not bound by the option to purchase. He
submitted that the obligations in respect of the option were not transferred to
Spearhead when it took transfer of the property pursuant to the sale. He
further contended that no valid 'deed of alienation', complying with the
formalities prescribed by the Alienation of Land Act 68 of 1981 ('the Act'),
had come into being as a result of the cumulative transactions between the
parties and that the claim for specific performance of a contract of sale by
Spearhead to E and D Motors must accordingly fail. Mr van Riet, for E and
D Motors, based his claims to validity of the exercise of the option on two
contentions. The first was that the transfer of rights and obligations pursuant
to the huur gaat voor koop rule occurred ex lege and, as such, the
substitution of Spearhead for Quantum was automatic. Accordingly, so the
contention ran, the option which had been granted and signed by Quantum
must be treated as an option signed by Spearhead, so that the exercise by E

40 This is my interpretation of the learned judge's approach from the following passage in para 39 of his
judgment, in which he dealt with the contention that there was no compliance with the statutory formalities:
'The option agreement in the present matter was transferred by virtue of the principle huur gaat voor koop
from Quantum Leap to the defendant [Spearhead] which entitled the plaintiff [E and D Motors] to exercise
its rights as against the defendant directly. The option which the plaintiff seeks to exercise is contained in
the lease agreement which it concluded with Quantum Leap. In other words the defendant was substituted
ex lege for Quantum Leap (the original lessor) and the latter fell out of the picture. On being substituted the
defendant acquired by operation of law all the rights and obligations of Quantum Leap under the lease.'

and D Motors must, in law, bring into being a valid contract of sale by
Spearhead to E and D Motors. Mr van Riet's second contention was that the
written lease by Quantum to E and D Motors, which had been signed by
both of them, and the contract of sale signed by Spearhead, obliged
Spearhead to honour the option if exercised by E and D Motors. The
exercise of this option by the signature and transmission of the letter from E
and D Motors to Spearhead, he contended, would in any event bring into
existence a contract complying with the formalities prescribed by the Act.

[50] Two comparatively recent decisions by this court have restated the
basic principles upon which the huur gaat voor koop rule is to operate. The
first is Mignoel Properties (Pty) Ltd v Kneebone 1989 (4) SA 1042 (A), in
which Friedman AJA held that:41
'. . . once the lessee elects to remain in the leased premises after a sale, the
seller ex lege falls out of the picture and his place as lessor is taken by the
purchaser. No new contract comes into existence; all that happens is that the
purchaser is substituted for the seller as lessor without the necessity for a
cession of rights or an assignment of obligations. On being so substituted for
the seller, the purchaser acquires all the rights which the seller had in terms
of the lease, except, of course, collateral rights unconnected with the lease.'
The second decision is Genna-Wae Properties (Pty) Ltd v Medio-Tronics
(Natal) (Pty) Ltd 1995 (2) SA 926 (A) at 939, where Corbett CJ extended the
principle stated in Mignoel by confirming that the lessee does not have an
election whether to proceed with the lease – he is bound, just as the
purchaser is, to the terms of the lease as they stood between him and the

41 At 1050I ─ 1051A.

original lessor. Apart from this gloss, the decision in Genna-Wae endorsed
the principle quoted above from Mignoel.

'Collateral rights unconnected with the lease.'
[51] The authors Cooper42 and Kerr43 suggest that the question of what are
'collateral rights unconnected with the lease' must be decided on a casuistic
basis, dependent upon the intention of the parties as gleaned from a
consideration of the contract as a whole (or possibly the contractual matrix,
where more than one contract is involved). Options to renew present no
difficulty. It has long been the position that such options, constituting, as
they do, obligations due by the landlord in his capacity as such, are a
fundamental part of the lease arrangement and should not be regarded as
'collateral' or 'unconnected with the lease'.44 It is the authors' approach to
options to purchase with which I have difficulty. Stating that options to
purchase 'present a more difficult problem', Kerr45 refers to the decisions in
Ginsberg v Nefdt (1908) (25) SC 680 and Archibald & Co Ltd v Strachan &
Co Ltd 1944 NPD 40 as examples (as I understand the learned author) of
cases in which huur gaat voor koop operated in favour of a lessee who had
an option to purchase and, accordingly, against the prospective purchaser.
After then referring to the apparently contrary decision by Ogilvie
Thompson J in Shalala v Gelb the learned author states:
'With The Hon Mr Justice Cooper it is thought that the correct approach is to
enquire whether the option to purchase was an integral part of the original
lease or not; if it was, as for example where it was an inducement to

42 Landlord and Tenant (2 ed) p 303.
43 The Law of Sale and Lease (3 ed) p 442 and also writing in 14 (2) Lawsa (2nd reissue) para 46.
44 Shalala & another v Gelb 1950 (1) SA 851 (C) at 856 to 864.
45 Op cit pp 441 ─ 442.

contract, or its presence had a bearing on the rent agreed upon, then it is
protected by the rule huur gaat voor koop; if it was not, as for example when
it is clearly supplementary to the main agreement, then it is not protected.'
I very much doubt that the test thus proposed will assist in dealing with the
difficulty.

[52] It must be borne in mind that the principle of huur gaat voor koop
operates in regard to the purchaser of leased property regardless of whether
he has notice of the existence or the terms of the prior lease.46 The object of
the rule is an equitable one, namely to protect the right of the lessee to
continued occupation of the property. It is perhaps not surprising that such a
rule, which does not have its origins in one or other of the recognized
principles of contract, should give rise to vigorous debate about its effects
and its limits.47 But it can hardly be equitable to bind an innocent purchaser
to an option to purchase which may well be for a price less than that which
he has just paid to acquire the property, simply because the option forms an
'integral part' of the lease to which he has succeeded. In my view, the
problem must be approached from an objective point of view which keeps in
focus the basic object of huur gaat voor koop. On this approach, the question
is simply whether the 'collateral right' (or the collateral obligation) relates to
the lessee's real right of occupation as lessee. It seems to me that this
question can hardly ever be answered in the affirmative when it relates to the
rights and obligations flowing from an option to purchase. The guarded
statement by Ogilvie Thompson J in Shalala, to the effect that the maxim
huur gaat voor koop has no application as between competitors for

46 Shalala at 862.
47 See Kessoopersadh v Essop 1970 (1) SA 265 (A) at 282 ─ 283.

dominium48 has been criticized by the writers to whom I have made
reference earlier, but in my view it encapsulates a legal conclusion which fits
very comfortably into the scheme of application of the huur gaat voor koop
rule.

[53] An option to purchase incorporates a pactum de contrahendo in which
the grantor undertakes irrevocably to keep an offer to sell open, usually for a
specified or determinable period. The grant may be subject to certain
contingencies and/or conditions.49 The rights conferred by it are purely
personal to the grantee. Assuming that the option is granted in respect of the
leased property (for, if it is not, then it can hardly be regarded as part of the
landlord's obligations to his tenant 'as lessor'), then the anomalous situation
arises that, by selling to the purchaser, the landlord jeopardizes the pactum.
The common law in this situation (quite apart from the huur gaat voor koop
rule) is clear. If the purchaser had notice of the existence of the option prior
to purchasing, he must be taken to have bought the property subject to the
lessee's personal right against the landlord to exercise it. If the purchaser did
not have notice of the option, there is no rule in the common law (again
apart from the possible application of huur gaat voor koop) which would
render the purchaser bound to an obligation of which he was unaware. The
question is whether the development of the huur gaat voor koop principle in
our law has included, or should include, the ex lege transfer of obligations
arising out of an option to purchase, granted by the original landlord, to the
purchaser of leased property. Certainly, an examination of the reported

48 At 865.
49 Hirschowitz v Moolman 1985 (3) 739 (A) at 765 ─ 766.

decisions concerning options to purchase in this context does not reveal any
such development.

The Case Law on the Exercise of Options to Purchase.
[54] There are three reported cases in which the exercise of an option to
purchase, granted to a lessee, occurred after the original landlord had sold
the leased property.50 The first such decision is Ginsberg v Nefdt (1908) 25
SC 680. The lease in this matter included the grant to the lessee of an option
to purchase the leased property. The landlord sold the property to a third
party during the currency of the lease. The lessee applied to interdict the
transfer of the property to the purchaser. The purchaser agreed to be bound
by the lessee's option but, for some reason which is not clear, the court
granted the interdict to protect the lessee's option. It appears that the option
had not been exercised at the time when the matter came to court, nor is
there any indication as to whether the option was to be exercised against the
original landlord or the purchaser. Given that an interdict against the
purchaser was granted, though, it seems that the parties contemplated that
the option was to be exercised against the former.

[55] The second case is Archibald & Co Ltd v Strachan & Co Ltd 1944
NPD 40. Insofar as they relate to the issues in this matter, the facts are
briefly that the landlord had granted the lessee an option to purchase the
leased property, such option being incorporated in the agreement of lease.
The landlord subsequently sold the property but, for reasons which are not
recorded, transfer of the property was not passed to the purchaser. Nearly 18

50 These are, as far as I have been able to ascertain, the only three cases in which this aspect has been dealt
with.

months after the conclusion of the contract of sale, the lessee exercised his
option by directing a written acceptance of it to the original landlord. The
landlord thereupon notified the purchaser that the sale to him had 'fallen
away' by virtue of the lessee's decision to exercise the option. The purchaser
sought an order of specific performance against the landlord but his
application was dismissed. The court held that the purchaser had concluded
the contract of sale in the full knowledge of the existence of the option and
was accordingly bound to recognize the lessee's entitlement to exercise it.
Here again, the lessee had exercised the option against the original landlord
and not against the purchaser.

[56] In Van der Pol v Symington 1971 (4) 472 (T), the original lessor (who
had granted the lessee an option to purchase) had died during the currency of
the lease and the property was transferred to her son by her executor. The
lessee exercised the option against the son. The court held that the son was
bound by the option, regardless of whether he had knowledge of the lease
before he took transfer, on the basis that he was a gratuitous successor to the
original lessor. The question whether, by exercising the option, the lessee
had brought into being a written contract between himself and the son was
not considered. Nor was this an application of the principle of huur gaat
voor koop because the son had not purchased the property but had acquired
his title as an heir.51

51 There is one other decision in which an option to purchase leased property was considered in this
particular context, namely Shalala v Gelb 1950 (1) SA 851 (C) at p 862. However, it was considered only
for the purpose of differentiating it from an option to renew the lease and although Ogilvie Thompson J
made a statement to the effect that the principle huur gaat voor koop does not apply to options to purchase,
the dictum was plainly obiter and has been treated as such in subsequent cases.

[57] A significant feature of both Ginsberg and Archibald is that the option
was exercised against the grantor and not the purchaser and the court, in
each case, applied the doctrine of notice as the basis for finding that the prior
right of the lessee under his option prevailed over the subsequent right of the
purchaser to transfer of the property.52 Nor, in either of the two cases, had
there been transfer to the purchaser, and although there was a passing
reference in Ginsberg to the 'well known proposition . . . that lease goes
before sale', the court appeared to be applying the principles of a 'double
sale', and not huur gaat voor koop.The result is that there is no reported
decision in our case law to the effect that the obligations arising out of an
option to purchase are transferred ex lege and without express or tacit
assignment, to the purchaser of leased property. Nor, on the basis of what I
have set out above, is there any reason to extend the effects of the huur gaat
voor koop rule to include such a transfer.

[58] I have already indicated that such an extension would operate unfairly
against an 'innocent purchaser' (ie one who purchases the leased property in
ignorance of the terms of the agreement between the landlord and the
tenant). As to the 'purchaser with notice', the doctrine of notice, in my view,
provides adequate protection to the tenant in respect of his rights in terms of
the option, as is apparent from the decisions referred to in para 57, above.
The situation of the tenant who invokes the doctrine of notice against a
purchaser of the leased property in these circumstances has recently been
clarified by this court in Bowring NO v Vrededorp Properties CC 2007 (5)
SA 391 (SCA), particularly in paras 17 and 18. In that case the respondent

52 The remaining cases cited by Kerr in this context, viz Levy v Banket Holdings (Pvt) Ltd 1956 (3) SA 558
(FC) and Sandmann v Schaefer 1969 (4) SA 524 (SWA), deal with the question of 'collateral terms' in a
lease and not with the application of huur gaat voor koop.

had purchased a portion of a property on the basis that the portion was to be
subdivided and transferred to the respondent together with the registration of
a servitude which was to give the respondent access to the subdivision.
Before transfer or registration of the servitude, the owner of the property had
been liquidated. The liquidator sold the whole property to Investec Bank, the
contract of sale making express reference to the uncompleted sale to the
respondent and specifically recording that the property being sold did not
include the portion sold to the respondent. Investec Bank later sold the
whole property to the appellant. The contract between Investec Bank and the
appellant made no mention of the prior sale of portion of the property to the
respondent, but it was common cause that the appellant was aware of the
respondent's right to claim transfer of, and have the servitude registered in
favour of, the portion of the property.

[59] The respondent had sued the appellant for transfer of the portion of
the property to it and for an order that the appellant do whatever was
necessary to register the servitude over the remainder of the property in
favour of the respondent. The appellant had contended that the respondent
had no right to claim transfer from it, but that the doctrine of notice required
the respondent first to set aside the sale to the appellant and then to claim
transfer from Investec Bank. This defence had failed in the court of first
instance, nor did it succeed before this court. After a careful examination of
the consequences of 'double sales' to purchasers with notice, Brand JA
said:53
'(I)n the case of a servitude, application of the doctrine of notice does not
require that the transfer of the property to the purchaser be set aside so as to

53 Paras 17 and 18.

enable the beneficiary under the servitude agreement first to claim
registration of the servitude against the seller before the property is
retransferred to the purchaser subject to the registered servitude. The
beneficiary's claim is allowed directly against the purchaser (see eg Grant
and Another v Stonestreet and Others54 (supra) 7). That there is no privity of
contract between the beneficiary and the purchaser is not seen as an
insurmountable hurdle. Why then, it may in my view rightfully be asked,
should the position be any different when the same doctrine is applied in the
instance of double sales?
My suggestion is not that in the successive-purchaser situation B (the first
buyer) should always be allowed to claim transfer directly from C (the
second). The doctrine of notice is an equitable remedy and its manner of
application should be determined largely by what is considered to be
equitable to all concerned in the circumstances of the particular case. Where
the whole property is first sold to B and then to C, the most equitable
solution will probably be to restore A and C to their former position – by
ordering cancellation of the transfer and repayment of the purchase price –
before A is ordered to transfer the property to B. But in this case the position
is substantially different. (The respondent) claims transfer of . . . portion of
the railway siding only. Cancellation of the successive transfers of the whole
property to Investec and the (appellant) will therefore require that the
remainder of the property be retransferred first to Investec and then to the
(appellant). . . . No reason has been suggested, and I can think of none, why
this cumbersome and wasteful process would be in anybody's interest.'

54 1968 (4) SA 1 (A).

[60] It seems to me that, in general, the equitable process of rearrangement
contemplated in this judgment will be applicable to a situation where a
lessee seeks to enforce his right to delivery pursuant to the exercise of his
option against the original lessor, regardless of whether the option related to
the whole of the property sold or to only a portion of it. The fact is that there
is no 'equitable need' to postulate an ex lege transfer of the obligations
arising out of the option to the purchaser in order to protect the lessee's
option against a purchaser with notice.

[61] I conclude, therefore, that the obligations arising from an option to
purchase the leased property, granted by the lessor, are not, by the operation
of the rule huur gaat voor koop, transferred ex lege to the purchaser of the
property. It follows that a lessee, seeking to exercise such an option (always
assuming, of course, that the relevant contracts do not constitute an
assignment of the lessor's obligations to the purchaser) must do so as against
the grantor and not against the purchaser. Where, however, there has been a
transfer of the property to a purchaser with notice of the option, the lessee,
having thus exercised his option, will generally be able to claim transfer of
the property from the purchaser. The submissions on behalf of E and D
Motors to the effect that it was entitled to exercise the option against
Spearhead merely by operation of the huur gaat voor koop rule must, in my
view, fail.

[62] That leaves the contention by the respondent that the lease, the
contract of sale to Spearhead and the letter from E and D Motors to
Spearhead purporting to exercise the option, read together, constitute a
written deed of alienation complying with the provisions of the Alienation of

Land Act 68 of 1981. There is no doubt that the grant of the option in the
written lease by Quantum to E and D Motors constituted an offer to sell
complying with the requisite formalities.55 The fact that the written offer and
the written acceptance may be embodied in different documents is not a bar
to compliance with the Act.56 The question is whether the agreement of sale
from Quantum to Spearhead can be construed as an assignment of
Quantum's obligations in terms of the option to Spearhead, complying with
the statutory formalities. The only mention, in the contract of sale, of the
option granted to E and D Motors is to be found in clause 6.4, which reads:
'6.4
The Seller warrants and undertakes to the Purchaser –
6.4.1 the Seller is the owner of and has the absolute right to dispose
of the property to the Purchaser in accordance with the provisions of
this agreement;
6.4.2 no agreements have been entered into by the Seller whereby
any restrictive conditions or servitudes or other real rights attach to
the property or in terms of which any person, natural or corporate, is
entitled to obtain any real rights to the property, save for the existing
tenant, Ottery Toyota,57 who have limited rights to purchase their
section subject to a subdivision of the land;
6.4.3 no notice has been received by the Seller of the intention of any
authority to expropriate the property or any portion thereof nor is the
Seller aware of any intention to expropriate the property or any
portion thereof by any such authority;

55 Venter v Birchholtz 1972 (1) SA 276 (A) at 283 ─ 284.
56 Johnston v Leal 1980 (3) SA 927 (A) at p 937H;  Hirschowitz p 758B to C.
57 The trade name of E and D Motors.

6.4.4 as far as the Seller is aware the current use of the property and
buildings by the existing tenants is lawful and is not in contravention
of any applicable zoning scheme and/or conditions of title;
6.4.5 as far as the seller is aware no building encroaches over any
boundary or building line or similar restriction;
6.4.6 as far as the Seller is aware no building or improvement on any
adjoining property encroaches onto the property.'

[63] I have purposely quoted the clause in full to set clause 6.4.2 in its
context. I do not think that the clause can, by the furthest stretch of
imaginative interpretation, be construed as an assignment by Quantum to
Spearhead of any obligations, let alone the obligations arising out of the
option. Nor is it couched as an offer by Spearhead to endorse the option in
favour of E and D Motors. What the seller is saying in this clause is plainly
along the following lines: 'Take notice that there is an option which entitles
Ottery Toyota to purchase a portion of the property if the land is
appropriately subdivided'. The sale of the subdivision to E and D Motors
would not be frustrated by the fact that Quantum was no longer the owner
and, indeed, the tenor of the stipulation is simply that, if the option is
exercised (against Quantum), Spearhead may later be required  to transfer
the subdivision to E and D Motors. It is a classic situation where the doctrine
of notice would apply. But that, to my mind, is as far as the clause can be
taken.

[64] It follows that, in my view, the appeal should succeed. The following
order is made:

The appeal is allowed with costs, such costs to include the costs of
two counsel.
The order of the court below is set aside and the following order
substituted therefor:
'The plaintiff's claim is dismissed with costs, such costs to include the costs
of two counsel.'

________________________

NV HURT
ACTING JUDGE OF APPEAL

Appearances:

For Appellant:
S Mullins SC

A D Brown

Instructed by
Bernadt Vukic Potash & Getz; Cape Town

Lovius Block, Bloemfontein

For Respondent:
R S Van Riet SC

Instructed by

Harmse Kriel Inc; Cape Town

Rossouws Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

1 June 2009

STATUS:
Immediate

Spearhead v E & D Motors (214/2008)[2009] ZASCA 70 (1 June 2009)

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

The SCA today upheld an appeal by Spearhead Property Holdings (Pty) Ltd against a
judgment in the Cape Provincial Division of the High Court in terms of which
Spearhead had been ordered to transfer a portion of the property on which the Ottery
Shopping Centre in Cape Town is situated. The property in question has been leased
by the Toyota franchise, E & D Motors (Pty) Ltd since 2003 and the lease contained
an option, in favour of E & D Motors, to purchase the leased property together with
an additional area for parking. Spearhead bought the property from the original
landlord at a time when the lease to E & D Motors was already in force. The majority
of the judges held that E & D Motors was not entitled to exercise the option against
Spearhead, but that it should have been exercised against the original landlord.