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[2015] ZAKZDHC 58
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Breakers Share Block Ltd v EThekwini Municipality (9378/2013) [2015] ZAKZDHC 58 (27 July 2015)
IN
HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 9378/2013
DATE:
27 JULY 2015
BREAKERS
SHARE BLOCK
LTD
...................................................................................
PLAINTIFF
And
ETHEKWINI
MUNICIPALITY
......................................................................................
DEFENDANT
JUDGEMENT
Delivered:
27 July 2015
MBATHA
J
[1]
The parties are engaged in civil litigation, and instead of
proceeding to trial, have in terms of Rule 33 (1) agreed upon on
written statement of facts in the form of a special case for
adjudication by this Court. In its particulars of claim the
Plaintiff has raised two (2) claims against the Defendant, viz,
(a)
Claim 1, in which the Plaintiff seeks an order declaring that, on a
proper interpretation of clause 6(b) of the leases forming
the
subject matter of the action, the rental payable by it ought to be
calculated upon a floor area of 12 079,10 square metres
and,
(b)
Claim 2, in which the Plaintiff seeks a monetary judgment against the
Defendant based upon an overpayment of rental due in terms
of the
said leases.
2.1
The stated facts of the case can be summarised as follows:
The
Plaintiff and the Defendant had executed and registered a lease
agreement with reference number K1541/1975 referred to as Lease
1 in
these proceedings.
2.2
Subsequently thereafter the Council and Sycol registered a Notarial
Deed of Amendment of Lease, which was registered with reference
number K790/1981. This also led to the amendment of clause 6 of
Lease 1. This lease is referred to as the Amended Lease.
2.3
Later on, the Council and Sycol executed a further Notarial Deed of
Lease, which was registered under reference number K792/1981.
This lease is referred to as Lease 4. This lease changed clause
6, to a certain extent, but the parties agree that clause
6 of the
amended lease and lease 4 are similar in nature.
2.4
On the 21
st
of May 1985 Sycol ceded and assigned all its rights, tittle and
interest in both Lease 1 and Lease 4 to the Plaintiff, under Deed
of
Cession of Lease reference number K752/85. This is also common
cause between the parties.
2.5
On or about November 2008 negotiations started between the Plaintiff
and the Defendant as the Plaintiff offered to purchase
the property
from the Defendant. Messrs LD Barker and Associates were
appointed to determine the detailed measurements of
the actual floor
area of the buildings constructed upon the property. The floor
area of the buildings was calculated to be
12, 079, 10 square metres
and the floor area of all parts of the building under roof at each
floor level to the external wall was
calculated at 15, 594, 34 square
metres.
[3]
The issue before this Court for determination in terms of Rule 33(4)
is the issue pertaining to the proper interpretation of
clause 6(b)
of each of the Notarial Deed of Leases (Lease 1&4) concluded
between the parties on the 21
st
of August 1975, with reference number K154/1975 and 27
th
of January 1981, with reference number K792/1981.
The
relevant clauses for determination in these proceedings are clauses 6
of both leases, particularly clause 6(b) thereof.
Clause 6(b)
reads as follows:
“
6.
Revision of Rental (Lease 4) and Lease 1 as amended.
(a)……
(b)
When the annual rental becomes due for revision same shall be
computed at 7% of the valuation (which valuation shall be based
on
the current market price per square metre of Lot 1066 Umhlanga Rocks
Township of an area of foreshore land) which area shall
be equivalent
to the floor area (calculated in accordance with the provisions of
Umhlanga Town Planning Scheme no. 1 as it was
at the date of
signature hereof) of the buildings on the Lot.”
Clause
6 of Lease 1 before it was amended reads as follows:
“
6.
Revision of Rental
(a)……
(b)
The annual rental for each revision period of ten (10) years as
aforesaid shall be computed as to seven per centum (7%)
of the
valuation of an area of foreshore land equivalent to the floor area
of the buildings on the Lot, based on ruling market
prices per square
metre of foreshore land, provided that the rent shall in no case be
less than Twenty thousand (R20 000,00)
per annum. Floor
area shall be defined in the draft Town Planning Scheme as amended
from time to time.”
[4]
The Plaintiff contends that on a proper interpretation of the said
clauses, read with the provisions of the Umhlanga Rocks Township
Scheme no. 1, the floor area upon which the revision of rental is
calculated ought to be determined with reference to the definition
of
“residential buildings” and the provisions of section
5.1(ii) (b) (iii) a) and b) of Part 5 of the Scheme.
4.2
The relevant provisions of this Scheme, as contended to by the
Plaintiff, read as follows:-
“
Definition
of a Residential Building: a building or portion of a building other
than a dwelling house, duplex flat, semi-detached
house, terrace
house or maisonette used for human habitation together with such
outbuildings are ordinarily used therewith and
includes an hotel, a
block of flats, a boarding house, a residential club or hostel, which
building, in the case of a hotel, may
include a restaurant or
restaurants for the sale and consumption of food and drink.”
4.3
Section 5.1(ii) (b) (iii) (a) and (b) of Part 5 reads as follows:
“
(iii)
For the purpose of calculating the total permissible floor area in
terms of Table D:
(a)
In a residential building, the area
of all public access corridors, public stairways and public entrances
or hallways whether open
or closed shall be excluded, provided that
in the case of a block of flats the area of any portion of a public
thoroughfare or
public waiting space shall be included, and provided
that in the case of a hotel the total area of public entrance and
hallways
shall be included.
(b)
In a residential building, the area of
any roofed veranda, balcony or terrace, which is intended for private
use of one flat in
a block of flats or of one room or one suite of
rooms in a hotel, shall be included in the calculation of the total
floor area.”
4.4
In essence as summarised by counsel for the Plaintiff, the Plaintiff
contends that the floor area, for the purposes of determining
the
revised rental, ought to be calculated by excluding the area of all
public access corridors, public stairways and public entrances
or
hallways of the buildings.
5.1
The Defendant contends that, on a proper interpretation of clauses 6,
read with the provisions of the Umhlanga Rocks Township
Scheme no. 1:
(a)
The material provisions of clause 6 of the said leases, provide that
the area over which rent will be charged “…
shall be
equivalent to the floor area (calculated in accordance with the
provisions of the Umhlanga Town Planning Scheme no.1 as
it was at the
date of signature hereof) of the buildings on the Lot;”
(b)
“Floor area” is defined in the Scheme (clause 1.2 of Part
1) to be “…
the sum of the roofed area of the
buildings at each floor level measured over and including wall
thickness,”
(c)
Part 5 of the Scheme refers to “Bulk, Coverage and Height,”
and to “
permissible floor area”
in the context of
that part of the scheme rather than to “
floor area,”
(d)
Accordingly, the relevant provisions of the Scheme are those
contained in the definition in clause 1.2 and are not as
contained in
part 5 of the Scheme or as alleged by the Plaintiff.
5.2
In essence, as submitted by counsel for the Defendant, Defendant
contends that the floor area for the purpose of determining
the
revised rental, should be the sum of the roofed area of the buildings
at each floor level measured over and including wall
thickness.
[6]
It is agreed between the parties that if the interpretation contended
for by the Plaintiff is correct the rent will be calculated
upon a
floor area of 12, 079,10 square metres and if the interpretation
contended by the Defendant is correct, the rental will
be calculated
upon the floor area of 15, 594,34 square metres.
7.1
In line with the judgment of
Natal
Joint Mutual Pension Fund v
Endumeni
Municipality
[1]
,
the following should be taken into account in the interpretation of
these clauses:
a)
The language used, in light of the ordinary
rules of grammar or syntax;
b)
The context in which the word or phrase is
found;
c)
The purpose to which the provision is
directed;
d)
The knowledge of the parties;
e)
Where more than one meaning is possible it
must be considered against the background of the above facts;
f)
Whether the process of interpretation is an
objective one; and
g)
A sensible meaning is to be preferred to
one that would lead to absurdity.
[8]
The issues before me revolve around the interpretation of clause 6(b)
of Notarial Deeds K1541/1945 (the amended lease) and K792/1981
(Lease
number 4). Clause 6(b) refers to a calculation in accordance
with the provisions of the Umhlanga Town Planning Scheme
No.1 as at
the date of the signature of the Lease. Plaintiff’s
submission in summary is that the proper interpretation
of clause
6(b) should be found in the provisions of the Umhlanga Rocks Township
Scheme 1, which states that the floor area is to
be determined with
regards to the definition of a “residential building” and
the provisions of Section 5.1(ii)(b) (iii)
a) and b) of Part 5 of the
Scheme. The Definition of “residential building”
includes a hotel, a block of flats,
a boarding house, a residential
club or hotel.
Section
5.1(ii) (b) (iii) a) and b) of Part 5 of the Scheme states that for
purposes of calculating the total permissible floors
area in terms of
Table D in a residential area.
a)
The area of all public access corridors,
public stairways or public entrances or hallways whether open or
closed shall be excluded,
save for the place of public thoroughfare
or public waiting place shall be included more so in the case of a
hotel, public entrances
and hallways shall be included;
b)
In a residential building, the area of any
roofed veranda, balcony or terrace which is intended for private use
of one flat in a
block of flats shall be included in the calculation
of the total floor area.
[9]
The Defendant contends that the relevant Scheme is the one at the
date of signature of the document. However, the definition
of
“floor area” as described in that definition being “
the
sum total of the roofed area of the buildings at each floor level
measured over and including wall thickness
”
should be accepted; that Part 5 of the Scheme refers to “Bulk
Coverage and Height” and not to floor area and
that the
provisions of Part 5 of the Scheme are not relevant for the
determination of the floor area.
[10]
It is common cause that the Plaintiff started off as a Breakers
Hotel, but it now operates as a Time Share Resort and the low
rise as
a permanent residential building. It is not run as a hotel.
When the first lease was registered there was no
indication as to
what buildings were to be built on the leased premises.
(a)
Clause 6(b) of Lease 1 stated that the
floor area shall be as defined in the draft Town Planning Scheme as
amended from time to
time. The amended clause 6(b) and Lease 4
state that it shall be “calculated in accordance with the
provisions of the
Umhlanga Town Planning Scheme No.1 as it was at the
date of signature hereof.
(b)
There is a change in the wording of clause
6(b) in the amended Lease and Lease number 4. Initially in
Lease 1 reference was
made to the “draft” Town Planning
Scheme, now reference is made to a specific Town Planning Scheme.
It is my
view that at the time of the conclusion of the first lease,
the Town Planning Scheme was still being developed, as the words
“draft”
is used and there was anticipation that it will
be amended from time to time.
(c)
For the first time in the amended lease,
the word “calculated” was used. The use of the
words “as defined”
was abandoned. My view is that
there has been a change of intention between the parties. The change
being brought about by
the fact that the Scheme is now in place and
no longer in draft. A lot of uncertainty has been cleared.
[11](a)
If one looks a Lease 1, it is clear that it was not yet known what
type of buildings were to be constructed by the Plaintiff.
It
is my view that the type of buildings to be erected would determine
how the rental would have to be calculated. The definition
of
floor area of a building as stated in the definition section of the
Scheme is too wide for any sustainable interpretation.
It does
not take into account whether a block of flats, a hotel, or any other
type of building would eventually become the object
of the intended
floor area. It merely says that “
Floor
Area of a building shall be taken as the sum of the roofed areas of
the buildings at each floor level measured over and including
wall
thickness
”. Whereas, when
one looks at the use of the word “calculated”, it is
clear that reference is not made to
the definition, as submitted by
the Defendant.
(b)
The Plaintiff contends that it is a
residential building, as defined in the scheme. The Definition
of Residential Building
in the Scheme is given as “
a
building or portion of a building other than a dwelling house, duplex
flat, semi-detached house, terrace house or maisonette used
for human
habitation together with such outbuildings as they are ordinarily
used therewith and includes a hotel, a block of flats,
a boarding
house, a residential club or hostel, in the case of a hotel, may
include a restaurant or restaurants for the sale and
consumption of
food and drink.”
It
is clear from this description that the Plaintiff’s
construction falls within the description of a residential
building.
[12]
Section 5.1(ii)(b) (iii) a) and b) of Part 5 of the Scheme starts as
follows:
“
For
the purpose of calculating the total permissible floor area in terms
of Table D”.
The
words “calculating” and “floor area” as used
in part 6(b) of the Lease are used here. They complement
the
wording in clause 6(b) of the Leases. It is clear to me that
the references with regard to the calculation of the floor
area were
made in the light of the provisions of Section 5,1 of the Scheme.
[13]
Section 5 categorically states what needs to be excluded in the
calculation of the residential building. It says the
“…area
of all public access corridors, public stairways and public entrances
or hallways whether open or closed shall
be excluded”.
Should they have intended that there should be reliance on the
definition of “total roof area”
as contended for by the
Defendant, there would have been no need for such specific clauses,
defining how the calculation should
take place. It also states
under what circumstances a veranda, balcony or terrace can be
included in the calculation
of the total floor area. It will
only be included if it is for private use only. Section 5 also
provides an exception
to the general rule in the calculation of the
floor area. In the case of a hotel it is a residential
building, in calculating
the floor area of the hotel, public
entrances and hallways to be included.
[14]
I do not accept that the definition of the floor area as defined in
the Scheme should be accepted as the applicable method
of calculating
rental in this matter. It is a general definition referring to
buildings and not to a specific type of a building.
I have
perused the leases in this matter and none of them stipulate the type
of a building to be built save that for guidance and
directions
reference is made to the Umhlanga Town Planning Scheme and not only
to the definition section thereof. If one
looks at this
objectively, taking into account the nature of the land leased to the
Plaintiff and the purpose by the Plaintiff
of leasing these premises,
it is clear that the intention of the parties was that if you run a
hotel, there are prospects of the
that lessee having an income
throughout the year, hence, the incorporation of the payment for
public spaces, but if it is a residential
building with less frequent
occupation the intention is not to charge for public places.
The word calculated has been used
twice, in the amendment as well as
in Lease 4 and therefore it could not have been a mistake.
[15]
I considered the submissions made on behalf of the Defendant. It is
submitted that the definition of the floor area as defined
in the
Scheme should be considered as the correct measure of rental in this
matter. The definition of a floor area in the
Scheme states as
follows:
“
Floor
area-of a building shall be taken as the sum of the roofed areas of
the building at each floor level measured over and including
wall
thickness.”
It
does not provide this information for purposes of calculating rent.
That definition is for other purposes. It is vague
and not clear.
Common sense would dictate that you establish firstly what
residential building you have and then ascertain
how rental for that
building should be calculated. It could not have been the
intention of the parties that whatever building
is built on the
premises, the rental should be the same.
[16]
I do not think that it was the intention of the parties that they
should be penalised or pay rental for areas which they have
not yet
developed. I am persuaded by submissions made on behalf
of the Plaintiff that the place is a residential area
and that rent
had to be calculated in terms of clause 5 of the Scheme. I have
taken into account “
the
language of the provision, read in context and having regard to the
purpose and background to the preparation and production
of the
provision”,
as
stated in
Natal
Joint
Municipality
v Endumeni Municipality
[2]
Judgment..
[16]
It is trite that there must be legal certainly when documents such as
the Scheme are drafted. It is accepted that when
such
regulatory documents are drawn that they must not be oppressive.
I do not think that it was the intention of the drafters
of the
Scheme that the rental imposed on residential leases of Municipality
properties should be similar to those imposed on hotels.
This
would lead to an unjust result. Statute law is always presumed
not to be unjust inequitable and unreasonable.
This presumption
is applicable where there is more than one interpretation of the
statute. In such a case, the most just
and equitable
interpretation is to be preferred. See
LAWSA
Volume 25, Part 1, paragraph 322
.
In
support of this contention, I am reminded of a
dictum
in
Howick
District
Landowners Association v Umngeni Municipality
[3]
,
where the Court stated as follows:
“
The
question is what meaning can be properly gleaned from the Council’s
acts of/on that day. The landowners argument
treats the
Council’s acts as though they constitute a jumble, each bit of
which must be separately passed, even if that leads
to incoherence.
That criterion of intelligibility, which governs all communications,
requires that the Councils’ connected
acts be read cohesively
to draw fairly from them the meaning sought to be conveyed.”
[17]
I have perused the correspondence which forms part of the stated
case. There is a lot of discussion about the rental, the suitability
of the area, the offer made by the Defendant to purchase the property
etc. There is only one certainty emanating from these discussions
and
that is that the leased premises were residential in nature and not
commercial.
[18]
In the letter of the valuer T.B. Richardson dated 16 October 2008,
this is said, “
I have assessed the
‘Market Value’ of the subject property, as if vacant on 1
July 2008 to be R80 000 000
(eighty million rand) excluding
VAT. This equates to a bulk rate of R3 750 per m2
excluding VAT”.
In his
valuation report he came to the conclusion that the current developed
FAR is stated by the Municipality as 15, 594
square metres, which
equates to 157 rooms. He goes on further to say that there is a
potential 60 additional rooms to be
allocated to the subject
property. The total potential number of rooms is fixed at 214.
This is the optimum bulk to
allow for the development of 214 rooms.
My view is that he assessed the potential value of the property,
should it be developed
further, but not that the Plaintiff should pay
for the area which it has not yet developed.
[19]
I am alive to the decision in
Port
Elizabeth Municipality Council v Part Elizabeth Electric Trainway
Co.
LTD
[4]
to
which the Defendant has referred us to. I still hold the view
that the use of the words “calculated” in the
leases and
in the Scheme indicates a change of the intention of the parties.
The
correspondence between the parties subsequent to the amendment of the
lease, indicate a reference to the floor area ratio or
bulk.
The scheme has a heading Bulk Coverage and Height at para 5.1.
This merely indicates how the floor area that
you are entitled to
build on is calculated. Had the parties relied on the
definition as submitted by the Defendant there
would have been no
reference to the use of the terms FAR and Bulk in their
correspondence. These factors have all been taken
into account
in ascertaining the intention of the parties. Nowhere in that
correspondence is the reference made to the definition
in terms of
the Scheme .
[20](a)
I cannot accept the submission by the Defendant that the nature of
the building that was built is irrelevant to the determination
of the
rental. Defendant refers to the potential of what can be built
on the property which is an abstract concept.
A property in
other cases is rateable in terms of its value. A vacant land
cannot attract the same rates as land with buildings.
Common
sense dictates that the same rule should apply in leased municipal
properties.
(b)
“
Equivalent to the floor area of
the buildings on the lot
” did not
change in the amended lease. The Defendant submits that it
meant that rental would be determined on the actual
floor area of the
buildings on the property. I do not agree as paragraph 5.1 sets
out what is payable in respect of each
property depending upon what
it is used for. The exclusions set out in paragraph 5 are not
indulgences, but are prescribed
in terms of the Scheme.
[21]
I have been referred to
Manyasha
v Minister of Law and Order
[5]
by the Defendant regarding the change in a statutory provision, that
it signifies a change of intention. That much will depend
on
the nature, extent and significance of the change. Basically,
what the Defendant submits is that it concedes that there
has been a
change in the wording of the statute, but there is no change as far
as the actual portion of the building which is to
be taken into
account in the determination of rental. I am of the view that
the change in the wording of clause 6 of both
leases indicated the
change in the intention of the parties.
[22]
I therefore make the following order:
a)
Declaring that, on a proper interpretation
of clause 6(b) of the Notarial Deed of Lease concluded on the 21
st
of August 1975 with reference number K1541/1975, as amended, and the
Notarial Deed of Lease concluded on the 27
th
of January 1981 with reference number K792/1981, the floor area of
the buildings constructed upon the leased property ought to
be
calculated by determining the total floor area of such buildings
excluding the area of all public access corridors, public stairways
and public entrances or hallways of the said buildings.
b)
Declaring that the floor area, for the
purposes of calculating any revision of the rental payable in respect
of clauses 6(b) of
the aforesaid leases, is 120, 079,10 square
metres; and
c)
Directing the Defendant:
(i)
To forthwith recalculate the rental
currently payable by the Plaintiff pursuant to the provisions of the
aforementioned leases upon
a floor area of 12, 079, 10 square metres;
(ii)
To levy a current rental based upon such
recalculation; and for so long as the current use of the buildings
constructed upon the
leased property remains the same, to calculate
and levy all future rentals, or any revision thereof as may occur
from time to time,
upon a determination of the total floor area of
such buildings excluding the area of all public access corridors,
public stairways
and public entrances or hallways.
d)
Directing the Defendant to pay the
Plaintiff’s costs of suit to date, including the costs of
senior counsel where employed.
e)
The issue of wasted costs occasioned by the
adjournment of the hearing of the matter on the 18
th
of March 2015 is reserved for determination when this matter is
finalised.
MBATHA
J
Date
of hearing : 11 May 2015
Date
delivered : 27 July 2015
Appearances
:
For
the Applicant : Adv. I.L. Topping
Instructed
by : Tomlinson Mnguni James
2
Ncondo Drive, Nedbank Building
Umhlanga
Ridge
For
the Respondents : Adv. V.I. Gajoo SC & Adv. G.D. Goddart
Instructed
by : Gcolotela & Peter Inc.
294/6
Mathews Meyiwa Street
Durban
[1]
2012
(4) SA 593 (SCA).
[2]
2012
(4) SA 593 (SCA).
[3]
2007
(1) SA 206
(SCA) para 15.
[4]
1947
(2) SA 1269
(A) page 1279.
[5]
1999
(2)SA 179 (SCA) para 186.