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[2019] ZAGPJHC 160
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Atlantis Property Holdings CC v Atlantis Excel Service Station CC (A5030/2018) [2019] ZAGPJHC 160; [2019] 3 All SA 441 (GJ) (29 May 2019)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
APPEAL CASE
NO: A5030/2018
GJ CASE NO:
40742/2017
In the
matter between:
ATLANTIS PROPERTY
HOLDINGS CC
Appellant
(Applicant in the court
a
quo
)
and
ATLANTIS EXEL SERVICE
STATION CC
Respondent
(Respondent in the court a quo)
JUDGMENT
Coram Windell and
Opperman JJ.
INTRODUCTION
[1] The appeal turns on a narrow question namely the interpretation
of a written, fixed term, commercial lease agreement
(“the
agreement”
).
[2]
The parties concluded the agreement in August 2016. In terms thereof,
the respondent let from the appellant certain immovable
property
(“
the
property”
)
with effect from 1 March 2016. The property was rented and utilised
by the respondent for the purposes of conducting a fuel filling
station and a convenience store. In terms of the agreement the
respondent occupied the property for a period of 6 (six) months
(“the
initial period”)
after which the lease was extended for a period of
3
(three) years
(“the
renewal period”),
subject
to the respondent having maintained its rental payments during the
initial period. Approximately seventeen months after
the conclusion
of the agreement, and whilst the agreement was in the renewal period,
the appellant terminated the agreement in
terms of clause 22.1 which
provides that the agreement may be terminated by either party
serving the
other notice of its intention to cancel the lease upon 30 (thirty)
calendar days’ notice. In terms of the
cancellation
letter, the respondent had to vacate the property on or before 31
July 2017. The respondent refused to vacate which
led to the launch
of an application for eviction on 25 October 2017.
[3] The eviction application was dismissed with costs by
the court
a quo
. In essence the judge found that it would be
untenable to interpret clause 22.1 to mean that the agreement permits
either party
to “escape” the fixed term agreement on 30
(thirty) days’ notice. She held that the clause can only have a
sensible
meaning if it is taken to refer to the time period after the
renewal period has run its course and the tenant has either exercised
its option to renew the agreement or has been renewed tacitly. In
other words, the court held that clause 22.1 was intended only
to
have application after the expiry of the renewal period.
BACKGROUND
FACTS
[4] The
appellant alleged that the respondent had committed a number of
breaches. It was as a result of these breaches that it elected
to
invoke the provisions of clause 22.1. Therefore, in compliance
with clause 22.1, the appellant’s attorney wrote
to the
respondent on 28 June 2017 informing the respondent of the
cancellation of the agreement and that it was required to vacate
on
or before 31 July 2017. In the letter the appellant accused the
respondent of not having a retail licence to sell Sasol products;
that it had failed or refused to make payment of the rates and taxes,
utility and services charges and that it was in arrears;
that it had
illegally tampered with the electricity meter in order to avoid
paying in full for the consumption of electricity and
that it had
caused damage to the on-site generator which had to be repaired. The
respondent responded to the letter, denied the
alleged breaches and
proposed a round table meeting to resolve the issues in an amicable
manner. The appellant replied that it
was not interested and was of
the opinion that ‘
the time for negotiations has long past’
and ‘
it was simply not prepared to expend time and money on
issues that are not capable of being resolved’
.
[5] The respondent refused to vacate and the appellant subsequently
instituted an application wherein it sought the eviction of
the
respondent within 14 days of the order. In the answering affidavit
the respondent disputed that it had committed any breach
or that the
agreement had been lawfully cancelled by the appellant. It contended
that all amounts invoiced by the appellant had
been paid and that
Sasol’s termination of the supply agreement between Sasol and
the respondent was as a result of false
representations made by the
appellant’s sole member Bezuidenhout, to Sasol, and that Sasol
was not entitled to terminate
such agreement. The respondent also
alleged that the appellant had, during the renewal period, decided to
sell the property.
Bezuidenhout and her employees then started
harassing and hounding the respondent to get the respondent to vacate
the property
as the appellant was unable to sell it to its
prospective buyer in circumstances where the respondent continued to
lease the property.
The respondent stated that it believed that the
prospective buyer was insisting that the respondent vacate the
property prior to
any sale materialising. Accordingly, the
respondent’s continued occupation of the premises became a
major impediment to the
appellant selling to the prospective buyer.
For this reason the appellant began falsely accusing the respondent
of various misdemeanours
and breaches.
[6] The respondent further complained about the fact that, although
the appellant had referred to the various alleged breaches
by the
respondent in its cancellation letter, it had failed to provide the
respondent with 7 (seven) calendar days written notice
to remedy the
alleged breaches as it was obliged to do in terms of clause 20.1
(“the breach clause”)
of the agreement. In
par 21 of its answering affidavit the respondent contended as
follows:
“
21.
Accordingly the Applicant is not entitled to utilise the provisions
of clause 22.1 to cancel the lease agreement. Quite clearly
clause
22.1 is a remedy which can only be utilised after various breaches of
annexure MHB2 has occurred and the Respondent has
failed to remedy
the said breaches within a seven (7) calendar day written notice.
Clearly annexure MHB2 is not a monthly lease
agreement and clause
22.1 does not afford the Applicant the right to cancel the said lease
agreement on one month’s notice
prior to the expiry of the full
term of annexure MHB2.”
[7] In reply,
the appellant persisted that the respondent was in breach of the
agreement but averred that, as the agreement was
terminated in terms
of clause 22.1, and not in terms of the breach clause, it was not
necessary to deal with the breaches in reply
any further. It denied
that the Sasol agreement was terminated as a result of
misrepresentations by Bezuidenhout. It contended
that the reason for
the termination can be gleaned from Sasol’s termination letter
attached to the founding affidavit, namely
that respondent had been
trading without a retail license and that the respondent had on
numerous occasions procured petroleum
products from other suppliers
without Sasol’s consent. The appellant drew attention to the
fact that, although the respondent
had alleged that it was as a
result of misrepresentations by Bezuidenhout that Sasol had cancelled
the lease (which the appellant
denied), the respondent had not
disputed that it was trading without a licence and that it had
procured petroleum products from
other supp
liers.
INTERPRETATION
OF THE AGREEMENT
[8] The agreement provides for cancellation of the
agreement in the event of a breach (Clause 20), and on 30
(thirty) days’
notice (Clause 22). In cancelling the agreement
the appellant invoked clause 22 and the application for eviction was
based solely
on the right to terminate in terms of clause 22.
Clause 22 provides as follows:
“
22.
CANCELLATION OF LEASE
22.1. The
LESSOR and the LESSEE expressly and irrevocably record that this
Lease may be terminated by either Party
serving the other notice of
its intention to cancel this Lease and upon 30 (thirty) calendar
days’ notice.
22.2 In the
event that the LESSEE serves such a notice as described in clause
22.1 on the LESSOR; the following
shall occur:
22.2.1. The
LESSEE shall not be entitled to withhold any of the payments due
under this Agreement during the 30-day period, notwithstanding
when
the LESSEE vacates the premises; and
22.2.2. The LESSEE shall
immediately upon expiry of the 30- day period (or on any date prior
to the expiry of this period) vacate
the property. Upon the LESSEE
vacating the property the LESSEE shall not be entitled to remove any
improvements to the PREMISES
without the express written consent of
the LESSOR.
22.3. In the event
that the LESSOR serves such a notice as described in clause 22.1 on
the LESSEE; the following shall
occur:
22.3.1
The LESSOR shall be entitled to attend at the PREMISES with any
prospective new tenant for the PREMISES and for purposes
of allowing
the prospective new tenant to view the PREMISES.”
[9] The breach clause provides for the following:
“
20.
BREACH
20.1. In the
event of the LESSEE committing a breach of any of the terms in this
agreement and failing to remedy
the breach within a period of 7
(Seven) calendar days after despatch of written notice calling upon
the LESSEE to remedy the breach
complained of, then the LESSOR shall
be entitled, at its sole discretion and without prejudice to any of
its other rights in law
and or in terms of this agreement, either to
claim specific performance of the terms contained in this Agreement
or to cancel this
agreement forthwith and without further notice,
claim damages from the LESSEE, provided that if the LESSEE
commits a breach
of the provisions of this agreement 3 (Three) times
in any calendar year, then, upon the third breach, the LESSOR shall
be immediately
entitled to implement either of the above remedies,
without first having to give the LESSEE written notice to rectify
such breach.
20.2. Should
this agreement be cancelled by the LESSEE for any reason whatsoever,
the LESSEE and / or any other
person occupying the PREMISES, shall
immediately vacate the premises and allow the LESSOR to take
occupation thereof.
20.3. Should
either Party cancel alternatively should the LESSEE breach any
provision of this Lease and fail to
remedy same within 7 days of
notice being transmitted to it to do so and the LESSEE remains in
occupation the Premises, the LESSOR
shall be entitled to immediately:
20.3.1. Make claim for the
ejectment of the LESSEE from the Premises; and
20.3.2. To
claim the full outstanding Rental amounts, as they would have been
escalated in the future, for the remaining period
over this Lease
Agreement from the LESSEE as damages for the cancellation
alternatively breach of the Lease Agreement.
20.4. Should
the LESSOR cancel this Lease and the LESSEE dispute the said right to
cancel the Lease and in the
event that the LESSEE remains in
occupation of the PREMISES, the LESSEE shall pending the
determination of the dispute, continue
to pay all amounts due by
LESSEE in terms of this Lease on the due date thereof and the LESSOR
shall be entitled to accept and
recover such payments without
prejudice to the LESSOR’s claim for cancellation of this Lease
or any other claims which the
LESSOR may have arising out of such
cancellation. Should the dispute be determined in favour of the
LESSOR the payments made in
terms of this clause shall be deemed be
amounts paid by the LESSEE on account of damages suffered by LESSOR
by reason of the cancellation
of the Lease Agreement or the Unlawful
holding over by the LESSEE or both.
[10] As stated earlier, after the initial period, the
lease was renewed for a period of 3 (three) years. In terms of the
agreement
the Lessee is granted the option to renew the lease on the
same terms and conditions contained in the agreement after the expiry
of the renewal period (Clause 4.1). The Lessee must exercise this
option by giving written notice to the Lessor by no later than
3
(three) calendar months prior to the expiry date of the agreement. It
is common cause that the agreement was cancelled by the
appellant
before the expiry of the renewal period.
[11] In essence, the dispute between the parties centred
on whether the appellant could cancel the agreement before the expiry
of
the fixed term. In the court
a quo
and in this appeal the
respondent pinned its argument on two bases. Firstly: The agreement
was not a monthly lease agreement and
the appellant therefore did not
have the right to cancel the agreement in terms of clause 22.1 before
the expiry of the renewal
period: Secondly: The appellant was not
entitled to utilise the provisions of clause 22.1 to cancel the
agreement as it is a remedy
that can only be utilised after various
breaches have occurred and the respondent has failed to remedy the
breaches within seven
(7) calendar days as provided for in the breach
clause.
[12] The court
a quo
found that the cancellation
under clause 22.1 was invalid given that the lease was still within
its 3 (three) year renewal period.
It held that as “
it is a
normal approach to written leases generally that, on expiry of their
defined period they are allowed to run from month-
to- month”
that clause 22.1 refers to the time period after the initial and
renewal periods have run their course and there has been an option
to
renew the lease exercised by the respondent and accepted by the
appellant.
The right to cancel a fixed term lease.
[13] It is trite that
in the interpretation of a document the ‘
inevitable
point of departure is the language of the provision itself, read in
context and having regard to the purpose of the provision
and the
background to the preparation and production of the document’
.
[1]
[14] There was no
special factual matrix present at the time that the agreement was
entered into that either party relied upon in
this matter; neither is
there subsequent conduct that was contended could influence the
interpretive exercise. The agreement must
accordingly be interpreted
within the four corners of the document and within the limited
factual matrix which results once the
Plascon
Evans
[2]
test has been
applied, interpretation being a unitary exercise. However, the
starting point remains the words of the document which
are the only
relevant medium through which the parties have expressed their
contractual interests. Consideration must be
given to the
language used in the light of the ordinary rules of grammar and
syntax.
[3]
Interpretation
of an agreement does not stop at the literal meaning of the words.
The court must have regard to the context
in which the words in the
contract were utilised to establish the intention of the parties.
[4]
[15]
The language used in clause 22 is unambiguous and clear. The parties
recorded that they ‘expressly and irrevocably’
agree that
the agreement may be terminated by either party giving 30 (thirty)
days’ notice. Clause 22.1 is a standard termination
on notice
clause commonly found in commercial contracts. It affords the right
to both the appellant and the respondent to cancel
the agreement by
giving 30 (thirty) days’
notice. It is
not uncommon for parties to agree to combine characteristics of a
fixed period lease with that of a periodical lease.
This is known as
a hybrid lease. Kerr
[5]
comments that in this way the parties have the security of a fixed
term lease if the relationship is successful, but, if the
circumstances
change, the parties have the contractual flexibility to
terminate the lease early. The appellant and the respondent
clearly
elected to introduce into their commercial relationship the
flexibility that termination on notice would afford and there is no
part of the language in clause 22.1 that does not communicate the
unmistakable intention that both parties sought to preserve for
themselves a right of “escape”, on 30 (thirty) calendar
days’ notice.
Is Clause 22 only
applicable in the event of a breach?
[16]
The answer is that clause 22 is not only applicable in the event of a
breach. Clause 22 not only provides for the cancellation
of the
agreement upon 30 (thirty) days’ notice, but also
regulates the position of both parties after such cancellation
which
is to be distinguished from the position of the parties in the event
of a breach. Clause 22.2 provides that should
the
Lessee
cancel, the Lessee shall vacate the property immediately
upon
the expiry of the 30 (thirty) day period
and the Lessee shall not be entitled to withhold any of the payments
due under the agreement
during the 30
(thirty) day period.
In the event of
the
Lessor
cancelling (clause 22.3), it makes provision for the Lessor to attend
at the premises with any new prospective tenant for the purposes
of
allowing the prospective new tenant to view the premises. Clause 22
however does not specifically deal with the position of
the Lessee in
the event of cancellation by the Lessor. Clause 20.3, under the
heading “BREACH” does. It provides that
should
either
party cancel,
and the Lessee remains in
occupation of the premises,
the Lessor
shall be entitled to immediately make claim for the ejectment of the
Lessee from the premises, and to claim the full
outstanding rental
amounts, as they would have escalated in the future, for the
remaining period over the agreement from the Lessee
as damages for
the cancellation, alternatively breach of the agreement. At first
glance there appears to be an ambiguity between
clauses 22.2 and
20.3. But, looking at the contract as a whole, it is only
superficially problematic. Clause 20.3 read with Clause
22.2, clearly
regulates the position where the Lessee refuses to vacate
after
the expiry of the 30 (thirty) days’ notice
and where it remains in the property. Should the lessor claim damages
for the full unexpired portion it would of course remain
open to the
lessee to invoke the provisions of the Conventional Penalties Act, 15
of 1962. This
feature does, however, not
form part of this appeal. It may well be that the lessee could, under
such circumstances argue that the
implementation of such clause is
against public policy.
Does Clause 22 apply
in the period after the renewal period?
[17]
The court
a quo
did not accept that clause 22 permits either party to cancel the
agreement by giving 30 days’ notice. She found that “
the
clause can only have sensible meaning on the basis that it must be
taken to refer to the time period after the prescribed initial
and
renewal periods have run their course and there has been an option to
renew the lease exercised by the tenant and accepted
by the
landlord
.
”
[18] In arriving at
this conclusion, the court
a quo
relied on clause 5.13. Clause 5.13 reads as follows:
“
5.13
Should the LESSEE vacate the PREMISES for any reason whatsoever
within the Lease period, it shall be liable for
the Rental payable
for the full balance of the duration of the Lease period, until a
suitable tenant has been found, as well as
all costs including any
Estate Agent’s fee to source a suitable tenant;”
The judge
held that it cannot mean that the Lessee can simply be given 30
(thirty) days to vacate the premises and that the Lessor
would then
be entitled to claim the full balance for the duration of the
unexpired period of the lease until a suitable tenant
has been found.
[19]
This interpretation, in our view, fails to have due regard to
what is set out in the ensuing clauses. Clause
5.13 specifically refers to a scenario where the Lessee
vacates
the premises for any reason outside the parameters already discussed.
Clause 5.13 should not be read in isolation. In the context
of the
whole agreement, clause 5.13 is clearly not applicable to the
situation where the
Lessor
cancels the agreement and where it gives notice to the Lessee to
vacate in terms of clause 22.1. In the language of clause
22,
the parties wished to emphasise their right to cancel by mere notice,
by recording “expressly and irrevocably”
that the lease
may be terminated upon 30 (thirty) days calendar notice. This clear
language rules out any right of notice that
would apply only during
the period of the lease post the renewal period. There was
therefore no reason for the court
a quo
to attach a meaning to clause 22 that was not intended by the
parties. The court succumbed to the temptation to substitute what
it
regarded as reasonable, sensible and business-like for the words
actually used, and failed to have regard to the constraints
of the
language. It is not within the power of a court to rewrite the
agreement on terms that might be more commercially suitable
or
sensible. If parties conclude a clear agreement that is, in the
view of the court, a bad agreement, even if only for one
party (in
this case both parties benefit from the provisions of the clause)
this does not provide a basis upon which a court can
rewrite the
agreement between them.
[20] As a
last resort the respondent contended that the appellant had, to a
large extent, prefaced both its cancellation letter
and its founding
affidavit on the respondent’s alleged breaches of the
agreement. Accordingly, there was nothing preventing
the
appellant from proceeding in terms of the breach clause for the
eviction of the respondent from the leased premises.
There is
no merit in this argument. Clause 22.1 clearly provides the appellant
with an alternative option to evict the respondent
and the appellant
is entitled to rely on clause 22.1. The appellant has given the
requisite notice and has terminated the agreement.
There is no other
cogent defence advanced in the answering affidavit by the respondent,
and accordingly the relief sought in the
notice of motion should have
been granted.
Public
policy and good faith
[21] During the hearing of the appeal our brother Vally J, for the
first time, raised the issue of good faith and subsequently
penned a
judgment based on it. We have had the benefit of reading the
judgment. We disagree with him. These are our reasons.
[22]
The scope and impact of public policy and good faith on private
contracts has been considered by the Supreme Court of Appeal
(“
the
SCA”
) on more than one occasion
now. In two recent matters the High Court granted leave to
appeal to the SCA to specifically address
these issues. In
Mohamed
Leisure Holdings Pty Ltd v Southern Sun Hotel Interests (Pty) Ltd
[6]
,
Van Oosten J, in the court
a quo
,
had held that although the respondent had agreed to the cancellation
clause in a lease agreement, the eviction could not succeed
as the
implementation of the cancellation clause would be manifestly
unreasonable, unfair and offend public policy. He further
held that
the common law principle of
pacta sunt
servanda
should be developed by
importing or infusing the principles of
ubuntu
and fairness into the law of contract. On appeal, the respondent
argued that the breach clause should be
interpreted to mean that parties to a contract ought to act in good
faith which would render
the clause flexible to accommodate the
circumstances where a party is prevented by factors beyond her
control from complying with
the requirements of the clause. The
respondent further contended that by giving effect to the clause it
would be so manifestly
unreasonable that it would offend public
policy (as constituted by the concept of good faith,
ubuntu
,
fairness and simple justice between individuals) and the Court was
obliged to, in construing the impugned clause, promote the
spirit,
purport and objects of the Bill of Rights. The SCA found in favour of
the landlord and dismissed the appeal.
[23]
In coming to this conclusion, Mathopo JA discussed, with reference to
Barkhuizen v Napier,
[7]
how the question of substantive fairness of a contract (or a
contractual clause) is to be approached in its application of the
contractual doctrine of the public policy test. He held as follows:
“
The
Constitutional Court introduced a second (subjective) stage to
the public policy test in terms of which a contract (or
contractual
clause) must not only be objectively reasonable in order for it to be
valid but its effect must also be subjectively
reasonable in the
particular circumstances in order for it to be enforceable. This
approach facilitates a more purposive adjudication
and a
substantively fair outcome for contracting parties.”
[8]
[24] The SCA
considered that there was no complaint that the impugned clause was
objectively unconscionable and no allegation was
made that the lease
agreement was not concluded freely. There was also no evidence or
contention advanced by either of the parties
that there was an
unequal bargaining power between them. Evidently the respondent
was at all material times aware or must
have been aware of the
implications of the cancellation clause. It was therefore held that
against this background, it cannot be
against public policy to apply
the principle of
pacta sunt servanda.
At par [30]
and [32] the court concluded as follows:
“
[30]
The fact that a term in a contract is unfair or may operate harshly
does not by itself lead to the conclusion that it offends
the values
of the Constitution or is against public policy. In some
instances the constitutional values of equality and dignity
may prove
to be decisive where the issue of the party's relative power is an
issue. There is no evidence that the respondent's
constitutional
rights to dignity and equality were infringed. It was impermissible
for the high court to develop the common law
of contract by infusing
the spirit of
ubuntu
and good faith so as to invalidate the term or clause in
question.
[32] The result may well be
unpalatable to the respondent. It must therefore bear the
consequences of its agent's (bank) failure
in paying the October
rental on due date. Its defence was clearly to restrict the lawful
reach of the contract and to limit what
can be regulated by way of a
contractual agreement between parties, in circumstances where the
terms of the contract were
clear and unambiguous. In this case the
parties freely and with the requisite
animus contrahendi
agreed to negotiate in good faith and to conclude further substantive
agreements which were renewed over a period of time. It would
be
untenable to relax the maxim
pacta sunt servanda
in
this case because that would be tantamount to the court then
making the agreement for the parties.”
[25] The respondent, aggrieved by the SCA’s decision, applied
to the Constitutional Court for leave to appeal. It was refused.
[26]
In the matter of
The Trustees for the
time being of the Oregon Trust v Beadica
231
CC
[9]
,
Davis J granted leave to appeal against his orders on the basis that
“
his decision turned on the
development of jurisprudence flowing from the decisions of the
Constitutional Court in Everfresh
and Botha and that the
issue ought to be determined by the SCA.”
[10]
He found the following factors to be relevant considerations in
determining that the 'sanction' of termination and eviction was
disproportionate to the failure by the Lessees to properly and
timeously renew the leases:
“
(1)
The Lessees were unsophisticated business people who did not
understand the contractual provisions and their niceties and
implications.
(2) The purpose of the whole
scheme and the cooperation agreement with the NEF was to promote
black economic empowerment (BEE) and
the full participation by
previously disadvantaged individuals in the economy. The application
of the strict terms of the contracts
would have been inimical to the
empowerment project.
(3) The NEF had supported the
Lessees and had provided supporting affidavits to the effect that
they had complied with their obligations
under the franchise
agreements, repaying their loans timeously. The franchisees would
inevitably lose their businesses if they
were to be evicted.
(4) The
leases were tied to the franchise agreements, and it was envisaged
when the respective agreements were concluded that because
the
franchise agreements would endure over 10 years that the leases would
effectively be of the same duration – hence the
right to renew
the leases for a further five years. The two agreements, are
therefore inextricably bound to each other.”
[11]
[27]
The SCA dismissed the appeal and found that t
he
issue remains one of public policy and although fairness and
reasonableness
inform policy they
are not self-standing principles. This is also the position that the
Constitutional Court took in Barkhuizen
v
Napier
[12]
.
Ngobo J, writing for the majority, said
the following:
“
[27]
What then is the proper approach of constitutional challenges to
contractual terms where both parties are private parties?
……...
[28]
Ordinarily constitutional challenges to contractual terms will give
rise to the question of whether the disputed provision
is contrary to
public policy. Public policy represents the legal convictions of the
community; it represents those values that
are held most dear by the
society. ………
[30]
In our view the proper approach to the constitutional challenges to
contractual terms is to determine whether the term challenged
is
contrary to public policy as evidenced by the constitutional values,
in particular, those found in the Bill of Rights. This
approach
leaves space for the doctrine of
pacta
sunt servanda
to operate,
but at the same time allows courts to decline to enforce contractual
terms that are in conflict with the
constitutional values even though
the parties may have consented to them. It follows therefore, that
the approach that was followed
by the High Court is not the proper
approach to adjudicating the constitutionality of contractual
terms.”
[28] Recently, in
AB
and Another v Pridwin Preparatory School
and
Others,
[13]
Cachalia JA stated that the
relationship
between private contracts and their control by the courts through the
instrument of public policy, underpinned by the Constitution,
is
now clearly established and that it is unnecessary to rehash all the
learning from our courts on this topic. At par [27] he
sets out the
most important principles to be gleaned from them:
“
(1) Public
policy demands that contracts freely and consciously entered into
must be honoured;
(2) A court
will declare invalid a contract that is
prima facie
inimical
to a constitutional value or principle, or otherwise contrary to
public policy;
(3) Where a
contract is not prima facie contrary to public policy, but
its enforcement in
particular circumstances is, a court will not
enforce it;
(4) The party
who attacks the contract or its enforcement bears the onus to
establish the facts;
(5) A court
will use the power to invalidate a contract or not to enforce it,
sparingly, and only in the clearest
of cases in which harm to the
public is substantially incontestable and does not depend on the
idiosyncratic inferences of a few
judicial minds;
(6) A court
will decline to use this power where a party relies directly on
abstract values of fairness and reasonableness
to escape the
consequences of a contract because they are not substantive rules
that may be used for this purpose.”
[29] The parties had agreed
on a right to cancel the agreement upon 30 days’ notice. The
termination of the agreement in terms
of clause 22 does not offend
any identifiable constitutional value and is not otherwise contrary
to any other public policy consideration.
It is fundamentally fair
that each party should know what their bargain is and should be
entitled to rely on it unless it offends
public policy including the
values embedded in the Constitution.
[14]
[30] Vally J has
placed much reliance on the dicta at paras [45] to [46] in
Botha
v Rich NO
[15]
.
Not only were the facts materially different to the current situation
but the case also dealt with the interpretation and application
of
legislation dealing with property acquisition. The core question was
whether a purchaser as contemplated in section 27(1) of
the
Alienation of Land Act, 68 of 1981
(“
the
Act
”),
was limited to cancellation ie whether the legislation had ousted the
common-law remedy of specific performance. The Constitutional
Court
held that specific performance was available to such a purchaser.
That being so, Mrs Botha was, relying on section 27, entitled
to
insist on registration of the property into her name against payment
of all arrears. The origins of the
exceptio
non adimpleti contractus
were explored in paragraphs [45] and [46] of the judgment. The
comments were made in the context of the legislation under
discussion
and the application thereof to the particular facts.
[31] More problematic though is the fact that
the respondent did not oppose the application for its eviction on the
basis that the
enforcement of the agreement was contrary to public
policy and the respondent provided facts to support a case that the
enforcement
of clause 22 offends public policy in the circumstances
of this case. As stated above, fairness and reasonableness are not
free-standing
grounds which can be used to impugn the terms of a
contract. In any event, there is nothing on the face of clause
22.1, or
intrinsically, that offends any constitutional value or
principle or is otherwise contrary to public policy. In
Barkhuizen
,
Ngobo J stated that “
what this means in
practical terms is that once it is accepted that the clause does not
violate public policy and non-compliance
with it is established, the
claimant is required to show that, in the circumstances of the case
there was a good
reason why there was a failure to
comply.”
[32] This court is bound by the facts as set
out in the papers and the pleadings. In his judgment, Vally J accepts
that clause 22.1
allows either party to escape the agreement on 30
(thirty) calendar days’ notice. He however then proceeds to
find that clause
22.1, while there for the benefit of both parties,
can only be invoked by either of them when acting in good faith.
Assuming, without
accepting, that considerations of good faith could
be applied in the manner advocated by our brother Vally J, the
factual substrata
for a finding of the absence of good faith, is
precarious. By way of example: The appellant attached to its
founding affidavit
a letter from Sasol in terms of which Sasol had
cancelled its agreement with the respondent on the basis that the
respondent had
been trading without a retail license and had procured
petroleum products from foreign suppliers without Sasol’s
consent.
The respondent contended that Sasol had cancelled the
agreement as a result of representations made by the appellant to
Sasol.
What the respondent did not do is to dispute the correctness
of the reasons for the termination. For purposes of this application
therefore it must be accepted that the respondent did not have a
license and that it procured petroleum products from foreign
suppliers without Sasol’s consent.
[33] It is accepted by all three judges of this
full court that clause 22 is not
prima facie
contrary to
public policy. What needs to be shown is that the enforcement, in the
particular circumstances of this case, is against
public policy. The
high water mark of the respondent’s case, as per our brother’s
understanding of the facts, is that
the appellant had not intended
for the respondent to remedy its breach/es, but rather, that it
wanted to sell its property. This
objective, ie to want to sell ones
property, is not in conflict with any constitutional value and it
follows that there can exist
no impediment against the enforcement of
clause 22 on this basis.
[34] Vally J further finds
that the respondent in essence raised the
exeptio
doli generalis
defence because ‘
the
respondent maintains that the appellant’s invocation of clause
22.1 is mala fide, or to put it differently, the appellant
is not
acting in good faith by invoking the clause’
and
‘
that
clause 22.1 is not being utilised for purpose’.
Such assertion is not supported by the facts or by legal argument i.e
the
exceptio
doli generalis
was not mentioned by name, or in substance, and was never the case
for the respondent. The unenforceability of clause 22.1 or the
absence of good faith in invoking clause 22.1 was not raised on the
papers. This was not an issue before us nor was it dealt with
in the
judgment of the court
a
quo
.
It
would be undesirable for this court to deal with important issues of
law without the benefit of legal argument from the
litigants. In
Cape Town City v
Aurecon SA (Pty) Ltd,
[16]
the Constitutional Court
stressed the fact that the benefit of full argument is indispensable
in the decision-making process and
to “
proceed
unaided with complex legal
questions
is likely to give rise to unpredictable and altogether
unintended consequences”.
The
respondents’ case, as can be gleaned from the heads of
argument, was simply that on a proper construction of the agreement
the appellant was not entitled to terminate the agreement on 30
(thirty) calendar days’ notice during the renewal period.
[17]
[35] It
is further trite that a party must plead its cause of action in the
court of first instance so as to warn other parties
of the case they
have to meet and the relief sought against them. This is a
fundamental principle of fairness in the conduct of
litigation and
promotes the parties’ rights to a fair hearing which is
guaranteed by section 34 of the Constitution.
[18]
In
Everfresh Market Virginia (Pty) Ltd v
Shoprite Checkers (Pty) Ltd,
[19]
the court declined to deal with the issue of good
faith because the appellant had failed to properly raise the issue
before the
high court and dismissed the application.
This
court did not have the benefit of legal argument nor was this issue
fully ventilated at the hearing.
In
Albutt
v Centre for the Study of Violence and Reconciliation and Others,
[20]
the Constitutional Court
observed the
following:
“
Sound
judicial policy requires us to decide only that which is demanded by
the facts of the case and is necessary for its proper
disposal. This
is particularly so in constitutional matters, where
jurisprudence
must be allowed to develop incrementally. At times it may be
tempting, as in the present case, to go beyond that
which is
strictly necessary for a proper disposition of the case. Judicial
wisdom requires us to resist the temptation and to wait
for an
occasion when both the facts and the proper disposition of the case
require an issue to be confronted. This is not the occasion
to do
so”.
CONCLUSION
[36]
This
case concerns the interpretation of clause 22.1 of the agreement
which, we have all agreed, entitles the parties to escape
the
agreement during the renewal period. The unenforceability of clause
22.1 based on the
exeptio doli
generalis
or otherwise,
[21]
was never raised by the respondent.
[37] Because it wasn’t raised we do not
consider it appropriate to entertain it. Having said that, and should
we be wrong
on this, we would be compelled to conclude that our
brother Vally J’s construction of the law on this issue is
misplaced.
Having regard to our understanding of the law
relating to the role of good faith and reasonableness in the law of
contract
as it has developed and as summarised herein, we would
conclude that it cannot be against public policy, in the
circumstances of
this case, to apply
pacta sunt servanda
.
[38] In the
result the following order is made:
(1)
The
appeal is upheld.
(2)
The
order of the court
a quo
is substituted with the following order:
1.
The
applicant’s termination of the lease agreement dated 9 August
2016 in respect of the premises described as the Fuel Filling
Station
and Convenience Store situated at 81 La Rochelle Road, Trojan,
Johannesburg (‘the premises’) is declared to
be lawful
effective 31 July 2017.
2.
The
respondent is evicted from the premises and:
a.
is
ordered to vacate the premises within a period of 14 (fourteen) days
from the date of this order;
b.
in
the event that the respondent fails to vacate the premises within the
period stated herein, the Sheriff of the High Court, Gauteng
Local
Division, Johannesburg, or his lawfully
appointed deputy, is authorised and directed to evict the respondent
and all persons holding
title by, through or under it from the
premises.
3.
The
respondent is ordered to pay the costs of the application in the
court
a quo
on the scale as between attorney and client.
(3)
The
respondent is ordered to pay the costs of the appeal, including the
costs in respect of the application for leave to appeal,
on the
attorney and client scale.
L.WINDELL
JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION, JOHANNESBURG
I agree
I.OPPERMAN
JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION, JOHANNESBURG
APPEARANCES
Counsel for the Appellant:
Advocate D. Vetten
Instructed by:
Edward S Classen & Associates
Counsel for the
Respondent: Advocate S. L. Ress
Instructed by:
Naiker
Ooni Wadia Inc
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG PROVINCIAL DIVISION, PRETORIA
Case No.: A5030/2018
GJ Case No: 40742/2017
In the matter
between:
Atlantis Property Holdings
CC
Appellant
and
Atlantis Exel Service Station
CC
Respondent
JUDGMENT
Vally J
Introduction
[1] The
appellant is aggrieved at having failed to secure an order in the
court
a quo
(presided by Fischer J) where it sought to evict
the respondent from its premises. The appellant is also aggrieved at
having to
pay the costs incurred by the respondent for defending
itself against the endeavours of the appellant. The court
a quo
granted it leave to ventilate its grievance in this court in the hope
that it could be relieved of the burden of the order made
against it.
The lease agreement
[2] The
appellant and the respondent, which are both commercial entities,
concluded a written contract of lease on 9 August 2016, wherein the
appellant leased to the respondent certain premises described
as a
“
Fuelling Station and Convenience Store
”. The
lease commenced on 1 March 2016 and was for an initial period of six
(6) months, terminating on 30 August 2016. It
was then immediately
and automatically extended for a period of three (3) years.
[3] The
agreement allowed for the respondent to indicate to the appellant
three months prior to the expiry of the three (3) years that it
wished to renew the agreement, but the appellant had the right
to
decline the respondent’s wish to renew the agreement within
seven days of receipt of such notice.
[4] The
agreement spells out the rights and obligations of the appellant
and
the respondent. It is clearly one-sided in that the appellant
acquires mostly rights and the respondent mostly obligations.
There
are four clauses which the court
a quo
found to be of
particular importance in coming to its conclusion that the appellant
should fail in its endeavour to evict the respondent.
They are:
Clause 5.13
“
Should the Lessee
[respondent] vacate the PREMISES for any reason whatsoever within the
Lease period [three years after the renewal
of the first six months,
which ended on 30 August 2016], it shall be liable for the Rental
payable for the full balance of the
duration of the Lease period,
until a suitable tenant has been found, as well as all costs
including any Estate Agent’s fee
to source a suitable tenant;
”
Clause: 5.17
“
The LESSEE shall not make
any alteration or additions to the said PREMISES without the written
consent of the LESSOR first had [sic]
and obtained which consent
shall not be unreasonably withheld and, unless otherwise agreed upon
in writing, any alteration or additions
made shall be the property of
the LESSSOR and the LESSEE shall not be entitled to any compensation
therefor. …
”
Clause 5.18
“
At the termination of
this Lease, whether by effluxion of time or otherwise the LESSOR
shall, at its own option, be entitled to
call upon the LESSEE to
restore the PREMISES to the same condition as they were before the
alterations or additions, in which event
the LESSOR shall not be
obliged to compensate the LESSEE in respect thereof;
”
Clause 13.2.2
“
should the LESSOR not
require the removal thereof then all such alterations, additions or
improvements shall become the property
of the LESSOR and the LESSEE
shall be deemed to have waived any claims of whatever nature arising
out of such alterations, additions
or improvements to the PREMISES
and the LESSOR shall not be required to compensate the LESSEE in any
manner in respect thereof.
”
[5] The
agreement contains a breach clause and a cancellation clause. The
breach clause contains two sub-clauses and the cancellation clause
contains one sub-clause that are of particular importance in
the
resolution of the dispute between the parties. Respectively, they
read:
The breach sub-clauses
Clause 20.2
(strangely, this clause appears under the head:
Breach)
“
Should this agreement be
cancelled by the LESSEE for any reason whatsoever, the LESSEE and/or
any other person occupying the PREMISES,
shall immediately vacate the
PREMISES and allow the LESSOR to take occupation thereof.
”
Clause 20.3
“
Should either Party
cancel alternatively should the LESSEE breach any provision of this
Lease and fail to remedy same within 7 days
of notice being
transmitted to it to do so and the LESSEE remains in occupation of
the Premises, the LESSOR shall be entitled to
immediately:
20.3.1 Make claim for the
ejectment of the LESSEE from the Premises; and
20.3.2 To claim the full
outstanding Rental amounts, as they would have been escalated in the
future, for the remaining period
over this Lease Agreement from the
LESSEE as damages for the cancellation alternatively breach of the
Lease Agreement.
”
Clause 22.1
(the cancellation clause)
“
The LESSOR and the LESSEE
expressly and irrevocably record that this Lease may be terminated by
either Party serving the other notice
of its intention to cancel this
Lease and upon 30 (thirty) calendar days’ notice.
”
[6] It is
immediately noticeable that the breach and cancellation clauses
do
not sit comfortably with each other. The cancellation clause allows
either party to give the other party thirty (30) days’
notice
that it intends to terminate the agreement. If the respondent
(lessee) is the one that gave the notice, it would mean that
the
respondent should vacate within thirty days of giving it. However, in
terms of the breach clause the moment the respondent
gave notice of
termination, it had to vacate. It no longer would enjoy the benefit
of using the premises for thirty days from the
date of notice.
[7] Finally
there is the normal non-variation clause but it is of no import
to
the determination of the issues in the case.
Circumstances that led to the application for the respondent’s
eviction
[8] Not long
after the lease was in operation the parties experienced difficulties
with each other’s conduct. The appellant claimed that the
respondent was culpable for a number of breaches, which led it
to
seek recourse to the provisions of the cancellation clause (clause
22.1) in order to protect its interests. To this end its
attorney
wrote to the respondent on 28 June 2017 informing the respondent that
it had invoked the provisions of clause 22.1. The
reasons for
invoking this clause were given as:
[8.1] the respondent does not hold a
retail
licence to sell Sasol (a company that sells petroleum products to
retail outlets, such as the respondent) products;
[8.2] the respondent has illegally tampered
with the electricity meter in order to avoid paying in full for the
consumption of electricity;
[8.3] the respondent caused damage to
the
on-site generator, which had to be repaired by the appellant;
[8.4] after acknowledging that it damaged
the
generator, the respondent failed to reimburse the appellant for the
cost of the repairs;
[8.5] the respondent has failed to exercise
the duty of care imposed upon it by the agreement.
[9] The
respondent’s attorneys responded on 3 July 2017 to this letter.
They denied each of the allegations referred to in [8]. The denial
was amplified with supporting documents. The response concludes
with
the following paragraph:
“
[The respondent] has
previously proposed and further proposes that a round table meeting
be held to resolve all the remaining issues
as contained in your
letters as received. Our client wishes for this issue to be resolved
in an amicable manner.
”
[10] The appellant was not
interested in furthering any discussion with the respondent. Its
attorney replied on 7 July 2017 to the attorney for the respondent
stating:
“
The crux of the matter is
that, whether you agree or not, your client is in breach of the Lease
Agreement as is set out in our client’s
aforementioned Notice
of Cancellation. Additionally, and notwithstanding your client’s
breaches of the agreement, our client
is entitled to cancel the Lease
Agreement in terms of clause 22 of the said Agreement and as it has
validly done.
”
[11] In the same letter the
appellant gave the respondent until 31 July 2017 to vacate the
premises. The respondent refused to comply. Almost four months later,
on 31 October 2017, the appellant served its application
in the court
a quo
seeking,
inter alia
, the ejectment of the
respondent. The application was based solely on the right of the
appellant in terms of clause 22.1 to cancel
the agreement. The
respondent opposed the application on the basis that the appellant
was not entitled to cancel the agreement
and therefore, according to
it, the claim for ejectment was not legally sound. The respondent
proceeded to allege that the appellant
had an ulterior purpose in
cancelling the agreement and seeking its ejectment. To this end, it
pointed out that very soon after
the thirty-six month period of the
agreement commenced, in August 2016, the appellant decided to sell
the premises but found that
the agreement presented an insurmountable
obstacle to this objective. Consequently, it began harassing the
respondent in the hope
that the respondent might find greater solace
in cancelling the agreement and vacating the premises. The harassment
took the form
of falsely accusing the respondent of breaching the
agreement, as well as inciting Sasol (the petroleum licencing and
supplying
company) to terminate its business relationship with the
respondent. The detailed nature of these allegations are dealt with
in
[46] - [48] below. The alleged harassment failed to yield the
appellant’s desired outcome. As a result, claims the
respondent,
the appellant sought refuge in the provisions of clause
22.1. The respondent also drew attention to the fact that the
appellant
took almost four months after its attorney wrote the letter
cancelling the agreement to bring the application. The respondent
goes
further and contends that the intention of the parties, and the
only sensible interpretation of clause 22.1, was that it can only
be
invoked by either party if the other party is culpable for breaching
a material provision of the agreement. As the appellant
could not
show such a breach it was not entitled to cancel the agreement as per
clause 22.1. In reply, the appellant failed to
attend to the
allegations that it had, and has, an ulterior motive for cancelling
the agreement, and that it had engaged in bad
faith conduct as soon
as it found the agreement had become an “
albatross
”
that had to be discarded. The appellant, on the other hand, believed
that there was no need for it to deal with these allegations.
According to it, the plain language of clause 22.1 leads to a single
ineluctable conclusion that it requires no reason for cancelling
the
agreement and therefore the issue of motive for the cancellation is
irrelevant. Cancellation was there for the taking. And
it was there
for both parties.
The judgment of the court
a quo
[12] The court
a quo
came
to the conclusion that clause 22.1 does not carry the meaning
accorded to it by the appellant. It did not accept that the
plain
meaning of the clause was that either party could cancel the lease at
any time during the six months period (the initial
period) or the
thirty-six month period (the renewal period) thereafter. It said in
this regard:
“
The clause can only have
sensible meaning on the basis that it must be taken to refer to the
time period after the prescribed initial
and renewal periods have run
their course and there has been an option to renew the lease
exercised by the tenant and accepted
by the landlord.
”
[22]
[13] The court
a quo
found
further that this conclusion is “
fortified
” by
clause 5.13 which protected the appellant from any loss of rental
income should the respondent vacate the premises any
time prior to
the expiry of the lease. It provides that should the respondent
vacate the premises “
for any reason
” whatsoever,
it shall be liable for the rental of the unexpired period of the
lease or for a shorter period if a suitable
tenant was found during
the unexpired period. Clause 5.13 is so broad that it covers a
vacation of the premises by the respondent
at the instance of the
appellant, as would occur here if the cancellation by the appellant
is allowed to stand. The court
a quo
found the operation of
the clause - apart from being “
so inherently inequitable as
to be unenforceable for public policy
” - was:
“…
contrary to all
reason in a commercial context: why should a business concern make
the necessary commitment of resources to the
fitting out of the
business at the premises and to the creation of goodwill there –
if this can be brought to naught within
a matter of weeks at the whim
of the landlord?
”
[23]
[14] According to this
interpretation, clause 22.1 can only be invoked by the appellant
after
the entire lease period had expired and if the respondent had
not vacated the premises. In terms of the common law should a lease
period expire and the tenant remains in possession of the premises
with the consent of the landlord, the lease agreement on the
same
terms and conditions as set out in the expired agreement on a month
to month basis is deemed to be concluded between the parties.
According to the court
a quo
clause 22.1 is merely a
re-statement of the common law.
Does clause 22.1 only come into operation once the agreement
expires by effluxion of time?
[15] It is settled law that a
proper construction of a written contract rests in giving meaning
to
words utilised in the document, read in the context of the entire
document and with regard to any relevant background material
that
provides insight into the intention of the parties.
[24]
[16] In my view there can be no
doubt that clause 22.1 allows for both the appellant and the
respondent to cancel the agreement during the course of its lifetime.
In this view, I regretfully part company with the court
a quo
.
The plain meaning of the words used in the clause leaves no room for
any doubt or ambiguity. The words used are clear and
crisp. The
parties had “irrevocably and expressly” recorded that
they were each entitled to walk away from the agreement
by
terminating it on thirty (30) calendar days’ notice. There is
also no doubt in my mind that the termination could produce
harsh
consequences for the respondent. These eventuate by virtue of the
operation of clauses 5.13 (which makes it liable for the
full rental
of the unexpired period of the agreement or for any period for which
the premises remain unlet, even though it no longer
enjoys the
benefits accrued by usage of the premises), 5.17 (which denies the
respondent any compensation for alterations or additions
it made to
the premises), 5.18 (which compels it to restore the premises to its
pre-agreement state if the appellant requests such),
and
13.2.2 (which caters for the situation where the appellant
elects not to exercise its right to request that premises be restored
to its pre-agreement state by ensuring that the appellant
automatically enjoys the full benefit of the alterations and
additions
made by the respondent without having to compensate the
respondent therefor). But, the harsh consequence is no reason to hold
that
clause 22.1 should be read in a manner that it cannot be invoked
while the agreement subsists. To hold so would make clause 22.1
valueless. The court
a quo
concluded that the clause is merely
a re-statement of the common law position which treats the terms of a
lease agreement such
as this one as binding on the parties when the
agreement has terminated by the effluxion of time but the lessee has
not, whether
by agreement or not, vacated the premises. The
conclusion, in my view, is strained. To reach such a conclusion it
would be necessary
to add the phrase, “
In the event of this
Lease terminating with the effluxion of time and the LESSEE has not
vacated the PREMISES then
” at the beginning of the clause.
Thus, the clause would read:
“
In the event of this
Lease terminating with the effluxion of time and the LESSEE has not
vacated the PREMISES then
the
LESSOR and the LESSEE expressly and irrevocably record that this
Lease may be terminated by either Party serving the other notice
of
its intention to cancel this Lease and upon 30 (thirty) calendar
days’ notice.”
(Underlined portion added)
If this is what the parties intended clause 22.1 to mean
they could easily have incorporated the phrase into the clause.
[17] I hold that clause 22.1
allows either party to escape the stranglehold of the agreement
on
thirty calendar days’ notice. Does this mean that the appellant
should succeed? Not necessarily so. It has to be remembered
that the
respondent maintains that the appellant’s invocation of clause
22.1 is
mala fide
, or to put it differently, the appellant is
not acting in good faith by invoking the clause. In essence, the
defence against the
ejectment is that clause 22.1 is not being
utilised for purpose. For this reason the appellant should not be
allowed to invoke
or enforce it. In order to give proper
consideration to this claim it is necessary to return to basic
principles and to the development
of our law of contract in the
recent past decades. A convenient place to begin would be with the
concept,
exceptio doli generalis
.
Exceptio doli generalis (exceptio)
and
considerations of public policy
[18] The
exceptio
is a
defence raised against the enforcement of a contract, or a term
therein, on the grounds that the plaintiff’s or applicant’s
conduct is not in good faith. Our courts have wrestled with the role
and relevance of the
exceptio
for some time. The attention
given to it peaked in
Bank of Lisbon
[25]
where it provided the sole basis for determining the outcome. The
majority (per Joubert JA) concluded that the principle was never
incorporated into our law.
[26]
So strongly did Joubert JA feel about it that he boldly pronounced
its death:
“
All things considered,
the time has now arrived, in my judgment, once and for all, to bury
the
exceptio doli
generalis
as a
superfluous, defunct anachronism.
Requiescat
in pace.
”
[27]
Jansen JA (in a minority of one) came to the opposite conclusion:
that it had always been part of our law, and further that if it was
not explicitly incorporated into our law the time for its
incorporation had arrived. Its utility, it was noted, rested in
preventing the injustice that might prevail in a particular case
if
the plain reading of the terms of a contract was allowed to have
decisive effect. The position adopted by Jansen JA was first
mooted
in an earlier judgment by him where he referred to the distinction in
Roman law between the
judicia bonae fidei
and
judicia
stricti juris
. A case decided on the latter approach involved a
judge reaching a conclusion “
according to the strict rules
of the old law
”, while in the former approach the case
would be decided “
in accordance with what the community as
such considered acting in good faith in the specific circumstances to
be.
” The former approach is to be preferred simply because
a decision based on the latter approach “
could be
inequitable in effect.
”
[28]
In the light of this, Jansen JA came to the conclusion that a court
following the former approach “
had wide powers of
complementing or restricting the duties of parties, of implying
terms, in accordance with the requirements of
justice, reasonableness
and fairness
.”
[29]
It was the community’s concept of what is good faith in a
particular matter that was relevant and that concept incorporated
“
justice, reasonableness and fairness
.” Jansen JA
maintained that our law had evolved to the point where it had
discarded the
judicia stricti juris
approach in favour of the
judicia bonae fidei
one. Hence, his dissenting judgment in
Bank of Lisbon
.
[19] Soon after considering
Bank of Lisbon
, the Appellate Division (now Supreme Court of
Appeal (SCA)) was entrusted with
Sasfin
.
[30]
In
Sasfin
the court came to the conclusion that our common law
“
does not recognise agreements that are contrary to public
policy
”
[31]
or ”
contrary to the moral sense of the community.
”
[32]
Interestingly, Jansen JA was part of the
Sasfin
bench.
Sasfin
approached the issue from the perspective of public policy or
boni
mores
of the community. It did not re-open the discourse on the
exceptio.
Subsequent courts too did not re-open the discourse
on the
exceptio
in great detail, but they continued to
determine contractual disputes, especially those involving restraints
of trade, on the basis
that the agreement either in whole or in part
should be consonant with the
boni mores
of the community.
On this basis they have on countless occasions, relying on
Sasfin
as authoritative learning, held that agreements or parts thereof
should not be enforced on the ground that they constitute an affront
to the
boni mores
of the community. It is important to
note though that the court in
Sasfin
was at pains to caution
future courts from interfering with contracts simply because they
believed the contract in whole or in
part conflicted with “
public
policy
” or the “
boni mores of the community.
”
The caution is unequivocal:
“
The power
to declare contracts contrary to
public policy
should
,
however,
be exercised
sparingly and only in the clearest of cases
,
lest uncertainty as to the validity of contracts result from an
arbitrary and indiscriminate use of the power.
”
[33]
(Emphasis added.)
This is particularly so, because adherence to contractual obligations
and exercising of contractual rights is itself a very forceful
public
policy. This public policy is inherent in the right to contract
freely.
[34]
[20] However, the issue
resurfaced some ten years after
Bank of Lisbon
, in
Saayman
.
[35]
Therein Olivier JA in a minority judgment reconsidered the role of
public policy and
bona fides
(good faith) in resolving a
contractual dispute. The learned judge of appeal examined numerous
authorities and came to the conclusion
that since the early 1900’s
our courts had utilised the principle of good faith to avoid an
injustice from prevailing by
the strict application of the law. Thus,
Olivier JA found that many cases had been decided on the basis that
the principle of good
faith was an integral part of our law of
contract and that it had a significant role to play in this area of
law;
[36]
Sasfin
was merely a more recent application of the principle.
In
Saayman
, Olivier JA reiterated what Jansen JA had
said in
Bank of Lisbon
and in
Truckers Land and
Development
. Five years later, in
Brisley
[37]
Olivier JA was faced with having to defend this view. Once again, the
learned judge of appeal was in the minority.
Brisley
dealt
with the application of the famous non-variation clause (also known
as the “
Shifren
clause
”). The majority
(Harms, Streicher and Brand JJA together with a concurring judgment
by Cameron JA) came to the conclusion
that the principle of good
faith was not the decisive factor in determining the issue of whether
to uphold the whole or part of
a contract. The other equally
important factor was that of holding parties to their bargain:
pacta
sunt servanda
. The main concern for the majority was that the
principle of good faith had been applied in such a manner by courts,
particularly
puisne
courts, to decide cases on the basis of
what the judges sitting in those courts thought to be reasonable or
fair. In other words,
they utilised the principle of good faith as a
gateway to introduce concepts of reasonableness or fairness into the
law of contract,
and by so doing gave themselves a licence to depart
from the other fundamental principle of
pacta sunt servanda
.
Applying the principle of
pacta sunt servanda,
which in their
view enjoyed superior status to the principle of good faith, led them
to conclude that the application of the non-variation
clause was
determinative of the dispute between the parties. Cameron JA (as he
then was), on the other hand, presented a slightly
more nuanced
account of the law. He considered the import of the
Constitution
of the Republic of SA, Act 108 of 1996
(the Constitution) and
came to the conclusion that “
neither the Constitution nor
the value system it embodies give the courts a general jurisdiction
to invalidate contracts on the
basis of judicially perceived notions
of unjustness or to determine their enforceability on the basis of
imprecise notions of good
faith.
”
[38]
Fundamental to the logic of Cameron JA was that courts must
prioritise contractual autonomy, which is part of the constitutional
value of “
freedom
” and is derived from “
the
constitutional value of dignity.
”
[39]
In contrast, for Olivier JA, “
our law clearly finds itself
situated in a developmental phase where contractual justice is
emerging more than ever before as a
moral and legal norm of immense
importance.
”
[40]
[21] Not long after
Brisley
the SCA had occasion, in
Afrox Healthcare
,
[41]
to re-consider the issue in the light of our constitutional values.
The facts in
Afrox Healthcare
had a sad tinge to them. Mr
Strydom contracted with a private hospital for medical services,
necessary for his healthcare. The
contract was a standard one that
all persons who seek the services of the hospital were required to
sign if they wished to have
recourse to the hospital’s
services. These contracts are also referred to in the literature as
“
contracts of adhesion
”. It contained a clause
which indemnified the hospital for all acts of negligence, save for
wilful ones, regardless of the
consequence(s) of the negligence. In
other words, even if death resulted from the negligence the hospital
was immunised from liability.
Anyway, as it so happened a nurse was
negligent, causing Mr Strydom harm. He sued Afrox but faced the
hurdle of the indemnity clause,
which Afrox invoked. He challenged
the validity thereof on the basis that it was not pointed out to him
when he signed the contract
(here he relied on established
authority
[42]
),
it was contrary to public policy and was in conflict with the
principle of good faith. He also invoked his right to healthcare
in
terms of s 27(1) of the Constitution. The SCA, per Brand JA, was not
persuaded by any of his contentions. Accepting that the
clause should
not hold sway if it was against public policy, he came to the
conclusion that there was an elementary and basic principle
of law
that contracts entered into voluntarily and freely by parties with
capacity should be enforced. This basic rule was part
of public
policy and if it was to be applied it could not be held that the
indemnity clause was contrary to public policy.
[43]
Brand JA found that the argument about good faith was not
sufficiently persuasive to displace the conclusion that the contract
and its terms should be adhered to in circumstances where it was
freely and voluntarily concluded:
“
As to the role and
function of abstract notions such as good faith, reasonableness and
fairness, it was decided by the majority
in
Brisley
that, although these considerations constitute the substructure of
our law of contract, they do not provide an independent or
‘free-floating’ basis for setting aside or limiting the
operation of contractual provisions. Otherwise stated, although
these
abstract notions represent justification for and inform the rules of
‘hard law’, they do not constitute rules
of ‘hard
law’ themselves.
When
it comes to setting aside or the enforcement of contractual
provisions, a court has no general discretion to act on abstract
notions such as good faith and fairness. It is bound to apply the
rules of hard law.
”
[44]
(Emphasis added.)
[22] The judgment in
Afrox
Healthcare
raises concerns from the perspective of public policy:
to allow a hospital to avoid all consequences for any negligence that
the
hospital staff may be responsible for simply on the basis of
upholding the
pacta sunt servanda
principle without more is,
with respect, giving an interpretation to public policy that is
one-sided. While it is important to
recognise that public policy
requires upholding the terms of a contract, it is also public policy
to renounce terms that are an
affront to the
boni mores
of
society. By way of illustration: the morals of society were found to
trump the need to uphold the contract in
Sasfin
. In the same
vein I would have no difficulty in refusing to uphold a contract
between a hospital and a patient which immunised
a hospital from the
negligence of its staff in a case where the patient visited the
hospital for a minor surgery and then left
with her leg amputated or
worse because of the negligence of the hospital staff. In my view,
the terms of the contract notwithstanding,
the
boni mores
of
society do not allow for the hospital to escape liability in such a
case. In contrast, according to the learning in
Afrox Healthcare
,
the terms of the contract without more are all important and ought to
be decisive.
[23] That said, there can be no
doubt that the more recent judgments of the SCA have unequivocally
endorsed the views of Joubert JA on the
exceptio
. The court
was alive to the fact that the judgments may be juxtaposed with that
of
Sasfin,
and therefore made it clear that it had no
difficulty with the finding in
Sasfin
since, in their view,
denying the validity of a contract or part thereof on the grounds of
public policy is not the same as denying
it on the grounds of good
faith. The test is consistency with public policy and not with “
good
faith, reasonableness and fairness
”, for these, according
to Brand JA, are “
abstract notions
”. The
conclusions of
Brisley
and of
Afrox Healthcare
attracted the attention of scholars, many of whom were critical of
separating “
good fait
h
, fairness and reasonableness
”
from “
public policy
” in so stark a manner.
[45]
Many of the scholars found the distinction to be problematic. In one
such scholarly piece the authors contended that the judgments
were
out of sync with the values embedded in our constitutional
dispensation and that instead they represented an “
increasing
conservatism in the judiciary’s attitude toward open-ended
constitutional values.
”
[46]
[24] In 2006 the issue resurfaced
in
Barkhuizen
.
[47]
Here the contestation involved a time-bar clause in an insurance
contract. The clause stated that the claimant must serve summons
on
the insurer within ninety (90) days of the insurer repudiating the
claim, failing which the insurer was automatically absolved
of all
liability. There was no debate that the claimant concluded the
contract voluntarily and freely. The claimant brought his
claim
outside the ninety day period. The insurer invoked the clause in a
special plea, as a result of which the parties requested
that the
court consider the matter on the basis of a stated case. This led to
the court being furnished with very little factual
information. The
parties approached the matter on the basis of principle. The claimant
claimed that the clause was contrary to
public policy in that it
denied him his constitutional right to access court.
[48]
In the High Court the claimant decided to re-focus his cause of
action solely on the constitutionality of the clause. The High
Court
agreed with him that the clause breached his constitutional right to
access courts. The matter came before the SCA. Its judgment
was
penned by Cameron J who it will be recalled was part of the majority
in
Brisley
. Referring both to
Brisley
and
Afrox
Healthcare
Cameron JA reiterated that our law of contract, like
all law in SA, is subject to the Constitution. Echoing what was said
there,
the SCA understood the law to be that if a contract in whole
or in part was offensive to public policy the courts were enjoined
to
declare the whole or the part invalid, and that public policy was
informed by the constitutional values of dignity, freedom,
respect
for human rights, non-racialism and non-sexism. However, holding a
contract or part thereof to be invalid for being incompatible
with
public policy is very different from declaring it invalid on the
grounds of good faith. To this end, Cameron JA categorically
reminds
the reader that:
“
Brisley
rejected the notion that the
Constitution and its value system confer on judges a general
jurisdiction to declare contracts invalid
because of what they
perceive as unjust, or power to decide that contractual terms cannot
be enforced on the basis of
imprecise
notions of good faith
.
”
[49]
(Emphasis added.)
[25] Cameron JA found that the
evidence placed before the court as to the rationale for the
time-bar
clause was threadbare and therefore the High Court’s decision
was problematic. This was so because the insurer needed
to know
within a reasonable time if it faced litigation. Whether 90
days might be reasonable or not depended on factual evidence
and that
was not presented to the court.
[50]
Hence, Cameron JA came to the conclusion that the claimant had failed
to show that he did not conclude the contract freely “
and in
the exercise of his constitutional rights to dignity, equality and
freedom
”
[51]
,
and therefore was not able to dislodge the insurer’s reliance
on the clause. The reasoning is simple: the claimant concluded
a
bargain, which included the time-bar clause, and was bound by the
terms of that bargain. Put differently, the insurer’s
reliance
on the clause was legitimate since that was the bargain it secured
and on the evidence presented there had been no offence
caused to
public policy. In such a circumstance the insurer was entitled to the
fruits of its bargain.
[26] Aggrieved at the outcome and
taking issue with the supporting reasoning thereof the claimant
sought assistance from the Constitutional Court (CC). The CC agreed
with the SCA that the case involved constitutional issues,
and on
that basis granted him audience. In the CC the claimant claimed that
the clause was unenforceable because it was contrary
to public policy
and that it was “
unfair
”. The claimant, no doubt,
steered away from the argument that the clause should not be enforced
because to do so would breach
the notion of good faith precisely
because of Cameron JA’s comment that such a notion was too
“
imprecise
”
[52]
to be of any value in determining the matter. However, and
interestingly, the insurer attempted to meet the argument of the
clause
contravening public policy by invoking the very “
imprecise
notion
” of good faith: it contended that the clause did not
contravene public policy because it:
“
should be read with the
implied term that parties to a contract ought to act
bona
fide
(in good faith).
This implied provision, so the argument went, rendered the clause
flexible enough to accommodate the circumstances
where the [claimant]
is prevented by factors beyond his control from complying with the
requirements of the clause.
”
[53]
[27] On the issue of the fairness
of the clause, the majority judgment of Ngcobo J (as he then
was)
identified two questions that had to be answered in the determination
of whether the clause was fair or not: was the clause
“
unreasonable
”,
and if not, should it be enforced “
in the light of the
circumstances which prevented compliance
”
[54]
therewith?
[28] On the issue of public
policy, the CC recognised that the denial of judicial redress could
be both a breach of the claimant’s s 34 constitutional rights
as well as a contravention of public policy. In such a case,
the s 34
right was a reflection of public policy. On the issue of the time-bar
and public policy the majority judgment pronounced:
“
Public policy imports the
notions of fairness, justice and reasonableness. Public policy would
preclude the enforcement of a contractual
term if its enforcement
would be unjust or unfair. Public policy, it should be recalled, ‘is
the general sense of justice
of the community, the
boni
mores
, manifested in
public opinion.’ Thus where a claimant seeks to avoid the
enforcement of a time limitation clause on the basis
that
non-compliance with it was caused by factors beyond his or her
control, it is inconceivable that a court would hold the claimant
to
such a clause. The enforcement of a time limitation clause in such
circumstances would result in an injustice and would no doubt
be
contrary to public policy. As has been observed, while public policy
endorses the freedom of contract, it nevertheless recognises
the need
to do simple justice between the contracting parties. To hold that a
court would be powerless in these circumstances would
be to suggest
that the hands of justice can be tied; in my view the hands of
justice can never be tied under our constitutional
order.
”
[55]
[29] The conclusion regarding
public policy and the need to do justice between the parties
notwithstanding, it must not be forgotten that the onus of showing
that enforcement of the clause is contrary to public policy
rests
with the claimant, who may be able to discharge it by showing that
non-compliance was beyond his control. This the claimant
failed to
do. In short, the claimant had failed to discharge the onus of
showing that “
it would be unfair or unjust to enforce
”
[56]
the time-bar clause. On that basis the majority judgment dismissed
his appeal. In other words, the clause would only have been
offensive
to public policy if the claimant was able to show that its operation
was unfair or unjust to him. The minority, in two
separate judgments
by Moseneke DCJ and Sachs J, agreed with the conclusion of the
majority regarding the role of public policy
in contractual law but
disagreed on the outcome of the appeal. In the view of Moseneke DCJ
the determination of whether a particular
clause in a contract
offends public policy is an objective one. Whether the claimant found
the offending clause to operate unfairly
or unjustly was irrelevant.
If the clause, viewed objectively, offended public policy the courts
should refuse to enforce it. In
this case, the clause was “
on
its face, unreasonable and unjust.
”
[57]
Sachs J agreed with Moseneke DCJ on this point. For them, as the
matter was adjudicated on the special plea raised by the insurer,
the
claimant should not be disadvantaged by the lack of evidence
regarding the circumstances which prevented him from complying
with
the terms of the clause. Hence, they were of the view that the
appeal should have been upheld – the time-bar clause
should
have been declared invalid – and the matter should have been
remitted to the High Court for further adjudication.
[30] The CC’s majority
judgment generated some debate in the legal community. This, to
some
extent, was galvanised by the fact that the concepts of fairness and
reasonableness were collapsed into one in the judgment
and many read
the
dictum
at [56]
[58]
of the judgment to mean that all contractual provisions had to be
reasonable to be fair in order to pass constitutional muster.
[31] A short while after the CC
judgment came out, an individual, Mr Bredenkamp, had his contract
with his bank (Standard Bank) terminated by the bank. He was informed
by the bank that it no longer wished to do business with
him, as any
association with him placed it at great risk of punitive measures
being taken against it by the US government, and
of suffering a great
loss of business with other international banks. Mr Bredenkamp
attempted to interdict the bank from terminating
the contract on the
basis that the bank’s conduct was unreasonable and therefore
unconstitutional. The matter came before
the SCA. Harms DP, writing
for a unanimous court, pointed out that the CC in
Barkhuizen
did not make any finding to the effect that “
fairness
”
is now recognised as a fundamental or “
core
”
constitutional value that infused all contracts.
[59]
This interpretation was not endorsed in two subsequent cases by the
CC as we will see below. Anyway, since the case brought by
Mr
Bredenkamp was one “
about fairness … and nothing
more
”,
[60]
it has to be borne in mind that fairness applies to both parties, and
to the extent that this may become a legitimate issue in
a case,
courts are enjoined to examine the matter from the view of both
sides.
[61]
In that case, the bank did not act unfairly by terminating the
account. Harms DP had no difficulty with acknowledging that the
concept of
bona fidei
was inherent in our law of contract. He
reiterated what Jansen JA said that “(a)
ll contracts in our
law are considered to be bonae fidei.
”
[62]
Even Joubert JA accepted this.
[63]
[32] However, in my view, on the
facts there was no doubt that the bank acted
bona fidei
in
terminating the contract. The bank could not be expected to keep Mr
Bredenkamp’s account open to its own detriment. It
was
therefore entitled to rely on the common law as there was no
termination clause in the contract. The bank acted in good faith.
[64]
Thus, even if Mr Bredenkamp was to allege that the bank’s
conduct violated the principle of good faith, he would nevertheless,
in my view, lose on the facts.
[33] Neither the CC judgment in
Barkhuizen
nor the SCA judgment in
Bredenkamp
sealed
the debate. In
Everfresh
[65]
the CC was once again confronted with the issue of good faith. There
the parties concluded a contract of lease, which provided
for the
lessee (Everfresh) to renew that contract upon its expiry. Everfresh
had to give notice of its desire to renew the contract
and the lessor
(Shoprite) would then negotiate a rental price for the renewed
contract. Shoprite refused to negotiate a new rental
price, thereby
denying Everfresh the opportunity to renew the contract. Prior to the
expiry date Everfresh gave notice of its desire
to renew the contract
and proposed an increase of 10% in the rental. Shoprite rejected the
offer. Upon the expiry of the contract
Shoprite sought the ejectment
of Everfresh and was met with a claim that such relief was unlawful
because Everfresh invoked the
option to renew the contract. It was
agreed though that at best for Everfresh it had an option to renew
the contract and not a
right to an automatic renewal. The option was
contingent upon Shoprite agreeing to an increased rental. However,
Everfresh contended
that Shoprite was duty-bound to make an effort to
negotiate the increase in rental in good faith by at the very least
making a
counter-offer. Its failure to do so rendered its efforts to
eject Everfresh unlawful. The High Court agreed with Shoprite that it
was under no contractual duty to agree to a new rental or to make a
counter-offer. It found that the option was no more than a
promise to
negotiate in good faith, but such a promise was too vague and
imprecise to be enforceable. This finding was in accordance
with the
common law as enunciated by the SCA in
Southernport
.
[66]
Accordingly, it ordered the ejectment. The SCA refused Everfresh
leave to appeal. The matter was brought to the CC on the basis
that
the conduct of Shoprite flouted the values enshrined in the
Constitution and was contrary to public policy. It argued that
these
values and public policy required Shoprite to negotiate a new rental
with it in good faith. It contended that the common
law of contract
as enunciated in
Southernport
should be developed in
accordance with the injunction imposed upon all courts by s 39(2) of
the Constitution.
[67]
This argument was not raised in the High Court, or even in the
application for leave to appeal to the SCA. Two judgments were
rendered by the CC. The majority came to the conclusion that
Everfresh should not be allowed to raise the constitutional point for
the first time in the CC and dismissed the appeal. The minority
judgment believed that it would have been more appropriate to refer
the matter back to the High Court for it to consider the argument
raised by Everfresh. The two judgments nevertheless agreed on
one
principle which was that where a contract contains a provision
requiring parties to negotiate further (an amendment for example,
or
as in
Everfresh
, a renewal of the contract upon its expiry)
that provision must be interpreted in the context of:
“…
the underlying
notion of good faith in contract law,
the
maxim of contractual doctrine that agreements seriously entered into
should be enforced
, …
Contracting parts certainly need to relate to each other in good
faith. Where there is a contractual obligation to negotiate,
it would
be hardly imaginable that our constitutional values would not require
that the negotiation must be done reasonably, with
a view to reaching
an agreement in good faith.
”
[68]
(Underlining added.)
Similarly, according to Yacoob J the contract must be interpreted:
“
against the backdrop of
an understanding that good faith should be encouraged in contracts
and a party should be
held to its bargain
.
”
[69]
(Underlining added.)
As
I read the judgments they both endorse the
pacta sunt servanda
principle. In both judgments the conclusion reached was that
provisions requiring further negotiation must be interpreted in such
a way as to make it meaningful rather than nullifying it. To this end
the judgments can hardly be said to be revolutionary. They
do so by
imposing a duty to act in good faith on the party who accepted the
obligation to negotiate further at the appropriate
time, i.e. when
the contract expired. However, an obligation to negotiate in good
faith is not an obligation to reach agreement.
Good faith
negotiations can, and often do, break down. Good faith negotiation
also does not mean that a party is precluded from
pursuing its own
interests: on the contrary it is perfectly legitimate for it to
pursue its own interests and yet be acting in
good faith. In both
judgments there was no suggestion that Shoprite was not acting in
good faith simply because it pursued its
own interests by rejecting
any increase in rental offered by Everfresh. All the two judgments
said was that Shoprite should not
be allowed to simply refuse to
engage with Everfresh because that would be contrary to the letter
and the spirit of the obligation
it voluntarily and freely accepted
when it concluded the contract. Both judgments held that it would be
wrong to find that the
provision imposing this obligation was too
vague and uncertain to be enforced, as such a finding would allow
Shoprite to escape
an obligation it adopted and which at the very
least gave Everfresh the benefit or opportunity to engage in
bona
fide
negotiations with Shoprite at the expiry of the contract. It
bears mentioning that the courts by applying the law requiring that
parties act in good faith towards each other are not necessarily
making a contract for the parties as is clearly demonstrated here.
The CC was upholding the contract by giving the clause - the duty to
negotiate an extension of the contract clause - a meaningful
interpretation. Hence, the judgments are an excellent example of how,
by relying on the principle of good faith, the other important
principle of
pacta sunt servanda
is not necessarily or always
modified, qualified or compromised. The two judgments demonstrate
that the two principles can in certain
circumstances enjoy
co-extensive existence.
[34] What is clear though is that
Everfresh
has left a deep imprint on this terrain of the law.
Contract law as enunciated by the SCA in
Brisley
(the majority
judgment),
Afrox Healthcare
,
Napier
and to a lesser
extent
Bredenkamp
was transformed. In their stead the
approaches of Jansen JA in
Tuckers Land and Development
Corporation
[70]
and
Bank of Lisbon
as well as that of Olivier JA in
Brisley
that contractual parties were required to act in good faith towards
each other was endorsed by the CC. Good faith according to
those
judgments incorporated the concepts of “
reasonableness and
fairness
”. The CC agreed.
[35] The CC had occasion to
reconsider the approach in
Botha
.
[71]
In this case, Mrs Botha concluded an instalment agreement for the
purchase of immovable land with a trust represented by Mr Rich.
Mrs
Botha was give possession of the land during the currency of the
agreement. The agreement contained a clause to the effect
that should
Botha breach the agreement (failure to pay any instalment due would
constitute a breach) the trust was entitled to
keep the purchase
price paid thus far (forfeiture clause), cancel the agreement
(cancellation clause) and seek the ejectment of
Mrs Botha. After
having paid three-quarters of the purchase price, Mrs Botha defaulted
on the instalments. The trust applied to
the High Court to declare
the agreement cancelled and order that Botha be ejected from the
land. At the same time the trust claimed
that it was entitled to keep
all the payments made by Mrs Botha in terms of the forfeiture clause.
Mrs Botha relying on s 27(1)
of the Alienation of Land Act, 68 of
1981 (the Act) counter-applied for the land to be registered into her
name. Section 27(1)
provides, amongst others, that if a purchaser has
paid “
not less than 50%
” of the purchase price, it
shall be entitled to demand that the seller transfer the land into
the purchaser’s name.
However, the High Court found in favour
of the trust in every respect. The matter came before the SCA on
petition for leave to
appeal. The SCA granted leave to the full bench
of the High Court, who dismissed the appeal. Botha applied to the CC
for assistance.
At the CC she repeated her claims that in the light
of her having paid three-quarters of the purchase price, the
cancellation of
the agreement contravened public policy and therefore
should not be enforced: alternatively if the cancellation clause was
upheld
she was entitled to a refund of the amounts paid towards the
purchase price – in other words, the forfeiture clause should
not be enforced.
[36] The CC, noting that all
bilateral contracts, such as the one in the case, are infused
with
the principle of reciprocity, and more importantly that the principle
was flouted by Mrs Botha by virtue of her being in arrears
with the
instalments, said the following:
“
To the extent that the
rigid application of the principle of reciprocity may in particular
circumstances lead to injustice, our
law of contract, based as it is
on the principle of good faith, contains the necessary flexibility to
ensure fairness. In
Tuckers
Land and Development Corporation
[72]
it was pointed out that the concepts of justice, reasonableness and
fairness historically constituted good faith in contract. The
principle of reciprocity originated in these notions. This accords
with the requirements of good faith.
”
[73]
And:
“
[The provisions of the
Act] are in accordance with the constitutional values of reciprocal
recognition of the dignity, freedom and
equal worth of others, in
this case those of the respective contracting parties. The principle
of reciprocity falls squarely within
this understanding of good faith
and freedom of contract, based on one’s own dignity and freedom
as well as respect for the
dignity and freedom of others. Bilateral
contracts are almost invariably cooperative ventures where two
parties have reached a
deal involving performances by each in order
to benefit both.
Honouring
that contract cannot therefore be a matter of each side pursuing his
or her own self-interest without regard to the other
party’s
interests.
Good faith
is the lens through which we come to understand contracts in that
way.”
[74]
(Underlining added.)
[37] On this reasoning, at the
heart of which lies, once again, the principle of good faith,
the CC
upheld the appeal and ordered the trust to register the land in the
name of Mrs Botha, subject to her purging her default.
Incidentally
Cameron J (as he now is) concurred in the judgment, despite his
earlier misgivings about good faith being an “
imprecise
notion
”
[75]
.
In essence, the CC refused to enforce both the forfeiture and the
cancellation clauses. It bears mentioning that the CC ensured
that a
balance between the interests of Mrs Botha and that of the trust was
maintained. This is manifest in the order it issued.
To explain the
order it utilised the term “
disproportionate
”:
“
[T]o
deprive Ms Botha of the opportunity to have the property transferred
to her under s 27(1) and in the process cure her
breach in
regard to the arrears, would be a disproportionate sanction in
relation to the considerable portion of the purchase price
she has
already paid, and would thus be unfair. The other side of the
coin is, however, that it would be equally disproportionate to
allow registration of transfer, without making that registration
conditional upon payment of the arrears and the outstanding amounts
levied in municipal rates, taxes and service fees. Accordingly an
appropriate order in this regard will be made.”
[76]
[38] In my reading, the CC in
Botha
crystallised what it had already stated in
Barkhuizen
and in
Everfresh
. It therefore, in my view, did not endorse
Harms DP’s interpretation of its judgment in
Barkhuizen.
[39] This then is the present
state of our law of contract. Though I have to say that the
underlined sentence in the
dictum
quoted above in [36] does
give me pause for concern if it were to be interpreted to mean that a
party can never pursue its own
interests in negotiations and act in
good faith at the same time. In my view, courts should not find that
because a party pursues
its own interests to the detriment of its
negotiating or contractual partner it is not negotiating or acting in
good faith. This
is why the judgment in
Bredenkamp
has to be
correct, even if viewed through the lens of good faith. The fact that
Mr Bredenkamp was severely prejudiced by the conduct
of the bank
pursuing its own interests it is not a basis for finding that the
bank was not acting in good faith. In fact, it demonstrated
that the
pursuit of its own interests was proof of its good faith. Similarly,
if Shoprite, in the course of meeting whatever evidence
that
Everfresh brought was able to show that it acted in good faith, even
though it pursued its own interests to the detriment
of Everfresh,
there should have been no reason to force it agree to an extension of
the agreement. To repeat what I say above,
a duty to negotiate
in good faith is not a compulsion to reach agreement. In
Botha,
Mrs Botha acknowledging her default had offered to purge her default
so that the contract could remain alive, alternatively she
asked for
the payments she made towards the purchase to be refunded. The
refusal of the trust to entertain either of the two without
more or
explaining itself and to insist on applying the letter of the
agreement cannot be held to be an act of good faith.
[40] The CC has now in a
unanimous judgment spoken unambiguously. Incidentally, Cameron J (as
he now is) concurred with the judgment. Nevertheless, it seems
the SCA elects to dissent. In a very recent judgment the SCA
in
BEADICA
[77]
refused to follow the CC’s lead in
Botha
.
[41]
BEADICA
was concerned
with a dispute between a lessor (Oregon Trust) and four lessees, each
of whom entered into a separate contract of
lease with the
Oregon
Trust. The four lessees conducted franchised businesses on the
premises let to them. The lease contracts were for a
period of
five years each and they commenced running on 1 August 2011. The
lessees each had an option to renew the leases for a
further five
years, failing which the leases would terminate on 31 July 2016. To
ensure that the option was meaningful a mechanism
to determine future
rental was incorporated into the lease contract. To exercise the
option the lessees were required to inform
the lessor six months
prior to 31 July 2016 that they intended to renew the contract.
The lease agreements resulted from each of the lessees having
concluded a franchise agreement with a Mr Sale. Mr Sale was also
the
sole member of the lessor. The franchise agreements provided that the
franchise businesses were to operate from the leased
premises. The
lessees failed to notify the lessor timeously of their desire to
exercise their options – instead of informing
the lessor by 31
January 2016, they only informed it in March 2016, with two of them
indicating that they wished to purchase the
leased premises. In
response the lessor stated that Mr Sale was not available but it
would respond as soon as he returned. No further
response was
received. Instead, on 29 July 2016, the attorneys for the lessor
informed each of the lessees that they were expected
to vacate the
premises by 31 July 2016. The lessees brought an application in
the Cape High Court interdicting the lessor
from ejecting them
pending the determination of a claim by them that they validly
exercised the option. The lessor counter-applied
for their ejectment.
The High Court, per Davis J, came to the conclusion that while they
failed to comply with the requirement
to inform the lessor by 31
January 2016 that they intended to renew the leases, the lessees
nevertheless substantively complied
with the requirement to timeously
inform the lessor.
[78]
He went further to find that by relying on the termination of the
agreement by effluxion of time, the lessor effectively imposed
a
sanction on the lessees for failing to inform it timeously of their
intention to renew the leases. Such a sanction was, in his
view, a
“
disproportionate sanction
”.
Given the particular facts of the case, Davis J came to the
conclusion that it would constitute “
capital
punishment.
”
[79]
The concept is commonly used in our labour law, where the sanction of
dismissal is readily accepted by all labour law practitioners
to be
equivalent to “
capital
punishment
”. On this
logic, Davis J ordered the lessor to comply with the option clause,
which contained a mechanism for
determining the future rental for the use of the premises.
[42] The SCA, per Lewis JA, was
of the view that to decide a contractual dispute on the basis
of
fairness, and to fashion a remedy on the basis of
“
disproportionality
”, which was the approach that
informed the CC’s decision in
Botha
, is
contra
the fundamental principle of rule of law in that it firmly sets the
law on the path of uncertainty. In contrast the SCA was of
the view
that the principle of
pacta sunt servanda
principle should
reign supreme for it produced certainty in the law. Incidentally,
Davis J did address the issue of certainty in
contractual law and
said that in his view, certainty is a “
shibboleth
”.
[80]
Not so according to the SCA. According to it, “(t)
he
reason for the continued application of the principle embodied in the
maxim pacta servanda sunt is the need for certainty
in
commerce
”
[81]
And,
pacta
sunt servanda
can only be circumvented in cases where it conflicts with public
policy. The SCA, however, did not envision this very qualification
as
undermining the “
need
for certainty in commerce
.”
[43] Lewis JA came to the
conclusion that the lessees did not advance any reasons, apart from
claiming to be uneducated persons, for not giving timeous notice of
the intention to renew the lease agreement. In this sense the
case
was on all fours with that of
Barkhuizen
where a failure to
explain a default was the basis upon which the majority in the CC
refused the defaulting party the relief it
sought. By not explaining
why they were unable to comply with the terms of the lease agreement,
the lessees had failed to demonstrate
why the enforcement of the
termination clause was contrary to public policy. Unlike the High
Court, the SCA rejected the claims
of the lessees that they were
uneducated and that Mr Sale, as the sole trustee, was motivated to
destroy their businesses. On the
latter issue, the SCA said that Mr
Sale’s “
motive, if he had any, was not relevant.
”
[82]
[44] In short, to the extent that
the CC in
Botha
saw it necessary to qualify the
pacta sunt
servanda
principle by reference to the concepts of “
good
faith
”, “
fairness
” or
“
disproportionality
” (which according to the SCA
are different from public policy consideration) it has, according to
the SCA, undermined the
rule of law. So strongly did the SCA feel
about this that Lewis JA showed no hesitation in approvingly quoting
the view of an academic
who described the CC’s judgment in
Botha
as being “
embarrassingly poor
.”
[83]
The description is unfortunate and in my view should not have been
repeated by the SCA. It is unhelpful and does not enlighten
the
discourse.
[45] That the CC and the SCA
follow different approaches to the law of contract is certainly
an
unwelcome development: it has the potential of producing “
endless
uncertainty and confusion
”
[84]
in the law. The SCA, whatever its misgivings, is bound by the
decisions of the CC. South Africa, after all, has a single system
of
law – not one pronounced by the CC and another pronounced by
the SCA.
[85]
That the SCA refuses to follow the
stare decisis
principle is
a matter for the SCA. This court, however, is bound by the CC’s
designation of the law and not that of the SCA,
especially where
there is, as in the present case, a divergence of views. I agree with
the CC and hold the view that its approach
is consonant with the
values espoused in our Constitution. In my judgment i
t
is important not to sanctify any one principle or constitutional
value to the detriment, or in total disregard, of others especially
in cases where two (or more) constituional principles or values
clash. On this logic,
pacta sunt
servanda
cannot be elevated above all
else. Contractual arrangements and the conduct of the parties bound
by them are, over time, far too
robust, rich and complex to be
understood simply through the bare bones of the
pacta
sunt servanda
principle without regard
to the “
principle
of
good faith
, [which]
contains the necessary flexibility to
ensure fairness”
.
The development of
contract law by the CC, in my judgment, captures this basic fact and
attempts to give it practical meaning by
inviting parites and courts
to be vigilant, thorough, fair to all sides affected by or involved
in the contractual relationshsip
and most of all respectful of all
the constituional values that arise in a contractual dispute.
However, had it not spoken on the subject, I would have
applied the SCA’s account of the law, even though I find myself
in
disagreement with it.
Application of the legal principles as laid out by the CC to the
facts of the case
[46] In the present case the
respondent’s opposition to the cancellation of the agreement
was,
inter alia
, that the appellant was not entitled to invoke
the cancellation clause for ulterior purpose.
[86]
Factual averments to this effect were placed before the court in the
answering affidavit. This is brought to the fore in the following
terms in the answering affidavit:
“
13.
After the lease was automatically extended for a further period of 36
months in terms of clauses
2.3 and 2.4 the [Appellant] decided that
it wished to sell the entire property upon which the lease premises
is [sic] situated.
In
amplification hereof Bezuidenhout and her employees began harassing
and hounding the Respondent for purposes of trying to ensure
that the
Respondent vacated the leased premises as the Applicant was unable to
sell the leased premises to its potential new purchaser
in
circumstances where the
Respondent
continued to lease the premises in terms of [the agreement]
.
14.
The Respondent believes that the new prospective purchaser was
insisting that the Respondent
vacate the leased premises prior to any
sale materialising. Accordingly, the Respondent’s continued
occupation of the leased
premises became a major impediment to the
[Appellant] selling the property to a prospective purchaser.
15.
For this reason the [Appellant] began falsely accusing the
Respondent of various misdemeanours and breaches.
One of these so
called breaches was that the Respondent caused on site damage to the
generator which then had to be repaired. Whilst
it is correct there
was a problem with the generator, the Respondent in no way
contributed towards this problem. City Power disconnected
the
generator which was interfering with the electricity at the leased
property. Furthermore, as the Respondent was desperate for
the
generator to be operative as a result of frequent power cuts that
were taking place in the area the Respondent agreed to pay
for the
repair of the generator.
16
It is denied that the Respondent failed and refused to make payment
to the [Appellant]
of the utility cost due, owing and payable as at
28 June 2017. In amplification hereof, the [Appellant] fails to set
out what those
utility costs being referred to in this paragraph were
and furthermore, fails to produce any proof that the Respondent was
invoiced
by the [Appellant] for the utility cost due for the said
period. Whenever the Respondent was invoiced by the [Appellant] for
utility
cost due, the Respondent would pay those costs.
17.
Furthermore, the Respondent requested a breakdown of amounts as
mentioned in an email to
the [Appellant] dated 15 June 2017 but never
received the said breakdown. I annex hereto the aforesaid email …
Annexed to
[Appellant’s] founding affidavit is a letter from
the Respondent’s attorneys of record, … in terms of
which
it denied that the Respondent has in any way or manner breached
any of the terms of the [agreement] as alleged or at all. I confirm
the correctness of the allegations set out in the said letter and
pray that the terms of the said letter be regarded as if specifically
incorporated herein.
18.
Accordingly, the Respondent emphatically denies that it has breached
any of the provisions
of the [agreement] as alleged or at all.
”
[87]
(Emphasis added).
[47] The claims may not be true,
but if that was the case, the appellant was obliged to dispute
them
and place factual evidence before the court. Instead it replied as
follows:
“
AD PARAGRAPHS 13 –
18
10.
The founding affidavit makes it clear that the [agreement] was
cancelled by the [appellant]
pursuant to its right in clause 22.1 of
the [agreement], namely to terminate the lease by serving on the
respondent a notice of
its intention to cancel the lease upon thirty
(30) calendar days’ notice.
11.
This right of the [appellant] is one that it may elect to pursue
whether or not the respondent
is in breach of the [agreement]
12.
The [appellant] persists that the respondent has breached the
[agreement] in, amongst other
the manner set out in paragraph 13 of
the founding affidavit.
I
have, however, been advised that given the fact that the [appellant]
relies on its right to cancel the [agreement] on notice to
the
respondent, it is not necessary to deal with the breaches of the
[agreement] committed by the respondent during the subsistence
of the
[agreement] neither with any of the allegations contained in
paragraphs 13 to 18 of the answering affidavit
.
”
[88]
(Emphasis added).
[48] The respondent goes further
to allege that the appellant “
has been contacting Sasol
(one
of the respondent’s suppliers)
and the respondent’s
other suppliers, and based on false facts instructed the said
suppliers and more particularly Sasol to
terminate its supply
agreement with the
” respondent. The respondent made this
allegation in the face of the appellant’s claim that the
respondent had received
a termination notice from one of its
suppliers of petroleum products, Sasol. In support of the claim the
appellant annexed a copy
of the letter the respondent received from
Sasol. To its credit the appellant denied the allegation, but in bald
terms. It could
at the very least have gone a step further and
explained how it came to possess a letter that was sent to the
respondent by Sasol
and is no doubt privy to Sasol and the respondent
only as it affects their private business relationship which the
appellant has
no role in.
[49] In my view the essence of
the averments made on behalf of the respondent were to the effect
that the appellant, in its quest to sell the property, attempted to
get the respondent to vacate the premises by employing methods
and
means that effectively breached its duty of good faith towards the
respondent. In particular, it “
harassed and hounded
”
the respondent’s employees, made false allegations of breach
against the respondent and interfered with the relationship
between
the respondent and its suppliers, so that the respondent would vacate
the premises. As I say above these averments
may be false, but
it was up to the appellant to say so and to place the relevant facts
before court so that they could be assessed.
The appellant refused to
deal with them. It took the view that they were irrelevant.
Consequently, on the rule outlined in
Plascon-Evans
[89]
the undisputed averments of the respondent constitute the factual
substratum upon which the dispute has to be resolved. And to
the
extent that it denied that it interfered with the business
relationship between the respondent and Sasol its denial was bare
and
therefore inadequate in terms of the
Plascon-Evans
rule as
clarified in
Wightman
.
[90]
According to these facts the respondent wished to relieve itself of
the agreement because it became an insuperable burden to its
motive
to sell the property.
[50] At the hearing this issue
was raised with Mr Vetten for the appellant. It was put to him
that
these facts relate to the issue of good faith. He conceded that the
averments do in essence challenge the good faith commitment
of the
appellant, but relying on the SCA’s approach to the law of
contract (as canvassed in the cases mentioned above), maintained
that
since good faith, especially in the form of reasonableness and
fairness, was not part of our law of contract there was no
need for
the appellant to meet the challenge. And he conceded that the
challenge was not met. Mr Ress, in response, insisted that
the
challenge was raised and went so far as to say that at the hearing
before the court
a quo
the discourse for a time focussed on
the learning presented by the CC in
Barkhuizen
and
Everfresh
.
In reply Mr Vetten said that his memory was slightly more faded than
that of Mr Ress and therefore he was not able to confirm
or deny that
the issue was canvassed at the hearing in the court
a quo
.
However, it was his submission that the issue of good faith,
especially in the form of fairness and reasonableness, was not
material
to the determination of the dispute.
[51] I, therefore, hold that the
issue of good faith was material to the determination of the
dispute.
The facts that have a bearing on this issue were raised by the
respondent. They were established by application of the
legal
principles applicable to motion proceedings. The respondent in these
circumstances had every right to argue that the appellant
failed to
act in good faith, and that its recourse to clause 22.1 was not borne
of good faith. Mr Ress did so and Mr Vetten’s
response was that
the law is set out by the SCA which this court, he reminded us, is
bound by. That is as far as the matter on
this issue was taken. But,
Mr Vetten did not dispute that the issue was raised.
[52] Windell and Opperman JJ
disagree with me. They say that the issue of good faith was never
pleaded nor argued before us. My reasons for holding otherwise are
clearly set out in the preceding paragraphs. In their joint
judgment
they place heavy emphasis on the question of the role and importance
of pleadings in the determination of disputes by
courts. I do not
underestimate the importance of pleadings. However, there is one
aspect that I wish to highlight. It is that pleadings
are rarely, if
ever, perfect. For this reason courts have for almost a century now,
accepted without more the
dictum
of Innes CJ:
“
The object of pleading is
to define the issues: and parties will be kept strictly to their
pleas where any departure would cause
prejudice or would prevent full
enquiry. But within those limits the Court has a wide discretion. For
pleadings are made for the
Court, not the Court for pleadings. And
where a party has had every facility to place all the facts before
the trial Court and
the investigation into all the circumstances has
been as thorough and as patient as in this instance, there is no
justification
for the inference by an appellate tribunal, merely
because the pleading of the opponent has not been as explicit as it
might have
been.
”
[91]
[53] Although I hold that the
facts allowing for the respondent to contend that the appellant
was
not acting in good faith when it sought to invoke clause 22.1, in any
event on the principle set out by Innes CJ, I believe
the respondent
was well within its rights to argue that the appellant failed to
adhere to its duty to, at all material times, act
in good faith
towards the respondent. It placed certain relevant facts before the
Court. It did not have to explicitly spell out
that the appellant did
not in accordance with its contractual obligation act in good faith
towards it. That was a matter it could
argue as long as it restricted
itself to the facts placed before the Court. The appellant could not,
in that event, claim prejudice.
Mr Vetten certainly did not do so.
After all, his client, on advice, voluntarily and explicitly elected
not to place contrary facts
before the court. The real dispute
between the parties was the right of the appellant to invoke clause
22.1 to secure the ejectment
of the respondent. The right of the
appellant was subject to its obligation to at all material times act
in good faith towards
the respondent. The respondent did not, in its
answering affidavit, step outside of the issue in dispute, nor did it
fail to place
material facts concerning the element of good faith
before the court. It was, therefore, legally competent for it to
canvass this
element at the hearing and this court is, in its duty to
do justice by the parties, free to deal with it.
[54] I have no difficulty with
the proposition that an owner of a property should have an unfettered
right to alienate the property. All owners do, and I believe should,
have that right as long as they themselves do not encumber
the
property, or where by alienating the property they affect the rights
that others have acquired over the property. In this case,
the
appellant of its own accord encumbered the property and by so doing
conferred rights upon the respondent. The appellant’s
right to
alienate its property must be understood in this context. I also do
not believe that the appellant was prevented from
ever alienating the
property as long as the agreement subsisted. My view is that it had
to do so in a manner that did not breach
its duty of good faith
towards the respondent, which duty it voluntarily adopted by
concluding the agreement. And, I repeat what
I say above, this does
not mean that it would have breached its duty of good faith by
pursuing its own interests to the detriment
of the respondent.
Unfortunately for it, it failed to make that case, or to put it
differently, it failed to meet the case of the
respondent. In
contrast, in
Bredenkamp
the bank made that case.
[55] Finally, Windell and
Opperman JJ say that my “
construction of the law is
misplaced
.” In my reading, our disagreement lies in the
fact that I hold the view that the law of contract has advanced since
Sasfin
. I have extensively explained the development that
occurred since
Sasfin
hereinabove. It is unfortunate that they
believe this “
construction
” to be “
misplaced
”.
[56] To sum up. On the facts
established by application of the principles set out in
Plascon-Evans
and their application to the law as set out by the CC, I hold that
clause 22.1 does not avail the appellant. In other words, the
appellant acted contrary to its duty of good faith towards the
respondent, and when that failed to yield it the desired result
it
sought refuge in clause 22.1. Under these circumstances it should not
be allowed safe passage. Accordingly, in my view,
the clause
should not in the present circumstances be enforced by the court.
Hence, I would issue an order dismissing the
appeal with costs.
Vally J
Date of hearing:
18 February 2019
Date of judgment:
11 April 2019
For the
Appellant:
D Vetten
Instructed by:
Edward S Claasen & Associates
For the Respondent:
S Ress
Instructed by:
Naicker Ooni Wadia Inc
[1]
Natal Joint Municipal Pension Fund v Endumeni
Municipality 2012 (4) 593 (SCA)
at
p604 C-D.
[2]
Plascon-Evans Paints Ltd v Van Riebeeck Paints
(Pty) Ltd
, 1984 (3) SA 623 (A)
[3]
Endumeni
at p614 A-B.
[4]
Novartis SA (Pty) Ltd v Maphil Trading (Pty)
Ltd
2016 (1) SA 518
(SCA) at [28].
[5]
Kerr’s Law of Sale and Lease Fourth Edition
at page 371.
[6]
2018 (2) SA 314 (SCA).
[7]
2007 (5) SA 323 (CC).
[8]
At [15].
[9]
2019 JDR 0602 (SCA).
[10]
Beadica 231 CC and Others v Trustees Oregon Trust and Another
2018 (1) SA 549 (WCC).
[11]
Beadica
supra a
t
[40]
[12]
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) paras 27-30.
[13]
2019 (1) SA 327
(SCA) at
[27]
[14]
Roazar CC v The Falls Supermarket CC
,
2018 (3) SA 76
(SCA) at para [20] and [23]
[15]
2014 (4) SA 124 (CC)
[16]
2017 (4) SA 223 (CC).
[17]
See paragraphs 2.14, 4.11, 5.1, 5.1.1, 5.1.2 of
the respondent’s heads of argument.
[18]
South African Police Service v Solidarity obo Barnard
[2014]
ZACC 23
at
[202]
[19]
2012 (1) SA 256 (CC).
[20]
2010
(3) SA 293 (CC).
[21]
The concepts of bona fides, disproportionality,
mala fides
are used in various contexts.
[22]
Judgement of court
a
quo
at [6]
[23]
Id
at [9]
[24]
Bastion Financial Services (Pty) Ltd v General
Hendrik Schoeman Primary School
2008
(5) SA 1
at [17];
South African Airways
(Pty) Ltd v Aviation Union of South Africa and Others
2011 (3) SA
148
(SCA) at [25] –
[30];
Natal Joint Municipal Pension
Fund v Endumeni Municipality
2012 (4)
SA 593
(SCA) AT [18];
Thomas v Minister
of Defence and Military Veterans
2015
(1) SA 253
(SCA) at [8]
[25]
Bank of Lisbon and South Africa Ltd v De
Ornelas and Another
1988 (3) SA 580
(A)
[26]
Id
at 605H-607A
[27]
Id
at 607A-B
[28]
Tuckers Land and Development Corporation v
Hovis
1980 (1) SA 645
(A) at 651C-D
[29]
Id
at 651E
[30]
Sasfin v Beukes
1989 (1) SA 1 (A)
[31]
Id
at 7H
[32]
Id
at 8A
[33]
Id
at 9B
[34]
Id
at 9E-F. See
the cases cited therein
[35]
Eerste Nasionale Bank van Suidelike Afrika Bpk
v Saayman NO
[1997] ZASCA 62
;
1997 (4) SA 302
(SCA) at
321H-I
[36]
Id
at 321H-I.
The
dictum
at
326G is explicit in this regard: “
I
am convinced that the principles of good faith, founded in public
policy, still play and must continue to play, a significant
role in
our law of contract.
”
[37]
Brisley v Drotsky
2002 (4) SA 1 (SCA)
[38]
Id
at [93]
[39]
Id
at [94]
[40]
Id at [72]. The judgment is in Afirkaans and the
particular
dictum
reads: “
Dit is duidelik dat ons
reg in ‘n ontwikkelingsfase is waar kontraktuele geregtigheid
meer as ooit tevore as ‘n morele
en juridiese norm van groot
belang op die voorgrond tree.
”
[41]
Afrox Helathcare Limited v Strydom
2002 (6) SA 21 (SCA)
[42]
Spindrifter (Pty) Ltd v Lester Donovan (Pty)
Ltd
1986 (1) SA 303
(A) at 316C-318C
[43]
Afrox Healthcare
,
n 20 at [23] – [24]
[44]
Id
at [32].
Translation has been provided by Brand JA himself in Fritz Brand and
Douglas Brodie,
Good faith in Contract
Law
in Zimmerman, Visser and Reid
(eds),
Mixed legal
systems
in Comparative Perspective: Property and Obligations in Scotland and
South Africa
(2004) at 108
[45]
Some of these are listed in fn 4 in
Napier
v Barkhuizen
2006 (4) SA 1
(SCA), but
there are many more than those listed therein. No purpose would be
served by listing them all.
[46]
D Bhana and M Pieterse,
Towards
a reconciliation of contract law and constitutional values: Brisley
and Afrox revisited
,
2005 SALJ 865
at
872
[47]
Napier v Barkhuizen
, n 24, fn 4
[48]
Section 34 of the Constitution provides that
everyone has a right to have any dispute resolved publically in a
hearing before
a court.
[49]
Napier v Barkhuizen
,
n 24, at [7]
[50]
Id
at [10]
[51]
Id
at [28]
[52]
See quotation from the judgment of the SCA in
[23] above
[53]
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) at
[21]
[54]
Id
at [56]. The
dictum
reads:
“
The determination of
fairness
There are two questions to be asked in
determining fairness. The first is whether the clause itself is
unreasonable. Secondly,
if the clause is reasonable, whether it
should be enforced in the light of the circumstances which prevented
compliance with
the time limitation clause”.
[55]
Id
at [73]
footnote omitted
[56]
Id
at [86]
[57]
Id
at [119]
[58]
Referred to in [27] and n 33 above.
[59]
Bredenkamp and others v Standard Bank of South
Africa
2010 (4) SA 468
(SCA) at [27] –
[28]
[60]
Bredenkamp
, n 38
at [30]
[61]
Id
at [65]
[62]
Id
at [33], See:
Tuckers Land and Development
Corporation
, n 7 at 651B-C
[63]
Mutual and Federal Insurance Co Ltd v
Oudtshoorn Municipality
1985 (1) SA
419
(A) at 433B
[64]
Bredenkamp,
n 38
at [57]
[65]
Everfresh Market Virginia (Pty) Ltd v Shoprite
Checkers (Pty) Ltd
2012 (1) SA 256
(CC)
[66]
Southernport Developments (Pty) Ltd v Transnet
Ltd
2005 (2) SA 202 (SCA)
[67]
Section 39(2) requires all courts to develop the
common law in a manner that promotes “
the
spirit, purport and objects of the Bill of Rights
”.
[68]
Everfresh
n 44,
at [72]. See also [69]
[69]
Id
at [37]
[70]
See n 7
[71]
Botha and Another v Rich N. O. and Others
2014 (4) SA 124 (CC)
[72]
Tuckers Land and Development Corporation
,
n 7 at 651 - 2
[73]
Botha
, n 50 at
[45]
[74]
Id
at [46]
[75]
See the quotation from his judgment in [20] above
[76]
Botha
n 50 at
[49]
[77]
Trustees for the Time Being of the Oregon
Trust v BEADICA 231 CC and Others
[2019] ZASCA 23
(28 March 2019)
[78]
Beadica 231 CC &
others v Trustees, Oregon Trust & another
2018 (1) SA 549
(WCC) at [39]
[79]
Id
at [39] and
at [42]
[80]
Id
at [44]
[81]
n 56, at [26]. Lewis JA referred to two other
judgments from the SCA in support of this conclusion. They are:
Mohamed’s
Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd
2018 (2) SA 314
(SCA) and
Roazar
CC v The Falls Supermarket CC
2018 (3) SA 76 (SCA)
[82]
n 56, at [45]
[83]
Id
at [37]
[84]
Bloemfontein Town Council v Richter
1938 AD 195
at 232
[85]
Pharmaceutical Manufacturers Association of
South Africa and Another: In re: Ex Parte
President
of the Republic of South Africa and Others
[2000] ZACC 1
;
2000 (2) SA 674
(CC) at
[49]
[86]
See [11] above
[87]
Paragraphs 13 – 18 of the answering
affidavit
[88]
Paragraphs 10 – 12 of the replying
affidavit
[89]
Plascon-Evans Paints Ltd v Van Riebeeck Paints
(Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
634E-635;
Wightman/ t/a J W
Construction v Headfour (Pty) Ltd
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA) at
[12]
– [13]
[90]
Id
.
[91]
Robinson v Randfontein Estates G. M. Co. Ltd
1925 AD 173
at 178;
Shill v Milner
1937 AD 101
at 105;
Stead v Conradie en
Andere
1995 (2) SA 82
(SCA) at 122B-C