Stantoll Properties CC v Tusk Investments Pty Ltd t/a Tusk Mobile and Electronics (HC-NLD-CIV-ACT-CON-2022/00139) [2024] NAHCNLD 140 (15 November 2024)

Case Title:

Stantoll Properties CC Plaintiff

and

Tusk Investments Pty Ltd t/a

Tusk Mobile and Electronics Defendant

Case No:

HC-NLD-CIV-ACT-CON-2022/00139

Division of Court:

High Court, Northern Local Division

Heard on: On the papers

Delivered: 15 November 2024

Heard before: Honourable Mr. Justice Munsu

Neutral citation: Stantoll Properties CC v Tusk Investments Pty Ltd t/a Tusk Mobile and Electronics (HC-NLD-CIV-ACT-CON-2022/00139) [2024] NAHCNLD 140 (15 November 2024)

ORDER

1. The Defendant is ordered to pay the Plaintiff’s Party and Party costs.

2. The matter is removed from the roll and regarded as finalised.

MUNSU J:

Introduction

[1] This matter became settled at mediation, prior to case management conference. However, the parties could not agree on the issue of costs. They filed heads of argument, and invited the court to decide the issue of costs, on the papers. I proceed to do so.

Background

[2] The plaintiff is the owner of the immovable property situated at Erf 6315, Extension 13, Oshana Regional Mall, Ongwediva (the leased premises). On 12 September 2013, the plaintiff and the defendant entered into a lease agreement in terms of which the defendant was to lease from the plaintiff Shop 33-34 situated on the leased premises for a fixed period of 5 years from 26 August 2013 to 25 August 2018. The lease agreement was renewed for another 5 years from 26 August 2018 to 25 August 2023.

[3] The plaintiff alleged in the particulars of claim that the defendant, in breach of the lease agreement:

1. Failed to pay the rental, alternatively the full rental, and all other monies payable monthly in advance on or before the 1st day of each month from 1 May 2020 to 31 December 2021;

2. Failed to pay on demand for all electricity and/ or water used on the leased premises and the sewerage, refuse removal and other charges payable in respect of the premises;

3. Failed to pay for the maintenance of the air conditioning;

4. Repudiated the lease agreement by cancelling same illegally. The plaintiff elected to keep the defendant bound to the lease agreement and did not accept the repudiation.

[4] In claim 1, the plaintiff sought an amount of N$ 444 154.48 for arrear rent and ancillary services.

[5] In claim 2, the plaintiff claimed the rental and other ancillary costs for the remainder of the fixed lease period (future loss of income) from 01 January 2022 to 25 August 2023, amounting to N$ 861 867.78.

[6] Under claim 3, the plaintiff demanded specific performance from the defendant to repair the damages to the leased premises and remove all signwriting.

[7] Lastly, the plaintiff claimed costs from the defendant, on an attorney-own client scale, as per clause 34.1 of the lease agreement.

[8] In its plea, the defendant disputed claim 2 (future loss of income), contending that it did not cancel the agreement illegally. The defendant pleaded that it had given the plaintiff 3 months’ notice of termination. The defendant further pleaded that if there was any loss that might have been suffered by the plaintiff, then the plaintiff failed to mitigate its loss as there was a tenant secured by the defendant.

[9] The defendant filed a counterclaim on the basis that it was entitled to remove and take possession of the furniture and fixtures in the premises on vacation of the leased premises. The defendant claimed the value thereof from the plaintiff in the amount of N$ 550 000.

[9] On 08 March 2024, the parties settled the plaintiff’s first and third claims and the defendant’s counterclaim during mediation. In terms of the first partial settlement agreement, the parties agreed that:

1. The defendant would pay the plaintiff an amount of N$ 350 000.00, which payment would be made in monthly instalments;

2. The plaintiff would take over all the fixtures and fittings in the leased premises and the defendant would have no further claim thereto nor would it be entitled to compensation in respect thereof;

3. The plaintiff’s claim 2 (loss of future income) and the legal costs would be held over for further mediation and/or litigation.

[10] The first partial settlement agreement was made an order of court on 13 March 2024.

[11] On 15 July 2024, the parties settled the plaintiff’s second claim during a subsequent mediation session. In terms of the second partial settlement agreement, the parties agreed that:

1. The Plaintiff abandons claim 2 (loss of future income).

2. Each party would pay its own legal cost in respect of the plaintiff’s claim 2;

3. Parties would proceed to argue costs in respect of the plaintiff’s claim 1 and 3 and the defendant’s counter claim.

[12] The second partial settlement agreement was made an order of court on 01 August 2024.

Submissions by the parties

[13] The plaintiff contends that, as a result of the breach of the agreement by the defendant, it had to institute legal action against the defendant and in the process, it incurred legal costs to the amount of N$ 114 510.36. The plaintiff argues that the defendant is contractually bound and liable to pay the plaintiff’s legal costs on an attorney-own client scale as agreed upon in clause 34.1 of the lease agreement. It is further submitted that there was no legal restriction that prevented the parties from entering into an agreement as they did. As such, the plaintiff submits that the court is obliged to enforce the agreement and award the plaintiff costs on the agreed scale.

[14] Furthermore, the plaintiff argues that public policy generally supports the principle of ‘freedom of contract’, a policy further reinforced by Article 21 of the Namibian Constitution, which addresses the fundamental freedoms enjoyed by all persons in Namibia, with the only exception to this rule found in Article 21(2) of the Constitution, and where certain contractual terms are deemed contrary to public policy. The plaintiff submits that neither of the exceptions apply to a contractual term where the parties agree to a specific scale of costs.

[15] The plaintiff makes reference to Intercontinental Exports (Pty) Ltd v Fowles¹ wherein the Supreme Court of Appeal of South Africa stated that:

‘A court will usually uphold a party’s freedom to contract and to give effect to any agreement reached in relation to costs.

[16] Additionally, the plaintiff argues that:

‘Where parties enter into a written agreement in terms of which costs incurred in relation to litigation would be paid at the scale of attorney and own client, the costs in that regard includes all costs incurred.’²

[17] The plaintiff contends that it was successful in its 1^st and 3^rd claims against the defendant as the defendant agreed to pay N$ 350 000 and gave ownership of the fixtures and fittings allegedly valued at N$ 550 000 to the plaintiff. It is argued that, not only is the plaintiff the successful party, but the parties are also bound to the contractual terms of the lease agreement.

[18] The defendant equally made written submissions. It admitted the plaintiff’s claim 1. It went on to submit that the plaintiff would not have succeeded in respect of claim 2 (future loss of income) for the reason that the defendant gave a 3 months’ notice to terminate the lease agreement. In respect of the plaintiff’s claim 3, the defendant argues that it was denied access to the leased premises, as such, the failure to remove the signage was of the plaintiff’s own making. Thus, the defendant contends that the plaintiff would not have succeeded with its claim 3.

[19] The defendant’s counterclaim was based on the fixtures and fittings it was entitled to remove on vacation of the leased premises. According to the defendant, such furniture and fittings were valued at N$ 550 000.

[20] The defendant goes on to submit that in determining which party is successful, the court should look to the substance of the judgment and not merely its form. The defendant cites Pennypinchers Timbercity Windhoek v Kohler³ wherein the court stated the following:

‘Although costs are generally awarded to a successful litigant, it cannot be regarded as an immutable rule that costs will always automatically follow the winning party. Rather, and in keeping with judicial discretion, a presiding officer may in fact base a cost-award exclusively upon the equities of the action. The test in making a cost-ruling is always to enquire what is just in the circumstances.’

[21] The defendant submits that the general rule that the successful party is entitled to costs is not applicable in this matter as it was settled at mediation, with the plaintiff being awarded N$ 350 000 as well as the fittings, and at the same time the plaintiff also abandoned its claim 2.

[22] The defendant further submits that it is discernible from case law that the court, in determining the issue of costs, must have regard to the material before it and that it may consider relevant factors.⁴

Discussion

[23] The award of costs is a matter wholly within the discretion of the court.⁵ The discretion must be exercised judicially.

[24] I am mindful that costs are compensatory in nature and not punitive. And, as a general rule, costs follow the event, meaning that the successful party is entitled to their costs. This rule is not to be departed from unless there are exceptional circumstances that justify some other order, such as when the claim is excessively high, the successful party engaged in improper or objectionable conduct, or the successful party sought an indulgence, among others.

[25] It is trite that a successful litigant who has failed on certain issues may not only be deprived of the costs in respect of those issues, but may also be ordered to pay the other party's costs in respect thereof.⁶

[26] The matter at hand was settled at mediation, and therefore did not proceed to trial. It has been held in other jurisdictions that where proceedings have been abandoned, discontinued or settled but the parties are unable to agree on costs, the court does not have the benefit of an event on which a costs order will follow.⁷ The following are some of the useful principles which have been applied:⁸

1. Where a party discontinues without the consent of the other parties, the other parties are entitled to costs unless the court otherwise orders.

2. Where a party effectively surrenders, it is often appropriate to make an award of costs in favour of the party receiving the effective surrender.

3. It is necessary to have regard to the parties' conduct, not to determine whether a party has acted in a manner that can objectively be characterised as unreasonable, but rather to determine whether by their respective conduct one party has, in substance, capitulated or surrendered to the other party.

4. An assessment of the degree to which the outcome achieves the relief sought is a threshold issue of significant weight in determining whether a party has effectively surrendered or capitulated (a party does not have to achieve complete success in order to establish that the other party effectively surrendered or capitulated; it is enough to demonstrate that the outcome secured sufficiently achieves the party’s purpose in bringing the proceedings).

5. It is not the function of the court to make a prediction as to the outcome of a hypothetical case in assessing the degree of success or failure achieved by a party in proceedings in which there has been no determination of the merits.

6. In some cases it is relevant to have regard to the likelihood of success, but only insofar as it is possible to identify a likely “clear winner”.

7. A distinction must be drawn between the situation where one party effectively surrenders to the other (after litigating for some time) (where commonly the court will award costs to the successful party) and the situation where there is a supervening event or settlement that removes or modifies the subject of the dispute such that, although it could not be said that one side has simply won, no issue remains between the parties except costs (where there may be difficulty in discerning a clear reason why one of the parties, rather than the other, should bear the costs.

8. Where proceedings are settled before hearing, the parties need to agree on the appropriate form of costs order as part of the settlement. If that has not occurred or proceedings are abandoned before hearing and it cannot be said that one party has simply capitulated, the courts make no order as to costs with the intent that each party bears its own costs, or orders that each party bear its own costs except in exceptional circumstances.

9. An order may be made if, it can be seen that one party has acted unreasonably in bringing or defending the proceedings; or it is awarded in favour of a party who almost certainly would have succeeded if the matter had fully been tried (even if both parties have acted reasonably).

10. It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine the case on the merits or, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters.

11. In determining the question of costs it would be appropriate for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.

12. In a particular case, it might be appropriate for the court in its discretion to consider the respondent's conduct prior to the commencement of the proceedings where that conduct may have precipitated the litigation.

13. Where a proceeding has been settled without a hearing on the merits and both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the court will usually make no order as to the cost of the proceedings.

14. However, the court may make an order for costs in favour of a party notwithstanding that there has been no hearing on the merits in circumstances where one party has had a substantial victory and the other a substantial loss, or there has been a marked difference in the reasonableness of the actions taken by the parties.

[27] In determining who the successful party is, the court will attempt to ascertain which of the parties has been substantially successful. The plaintiff sought costs on the scale of attorney and own-client because of clause 34.1 of the lease agreement which provides that:

‘If the Plaintiff instructs its attorneys to take steps to enforce any of the Plaintiff's rights in terms of this lease by reason of any breach by the Defendant, the Defendant shall pay to the Plaintiff on demand all collection charges and legal costs (including collection commission of 10%), including attorney and own-client charges, incurred by the Plaintiff as a result of such breach, whether or not legal proceedings have been instituted’.

[26] It is common cause that the defendant breached the lease agreement between the parties by failing to pay the rental amount. The default was for more than a year, which is a substantial period. The defendant was already in default when it gave the notice of termination of the agreement, wherein it undertook to make arrangements for a payment plan to settle the arrears. These proceedings were only instituted some eight months after the undertaking, and the arrears had not yet been settled. Thus, the defendant precipitated this litigation, and the plaintiff was justified in instituting these proceedings.

[27] In addition to being prejudiced over the arrear rental, the plaintiff incurred legal costs to enforce the agreement. This factor is of significant weight in determining whether the defendant should bear the plaintiff’s costs, for the reason that it has to do with a breach of a material term of the agreement.

[28] The initial settlement agreement resolved the plaintiff’s first and third claims. Regarding claim 1, the plaintiff sought N$ 444 154.48 for arrear rent and ancillary services. It succeeded with its claim as the parties agreed that the defendant would pay the plaintiff an amount of N$ 350 000. In addition, the plaintiff would take over the fixtures and fittings belonging to the defendant to the value of about N$ 550 000, thereby extinguishing the defendant’s counterclaim which targeted the same items. The defendant did not only give up its possessions, but also abandoned its counterclaim. This demonstrates that the plaintiff’s purpose in bringing the proceedings was sufficiently achieved by the outcome of the matter. Thus, the plaintiff has had substantial success in the matter compared to the defendant.

[29] It has been held that where a plaintiff is successful on all the major issues raised, he may very well be entitled to all the costs of the proceedings, despite being unsuccessful in respect of some minor issues.⁹ Similarly, where the counterclaim is quite distinct from the claim, the costs of each claim are generally awarded to the party who succeeds on it, but if the claim and counterclaim are inextricably mixed, costs are usually awarded to the party in whose favour a balance is found.¹⁰

[30] Technically, the issue of costs regarding the plaintiff’s claim 2 (which was abandoned) does not arise because the parties had agreed that each party would pay its own costs. However, given that all the claims were pleaded together as one case, it will be difficult to separate the plaintiff’s claim 2 from the rest of the claims.

[31] The court would have been inclined to award the plaintiff the costs on the scale agreed upon by the parties in the lease agreement if it had just been for claim 1. However, the plaintiff made more than one claim and only succeeded in part, as it had to abandon claim 2. Equally, the parties’ extent of success in respect of claim 3 is not quite clear as the settlement agreement is silent. All that is evident is that in resolving claim 1 and 3, the plaintiff received more, than the relief sought in claim 1. Thus, the court would not have made an as to costs in respect of claim 3.

[32] The fact that the plaintiff was not successful in relation to claim 2 is not sufficient to deny it costs because it has had significant success. But, because its success was reduced, it will be appropriate not to award it costs on the scale agreed upon by the parties in the lease agreement. Accordingly, I determine that an award of party and party costs to the plaintiff would serve the interests of justice.

[14] Consequently, I make the following order.

1. The Defendant is ordered to pay the Plaintiff’s Party and Party costs.

2. The matter is removed from the roll and regarded finalised.

Note to the parties:

DC MUNSU

Judge

None

Counsel:

Plaintiff:

Defendant:

W. Horn

Of W. Horn Attorneys

Oshakati.

M. Amupolo

Of Jacobs Amupolo Lawyers & Conveyancers

Ongwediva.