About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2007
>>
[2007] ZASCA 62
|
|
Ethekwini Metropolitan Unicity Municipality (North Operational Entity) v Pilco Investments CC (320/06) [2007] ZASCA 62; [2007] SCA 62 (RSA) (29 May 2007)
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO: 320/06
Not
Reportable
In
the matter between
ETHEKWINI
METROPOLITAN UNICITY MUNICIPALITY (NORTH OPERATIONAL ENTITY)
...............................
Appellant
and
PILCO
INVESTMENTS CC
...............................
Respondent
Coram
:
Harms ADP,
Van
Heerden, Jafta, Combrinck et Cachalia JJA
Heard:
3 May 2007
Delivered:
29 May 2007
Summary: Lease –
interpretation of – lessee given only partial occupation of
leased property – lessee obliged to
pay rent, although entitled
to a remission of rent proportional to its reduced use and enjoyment
– failure by lessee to pay
any rent, despite due demand –
lessor entitled to cancel lease
Neutral
citation: This judgment may be referred to as
Ethekwini
Metropolitan Unicity Municipality v Pilco Investments CC
[2007]
SCA 62 (RSA)
JUDGMENT
VAN HEERDEN JA:
The issue to be
determined in this appeal is whether the appellant (the defendant in
the court below) is liable to the respondent
(the plaintiff in the
court below) for damages on the basis of either breach of contract
or delict. For the sake of convenience,
I will refer to the parties
by their appellation in the trial court.
The
plaintiff was the sole tenderer for the development of a
recreational facility on certain property in Verulam in respect of
which tenders had been invited by the Town Council of the Borough of
Verulam, the predecessor in title to the defendant. The property
in
question, portion of Lot 7862 Parkgate, Verulam (‘the
property’), was zoned as a public open space,
approximately
30 000m
2
in
extent, and was going to be transferred into the name of the
defendant. The defendant eventually became the registered owner
of
the property on 21 October 1994.
On
30 August 1993 the defendant accepted a proposal by the plaintiff
‘for the development of parks, recreational and
sporting
facilities’ in respect of the property. The parties signed an
agreement of lease of the property in October 1994.
Building plans
were submitted by the plaintiff and approved by the defendant on 12
December 1994, subject to the condition, inter
alia, ‘that
liquor must not be sold or consumed outside the recreation club. The
usage of this club must be restricted to
members only.’ The
defendant also resolved ‘that a new agreement be drawn and
entered into’.
During
February 1995, the parties duly concluded a new written lease
agreement in respect of the property, thereby replacing
the
earlier lease. This new lease (‘the lease’) – that
lies at the centre of the dispute between the parties
– was to
commence on 1 November 1994 and to continue thereafter for 30 years
with an option to renew.
The
plaintiff’s main claim was one for damages for breach of
contract, arising from the defendant’s alleged repudiation
of
the lease. Its two alternative claims were in delict. C
ounsel
for the plaintiff did not really persist with these delictual claims
before us. In any event, the negligence relied upon
by the plaintiff
in each of the (alternative) delictual claims consisted in an
alleged breach by the defendant of duties allegedly
flowing from
specific terms of the lease. This being so, the decision of this
court in
Lillicrap,
Wassenaar & Partners v Pilkington Brothers (SA) (Pty) Ltd
1985
(1) SA 474
(A) precludes such delictual claims being brought by the
plaintiff against the defendant.
1
By
agreement between the parties, the trial court (Van der Reyden J
in the Durban High Court) was asked to make a ruling on
liability
only, with the issue of quantum standing over for later
determination, if necessary.
At
the conclusion of the trial, the trial judge held in favour of the
plaintiff in respect of its main claim based on repudiation
of the
lease. He accordingly issued a declaratory order ‘that the
plaintiff was entitled to resile from the lease agreement
and that
the defendant is liable to compensate the plaintiff for such damages
as it may have suffered in consequence of the breach’.
He also
ordered the defendant to pay the plaintiff’s costs, including
the costs of two counsel. In the circumstances, he
did not find it
necessary to consider the arguments presented on the alternative
delictual claims. With the leave of the trial
court, the defendant
now appeals against this judgment.
In
terms of the lease, the agreed rent in respect of the property was
R2 050 per month, payable in advance. In the event of
failure
by the lessee to make payment of rent upon due date, or ‘to
implement each and every one of his obligations’
in terms of
the lease, written notice to remedy such breach within ninety (90)
days had to be given by registered post to the lessee
(clause 13).
Clause
1 of the lease provided:
‘
Subject
to the provisions of Clause 18 hereof,
2
the
tenancy will commence from the 01 day of November 1994,
notwithstanding the date of occupation and will continue thereafter
[for]
thirty (30) years with an option to renew.’
In
terms of clause 16 –
‘
It
is a special condition hereof that in the event of the persons
presently occupying the premises not vacating them by the date of
commencement hereof, the Lessee undertakes to accept occupation from
such later date as the premises are available. In this event
the
Lessee shall have no claim for damages or right of action against the
Lessor and the Lease shall be deemed to commence as from
the later
date on which the premises become fully available for occupation,
with the following conditions:
(1)
The boundary pegs being flagged and pointed out to the Lessee.’
The
usage of the property was governed by clause 6 of the lease, which
provided that:
‘
The
property shall be used for recreational, kiosk and take-away
purposes by the Lessee, and buildings shall be constructed on the
said property for the above purposes and the following conditions
will apply:
a)
Liquor must not be sold or consumed outside the recreation club;
b)
. . .
c)
. . .
d)
The usage of the club must be restricted to members only.’
On
10 June 1997 the plaintiff applied for a licence in respect of the
property to conduct business described by it as ‘Entertainment
– Disco. Action Bar. Sports Café. Indoor Entertainment.
Playground Facilities.’ This was followed by the plaintiff’s
issuing an invitation, presumably to residents of the Parkgate
community and other potential patrons, to attend the opening of
‘Club Chalice’ on the property on Sunday, 15 June 1997.
Shortly
after the opening of Club Chalice, a complaint was lodged with the
defendant by a resident of the Parkgate community, followed
on 24
June by a petition signed by 47 residents complaining about high
noise levels emanating from the ‘disco’ at the
club;
loud and abusive language; off-consumption of liquor; club patrons
parking their vehicles in residents’ driveways and
on curbs
and driving while under the influence of liquor; and other forms of
anti-social behaviour by club patrons. The petition
resulted in an
inspection by the defendant’s building inspector of the
building erected by the plaintiff on the property.
The inspector
found that the approved building plans had been deviated from in
various ways and the plaintiff was required to submit
amended plans
to the defendant for approval. This the plaintiff did on 31 July
1997.
On
23 September 1997, a letter was addressed by the defendant to the
plaintiff (Annexure H to the plaintiff’s particulars
of
claim), informing the latter that approval of its amended building
plans had been refused for reasons which, for present purposes,
need
not be canvassed. This was followed, two days later, by a further
letter (Annexure J to the particulars of claim), informing
the
plaintiff that it had contravened the Verulam Town Planning Scheme
by operating a discotheque with food and alcohol for sale
in a
public open space. The plaintiff was required to terminate this
usage of the property within seven days, failing which it
would be
guilty of an offence under the Town Planning Scheme and liable to
incur certain fines.
In
the meantime, on 11 September 1997, the defendant’s attorneys
sent a registered letter to the plaintiff, pointing out that
the
plaintiff had failed to pay any rent in terms of the lease and that
it was at that stage in arrears to the tune of R74 784.
With
reference to clause 13 of the lease, the plaintiff was called upon
to remedy its breach within 90 days by paying the arrear
rent,
failing which the defendant would cancel the lease and institute
action in the magistrate’s court for recovery of all
arrear
rent and other amounts due by the plaintiff. The plaintiff failed to
pay any amount and, on 15 December 1997, the defendant
instituted
action against it in the Verulam Magistrate’s Court, claiming
confirmation of its cancellation of the lease, payment
of the total
arrear rent then due (R89 995) and ejectment of the plaintiff from
the property. The litigation in the magistrate’s
court was
eventually transferred to the High Court and resulted in the
proceedings which gave rise to the present appeal.
According
to the plaintiff, the abovementioned letters annexed to its
particulars of claim as Annexures H and J constituted a repudiation
by the defendant of the lease, which was accepted by the plaintiff.
The plaintiff allegedly conveyed such acceptance to the defendant
‘by relinquishing possession of the property and building to
the defendant’ sometime in mid-1998.
The
defendant denied that Annexures H and J constituted a repudiation by
it of the lease, contending that these letters were simply
intended
to notify the plaintiff that it was breaching the lease by using the
property for an unlawful purpose not intended thereby,
and to
require the plaintiff to comply with its lawful obligations in terms
of the lease. The defendant alleged, in turn, that
it was the
plaintiff who had ‘breached and repudiated’ the lease,
inter alia by failing to pay any rent and, when sued
by the
defendant for arrear rent, by pleading that the agreement of lease
had never commenced and was ‘of no force and effect’.
The defendant claimed to have cancelled the lease by instituting the
abovementioned action in the Verulam Magistrate’s Court
in
December 1997.
It
is common cause that, despite having taken occupation of the
property in late 1994, building the structure on the property, and
conducting the club business thereon (albeit only for a limited
period of time), the plaintiff never paid any rent whatsoever in
respect of the property. Its excuse for not doing so was that, until
June 1997, approximately 3000 to 4000m
2
of
the property had been occupied by another person who was using this
portion for making pre-cast concrete fencing and, further,
that the
boundary pegs had never been pointed out to it by the defendant as
required by clause 16 of the lease.
Counsel
for the plaintiff conceded before us that the boundary pegs
stipulation in clause 16 of the lease was not a ‘suspensive
condition’ in the sense that non-compliance therewith
suspended the commencement of the lease itself. However, counsel
contended
that, although the plaintiff had indeed taken occupation
of the property in late 1994, its obligation to pay rent was
suspended
until such time as the person making pre-cast fencing on a
portion of the property vacated this portion
and
the
boundary pegs were pointed out to the plaintiff. According to
counsel, this contention was borne out by a proper interpretation
of
clause 16, read together with clause 1, of the lease agreement.
3
In
other words, counsel submitted, the word ‘tenancy’ in
clause 1 of the lease and the word ‘Lease’ in clause
16
had to be interpreted to mean the lessee’s obligation to pay
rent and not the lease itself.
The
technique of interpretation of written contractual documents
consistently adopted by the South African courts was summarised
by
Joubert JA in
Coopers
& Lybrand & Others v Bryant
[1995] ZASCA 64
;
1995
(3) SA 761
(A) as follows (at 767E-768E):
‘
According
to the “golden rule” of interpretation the language in
the document is to be given its grammatical and ordinary
meaning,
unless this would result in some absurdity, or some repugnancy or
inconsistency
with the rest of the instrument … The mode of construction
should never be to interpret a particular word or
phrase in
isolation (
in
vacuo
)
by itself … The correct approach to the application of the
“golden rule” of interpretation after having ascertained
the literal meaning of the word or phrase in question is, broadly
speaking, to have regard:
1) to the context in which the word or
phrase is used with its interrelation to the contract as a whole,
including the nature and
purpose of the contract …;
2) to the background circumstances which
explain the genesis and purpose of the contract, ie to matters
probably present to the
minds of the parties when they contracted …;
3) to apply extrinsic evidence regarding
the surrounding circumstances when the language of the document is
on the face of it ambiguous,
by considering previous negotiations
and correspondence between the parties, subsequent conduct of the
parties showing the sense
in which they acted on the document, save
direct evidence of their own intentions.’
Applying
this approach to clause 1 of the lease, the ‘grammatical and
ordinary meaning’ of the word ‘tenancy’
in the
phrase ‘the tenancy will commence’ is the lease itself,
not the obligation to pay rent. This is borne out by
the rest of
clause 1, in particular the phrase ‘the tenancy . . . will
continue thereafter [for] thirty (30) years with an
option to
renew’. Moreover, clause 2 of the lease provides that ‘[t]he
Lessee [shall] commence the project within six
(6) months.’ To
make sense, this clause must be read as referring to a period of six
months calculated from the date of the
commencement of the lease,
certainly not from a date of commencement of the obligation to pay
rent.
Properly
interpreted, clause 1 thus provides that the lease will commence
from 1 November 1994, notwithstanding the date of occupation
of the
leased ‘premises’. This is, however, made ‘subject
to the provisions of clause 16’. In terms of
the latter
clause, in the event of the persons occupying the premises (ie the
person making pre-cast fencing on a small portion
of the property)
at the time of conclusion of the lease not vacating the premises by
‘the date of commencement hereof’
(ie 1 November 1994,
as stipulated in clause 1), the lessee undertakes to accept
occupation of the premises from such later date
as ‘the
premises are available’. In this event (delayed occupation),
the lessee has no claim for damages or ‘right
of action’
against the lessor and the lease shall be deemed to commence (and,
of course, the obligation to pay rent will
only run) from the later
date on which the premises become ‘fully available for
occupation’, with the further ‘condition’
that the
boundary pegs be flagged and pointed out to the lessee. The
corollary of this is that, notwithstanding the provisions
of clause
1, the lessee is not
obliged
to
take partial occupation of the premises and can delay taking
occupation and being obliged to pay rent until such time as the
premises are totally vacated and the boundary pegs have been flagged
and pointed out to it. The delayed occupation provision in
clause 16
is thus for the benefit of the lessee
.
It
does not follows
that
if the lessee
chooses
not
to delay taking occupation, but instead takes partial occupation of
the premises long before the occurrence of these two events
and
commences ‘the project’ referred to in clause 2, the
commencement of the lease and of the obligation to pay rent
is still
delayed. In such event, the lessee must be taken to have waived the
benefit of clause 16. This was what happened in the
present case
when the plaintiff took occupation of the property in late 1994 and
built its structure on the property. That despite
the continued
presence on the property of the person making pre-cast fencing and
the continuing failure by the defendant to flag
and point out the
boundary pegs.
It
follows that, upon taking occupation of the property in late 1994,
the plaintiff became obliged to pay rent to the defendant,
as
stipulated in clause 1 of the lease. Of course, because the
plaintiff was, until early June 1997, deprived of the use of that
portion of the property which was being used by the person making
pre-cast fencing, the plaintiff would be entitled to a remission
of
rent over the period in question, proportional to its reduced use
and enjoyment of the property.
4
If
the amount to be remitted was capable of prompt ascertainment, the
plaintiff could have set this amount off against the defendant’s
claim for rent; if not, the plaintiff was obliged to pay the full
rent agreed upon in the lease and could thereafter reclaim from
the
defendant the amount remitted.
5
As
was pointed out, albeit
obiter
,
6
by
Nienaber JA in
Thompson
v Scholtz
[1998] ZASCA 87
;
1999
(1) SA 232
(SCA) at 247A-D:
‘
Where
a lessee is deprived of or disturbed in the use or enjoyment of
leased property to which he is entitled in terms of the lease,
either in whole or in part, he can in appropriate circumstances be
relieved of the obligation to pay rental, either in whole or
in
part; the Court may abate the rental due by him
pro
rata
to
his own reduced enjoyment of the
merx.
This
is true not only where the interference with the lessee’s
enjoyment of the leased property is the result of
vis
major
or
casus
fortuitus
but
also where it is due to the lessor’s breach of contract, eg
because the leased property is not fit for the purpose for
which it
was leased or, as in this case, because the performance rendered by
the lessor is incomplete or partial … The lessee
would be
entirely absolved from the obligation to pay rental if he were
deprived of or did not receive any usage whatsoever. That
would
simply be a manifestation of the
exceptio
[
non
adimpleti contactus
],
more particularly of the first proposition in
B
K Tooling
[
B
K Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
1979
(1) SA 391
(A)] (cf
Fourie
NO en ’n Ander v Potgietersrus Stadsraad
1987
(2) SA 921
(A)).’
As
the plaintiff’s non-payment of rent
was
thus
a breach of the lease, and as it failed to remedy this breach upon
receipt of 90 days notice to do so, as required by clause
13, the
defendant was entitled to cancel the lease. It did so by instituting
action against the plaintiff in the Verulam Magistrate’s
Court
in December 1997, as set out above. This was long before any
purported acceptance by the plaintiff of any purported repudiation
of the lease by the defendant.
Although
the plaintiff did eventually purport to give notice to the
defendant, apparently in terms of clause 13 of the lease, that
the
latter was in breach in that it had failed, inter alia, to flag and
point out the boundary pegs and to give the plaintiff ‘total
occupation’ of the property, this was done only on 10 June
1998, once again long after the lease had been cancelled by the
defendant on the grounds of the plaintiff’s non-payment of
rent.
The
plaintiff’s contractual claim against the defendant should
therefore have failed in the court a quo. As regards the alternative
delictual claims, I have already indicated that the decision of this
court in the
Lillicrap
case
precludes such claims.
7
It
follows that the appeal should succeed.
Order
In
the circumstances, the appeal is upheld with costs. The order of the
court a quo is set aside and substituted with an order of
absolution
from the instance with costs.
B J VAN HEERDEN
JUDGE
OF APPEAL
CONCUR
:
HARMS
ADP
JAFTA
JA
COMBRINCK
JA
CACHALIA
AJA
1
See
Holtzhausen v Absa Bank Ltd
[2005]
2 All SA 560
(SCA) paras 6-7 and
Media
24 Ltd & Another v Grobler
2005
(6) SA 328
(SCA) para 69-70.
2
It
is common cause that the reference to clause 18 is incorrect and
that the relevant clause is actually clause 16.
3
For
the wording of the relevant parts of clauses 1 and 16, see para [9]
above.
4
See
in this regard, W E Cooper
Landlord and
Tenant
2ed (1993) 200; A J Kerr
The
Law of Sale and Lease
3ed (2004) 350.
5
Kerr
loc cit. See also J N Piek & D G Klein ‘’n Huurder
se aanspraak op vermindering van huurgeld terwyl hy in besit
van die
huursaak is’ 1983 (46)
THRHR
367, especially at 381-2.
6
The
case did not involve a lease, being concerned with the payment of
occupational interest in terms of a sale of property where
the
seller had failed to give the purchaser complete occupation of the
property purchased pending transfer thereof to the latter,
but
nevertheless attempted to claim the full occupational interest
agreed upon between the parties.
7
See
para [5] above.