Nightclub company wins partial victory against paying Covid lockdown rent

A company wanting to start a nightclub just before the Covid-19 lockdown has successfully fought off a court order by its landlord to pay almost R150,000 in rent.

The matter, which the Johannesburg high court has ruled should go to trial, could also clarify public policy issues down the line.

In late 2019, Aludar 233, a close corporation that runs bars and clubs, entered into a lease with Unlocked Properties to use one of its buildings as a nightclub in Johannesburg. However, in March 2020, the government declared the national state of disaster as a result of the global pandemic. 

The national lockdown that ensued shut down social gatherings and alcohol sales, which were central to Aludar’s operations.

As the lease agreement with Unlocked Properties was premised on the existence and operation of Aludar’s nightclub, Aludar took the view that the lease was terminated. It stopped paying in March 2020 and eventually left. According to Unlocked Properties, Aludar eventually vacated the property in September 2020.

But Unlocked Properties believed it was owed rent of about R150,000. This was despite acknowledging the impossibility of Aludar using the premises as a nightclub, which was the sole and exclusive purpose for renting it.

Believing Aludar had no defence against its claim for rent, Unlocked Properties approached a magistrate’s court for summary judgment.

A summary judgment is a fairly extreme court remedy where facts that would normally lead to a trial — such as owing money for rent — can be quickly decided on by a court in favour of an applicant. The applicant has to show the court the opponent has no proper defence against the claim. This helps prevent unnecessary trials from clogging up court rolls.

Unlocked Properties was successful in the magistrate’s court and Aludar was ordered to pay the almost R150,000. Aludar appealed to the Johannesburg high court.

The court’s judge Stuart Wilson (with judge Allyson Crutchfield concurring) slammed Unlocked Properties for seeking the “drastic” remedy of summary judgment when the matter should have gone to trial.

“I think that Unlocked Properties’ application for summary judgment,” wrote Wilson, “fell far short of [the] standard” that is expected from an applicant.

Wilson noted the lease agreement excluded so-called acts of God that might hinder Aludar’s nightclub operations, such as a global pandemic and state of disaster. However, “I do not think that completely answers the claim that the whole contract was voided because it could no longer be performed by either party”.

He noted both Aludar and Unlocked Properties were prevented from operating during the Covid lockdowns. This was overlooked and should be argued fully in a trial, he said.

Aludar had argued the entire agreement became null and void by the state of disaster as it was impossible to make money from running a nightclub and for Unlocked Properties to rent out its properties for such purposes.

Wilson, however, did not rule on whether Aludar was correct, only that it plainly had a proper defence. This means the matter should have gone to trial, and the magistrate was wrong to rule against Aludar.

Wilson also noted the case called for a full trial because it raised issue of “public policy”.

He set aside the order that Aludar must cough up nearly R150,000, and ordered Unlocked Properties to pay costs, but these would be decided at trial.   

moosat@businesslive.co.za