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[2011] ZAKZPHC 5
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Solvista Investment (Pty) Ltd v Sasol Fibres (Pty) Ltd (AR666/2009) [2011] ZAKZPHC 5 (28 February 2011)
19
KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA
REPORTABLE
Case No: AR666/2009
In the matter between:
SOLVISTA INVESTMENTS (PTY) LTD
…............................................................................
APPELLANT
vs
SASOL FIBRES (PTY) LTD
….........................................................................................
RESPONDENT
APPEAL JUDGMENT
MADONDO J
Introduction.
[1] This is an appeal from the judgment of Msimang J (as
he then was) dated 6 July 2009, finding for the respondent on the
main
action with costs against the appellant. At the Court
a quo
the appellant lodged an application for leave to appeal which was
refused. With the leave of the Supreme Court of Appeal the appellant
has appealed to this Court. Ms Lennard appeared for the appellant and
Mr Ungerer for the respondent.
Parties
[2] The appellant is Solvista Investments (Pty) Limited
(a defendant in the Court
a quo
on the main action), a company
with limited liability duly incorporated in accordance with the
company laws of the Republic of South
Africa with its business
address at 2 Joyner Road, Prospecton, Durban, KwaZulu-Natal.
[3] The respondent is Sasol Fibres (Pty) Limited (a
plaintiff in the Court
a quo
on the main action), a company
with limited liability duly incorporated in accordance with the
company laws of the Republic of
South Africa with business address at
1 Sturdee Avenue, Rosebank, Johannesburg, Gauteng Province.
Factual Background.
[4] On 29 September 2003 and at Johannesburg the parties
entered into a written sale agreement in terms of which the
respondent
sold to the appellant the immovable property described as
Portion 48 of Durban Airport No. 14263 in extent of 9,71889 hectares
(the property) for R7 500 000,00 which was payable upon registration
of transfer of the property.
[5] The appellant took occupation of the property on 1
October 2003. However, the transfer of the property was only effected
in
June 2004. Prior to the transfer of the property the appellant was
in terms of the agreement required to pay occupational interest
as
rental in the amount of R71 875,00 per month.
[6] It was agreed between the parties that the risk of
the property, and the liability to pay all rates, taxes and other
outgoings
would pass to the appellant on the date of transfer. The
benefit of the property including the right to receive all rents and
other
income (if any) would likewise pass to the appellant on the
date of transfer.
[7] According to the respondent the appellant failed to
pay occupational rental for the months of January to May 2004. In
July 2004
the respondent sued the appellant for the payment of the
sum of R359 375,00 as an arrear occupational rental for the period
calculated
at the rate of R71 875,00 per month.
[8] In its plea to the Plaintiff’s Particulars of
Claim, the appellant admitted liability to pay the respondent
occupational
interest as rental. However, it disputed that the
occupational interest payable by it to the respondent was R71 875,00
per month.
[9] It then alleged that the respondent was liable for
all expenses in respect of the property, such expenses included but
not limited
to the costs in respect of security, garden services,
general cleaning, fire protection and other related maintenance
expenses,
in compliance with clause 5.2 of the written agreement.
[10] Further, the appellant averred that it had paid an
amount of R215 625,00 towards occupational rental and that it had
also paid
the amount of R271 227,66 on behalf of the respondent in
respect of services rendered in relation to the property. It then
claimed
that the respondent should indemnify it for the expenses
incurred in respect of the property. After setting off the amount it
had
paid on behalf of the respondent, a balance of R327 358,56
remained as the amount which was then due, owing and payable by the
appellant to the respondent.
[11] Having adjusted its account the appellant in its
counterclaim tendered the payment of R48 330,90 in full and final
settlement
of the respondent’s claim against it.
[12] At the trial, it was common cause between the
parties that the appellant expended the sum of R271 227,66 on various
services,
provided to the property over the period of six months,
relating to security, gardening, general cleaning , fire protection
and
other maintenance services.
[13] However, the respondent contended that it was not
liable for the aforesaid amount on the basis that the appellant was
entitled
to set off certain amounts incurred by it in respect of
security services, garden services, general cleaning, fire protection
and
maintenance during the period December 2003 to May 2004, totaling
R271 227,66.
[14] The respondent accepted the appellant’s
calculation of occupational rental and it then became common cause
that the balance
outstanding was R327 358,56. Also, the respondent
accepted liability for the counterclaim in the amount of R7 500.00.
[15] In consequence thereof, the only issue the Court
a
quo
had to determine was whether the expenses the appellant
incurred in respect of security, gardening, general cleaning, fire
protection
and maintenance services constituted “other
outgoings” within the meaning of clause 5.2 of the written
agreement.
[16] The Learned Judge
a quo
construed the
expression “other outgoings” as confined to rates, taxes
or a statutory duty. Giving judgment in favour
of the respondent the
Learned Judge said:
“
The golden thread therefore running through the
specific words preceding the general word
in
casu
is that the “rates and taxes”
are exacted by and for the support of a government, a characteristic
which is missing
in respect of the types of expenditures in respect
of which the defendant wishes to hold the plaintiff liable. It is for
this reason
that I have been driven to the conclusion that those
expenditures fall outside the purview of the word “outgoing”
as
contemplated by the parties in clause 5.2 and therefore that the
plaintiff cannot be held liable for the same.”
[17] A difference of opinion had arisen between the
parties as to whether according to the true intent and meaning of the
sale agreement
the respondent was liable to pay the amounts of money
the appellant expended on the security, gardening, general cleaning,
maintenance
and protection services in respect of the property.
[18] It has been contended on behalf of the respondent
that it was liable only for such outgoings as related to rates and
taxes
or any other charge that was required by any authority or law
and which was necessary for the transfer of the property.
[19] The answer to the question depends entirely upon
the construction to be placed on clause 5.2 of the agreement.
[20] The principle of interpretation laid down in
Van
der Merve v Jumper Deep Ltd
1902 TS 210
is that the intention of
the parties to a contract should be gathered solely from the language
used by them. The main object is
to ascertain what the parties
intended. In construing a document effect should, as far as possible,
be given to every word and
phrase which has a sensible meaning.
[21] It is also a firmly established rule that where the
persons have entered into a formal written agreement, their intention
must
be deduced from the writing, and from that alone, if the
language used is clear and unambiguous effect must be given to it. It
must be presumed that the parties knew the meaning of the words used.
See
Consolidated Company Bultfontein Mines Limited
1910-17 GWLD
533
,
at page 550 and
Scottish Union and National Insurance Co.
Ltd v Native Recruiting Corporation Ltd
1934 AD 458
at 465-6.
[22] In construing a written contract the court must
give effect to the grammatical and ordinary meaning of the words used
therein.
In
Scottish Union case, supra,
at 465,
Wessels
CJ
(as he then was) said the following:
“
In ascertaining the meaning we must give effect
to the words used by the parties their plain, ordinary and popular
meaning, unless
it appears clearly from the context that both parties
intended them to bear a different meaning. If therefore, there is no
ambiguity
in the words of the contract, there is no room for a more
reasonable interpretation than the words themselves convey. If,
however,
the ordinary sense of the words necessarily leads to some
absurdity or to some repugnance or inconsistency with the rest of the
contract, then the court may modify the words just so much as to
avoid that absurdity or inconsistency but not more …”.
Interpretation of Clause 5.2 of the Written
Agreement.
[23] Clause 5.2 of the agreement reads:
“
The risk in and to the property, and liability to
pay all rates, taxes and other outgoings, shall pass to the purchaser
on the date
of transfer. Current rates and taxes shall be adjusted
between the parties pro rata at the date of transfer. The benefit of
the
property, including the right to receive all rents and other
income (if any) shall – likewise pass to the purchaser on the
date of transfer.”
[24] This Court must receive the construction which the
language of the clause will permit, and which best effectuates the
intention
of the parties to be collected from the whole of the
agreement.
[25] The words “the risk in and to the property”
relate to the security and protection of the premises and the
buildings.
The risk might involve the insuring of the property and
which was the responsibility of the respondent until transfer of the
property.
This is evidenced by clause 16 of the Lease Agreement
between the respondent and Dryden Combustion Company (Pty) Ltd
(Annexure
“B”) which provides that the insurance of the
structure of the building would be the responsibility of the landlord
and that the tenant would be responsible for the insuring of the
contents of the premises. In terms of clause 11.2 of the said
lease
agreement the maintenance of the plumbing system in the building
would also be the responsibility of the landlord.
[26] In the circumstances, it is reasonable to conclude
that the seller and the purchaser of the commercial property would
contemplate
the expenses which were incurred regularly in respect of
the property. The arrangements would then be made for the payment
thereof
until the registration of transfer of the property. This, in
my view, provides sufficient proof that it was also the intention of
the parties to provide for the payments of other expenses than rates
and taxes.
[27] The first sentence of the clause under
consideration continues to read:
“…
and liability to pay all rates, taxes
and other outgoings, shall pass to the purchaser on the date of
purchase.”
[28] The words “rates” and “taxes”
are not understood in the widest possible sense to cover all other
expenditures
relating to property. The Oxford English Dictionary
Volume vii (Oxford: at Clarendon Press) defines the word “rate”
as the value (of money, goods, etc.) as applicable to each individual
piece of equal quantity. It also defines it as a standard
value
assigned to each class of article, and duty paid in accordance with
this.
[29] The word “tax” is defined in the Oxford
English Dictionary Volume xi, as compulsory contribution to the
support
of government, levied on persons, property, income,
commodities, transactions, etc, now at fixed rates, mostly
proportional to
the amount on which the contribution is levied.
[30] The words “rates, taxes, assessments and
duties” only apply to recurring charges. See
Farlow v
Stevenson
[1900] 1 CH. 128
at 136.
[31] The term “taxes” in English language is
used as an umbrella word for all charges, assessments, impositions,
contributions,
burthens, duties, levies, tariffs and services
excluding all other general expenditures in respect of the property.
See
Oxford English Dictionary Volume xi page 119; Tidswell v
Wintworth [1867] LR20 at 326
and see also section 1 of the
Provincial Tax Regulation Process Act no.53 of 2001 and section 75A
of the Local Government: Municipality
Systems Act no. 32 of 2000.
[32] The word “other” is defined in the
South African Concise Oxford Dictionary (Edited by the Dictionary
Unit for South
African English: Oxford University Press) as used to
refer to a person or thing that is different from one already
mentioned or
known; that is distinct from, different from or opposite
to something or oneself.
[33] The use of the word “other” in
conjunction with the word “outgoings” in the clause under
consideration
imports that the outgoings contemplated were not
ejusdem generis
with specific words “rates” and
“taxes” referred to in the clause.
[34] In the second sentence of the clause, the parties
omitted the inclusion of the word “outgoings” and that,
in my
view, is an indication that the parties did not intend the word
to form part of the preceding words “rates” and “taxes”.
[35] In addition, only “current rates and taxes”
could be adjustable on a pro rata basis between the parties on the
date of transfer. This puts it beyond doubt that “other
outgoings” did not form part of the words “rates and
taxes” specifically mentioned in the first and second sentences
of the clause.
[36] The word “outgoings” originated from
English Law. It was inherited into our legal system and is frequently
used
to refer to expenses relating directly to the property or
premises.
[37] In South Africa the word “outgoings”
has not been the subject of much judicial controversy. The only
decided authority
in point is
Consolidated Company Bultfontein
Limited v De Beers Consolidated Mines Limited, supra.
In this
case the court was asked to decide whether or not the income and
dividend taxes should be held to include “duties,
rates, taxes
and other outgoings” which were to be paid by the defendant
company or in respect of which it would indemnify
the plaintiff
company in terms of the written agreement. The court found that since
both the income tax and the dividend tax were
taxes on the profits of
the plaintiff company in respect of its business and that as such
they did not constitute “duties,
rates, taxes and other
outgoings’ which were to be paid by the defendant company in
terms of clause 4 of the written agreement.
The court also held that
the taxes were payable by the plaintiff company and that it was not
entitled to claim any indemnity from
the defendant company in this
respect.
[38] Since in this case the court did not determine the
meaning of the word “outgoings” and the extent of its
application,
for the ascertainment of its true meaning, the extent of
its application and for its proper construction recourse must be had
to
the well known authoritative English dictionaries and English
decided authorities in point.
[39] The South African Pocket Oxford Dictionary (3
rd
Edition) Impression published by Oxford University Press south Africa
(Pty)Limited 2006 defines the word “outgoing”
as the
money that has to be spent regularly.
[40] South African Concise Oxford Dictionary defines it
as one’s regular expenditure. The Oxford English Dictionary
defines
“outgoing” as money which goes out in a way of
expenditure, outlay expenses and charges.
[41] In
Crosse v Raw (1874) LR90 EX 209 at 212
the
word “outgoing” was defined as something which has gone
out, an expense which the tenant has been at in respect
of the
premises, an expense imposed on him.
[42] South African concise Oxford English Dictionary
defines “expenses” as costs incurred in the performance
of a job
or task or something on which money must be spent.
[43] The word “charges” referred to in the
definition of the word “outgoing” by the English Oxford
Dictionary
covers all taxes, rates, duties levies, assessments,
impositions, contributions, burdens, and services which are taxed,
rated levies,
assessed or imposed on the property or in respect of
the property. See
Provincial Tax Regulation Process Act and the
Local Government Municipal System, supra.
[44] On the contrary, expenses are expenditures other
than charges that are incurred by the owner or occupier in relation
to the
property. See
Crosse’s case, supra.
[45] The term “outgoing” has been held to be
of very wide import and including not merely rates, taxes, repairs
and
ordinary expenses though of a capital nature of works executed by
local authorities under their sanitary and other expenses which
are
recoverable from the owner and are also, in general charged on the
property. See
34 Halsbury’s Laws 3
rd
Edition, and also Saunders (ED) Words and Phrases, Legally Defined
(1969) 2ed Butterworths’ London.
[46] Therefore, it follows that the word “outgoing”
cannot be confined to rates, taxes or a statutory duty. See
Associated Newspaper Limited and Corporation of the City of London
[1916] 2AC 429 at 461.
[47] In re
Duke of Cleveland, Wolme v Forrester
[1894] 1CH 164,
it was held that the word “outgoing”
ought not be construed in such a case as confined to rates, taxes,
tithes, rent
charge, and other outgoings (if any) which were
recoverable by process of law as against the premises out of which
rents were claimable.
[48] The real question to be decided
in casu
, is
whether the services paid for by the appellant fall under the
description of “other outgoings” the respondent undertook
to pay. The appellant must stand or fall by the expression “other
outgoings” and must satisfy the Court that the services
provided to the property were contemplated and included in the
expression as used in clause 5.2 of the agreement.
Expression “other outgoings”
[49] In order to arrive at the intention of the parties
it is necessary to consider and interpret the expression “other
outgoings”
used in the clause. The word “outgoings”
must be interpreted according to the natural and ordinary sense of
the language
used in the clause under consideration unless the
context clearly shows that it was used in a different sense. Effect
must also
be given to every word in the clause. See
Kangara
Holdings (Pty) Ltd v Minister of Water Affairs
[1998] ZASCA 36
;
[1998] 3 All SA 227
{SCA), 1998(4) SA 530 (SCA), and National Screen Print (Pty) Ltd v
Minister of Finance 1978(3) SA 501 (C) 506B.
[50] The present case is one to which the golden rule of
interpretation applies. The “golden rule” of
interpretation
is that the language in the document is to be given
its grammatical ordinary meaning, unless this would result in some
absurdity
or some repugnancy or inconsistency with the rest of the
instrument. See
Principal Emigration Officer v Hawabu and another
1936 AD 26
at 31, Scottish Union and National Insurance Co. Ltd case,
supra, at 465-6, Kalil v Standard Bank of South Africa Ltd 1967(4) SA
550 (A) at 556D.
[51] The correct approach to the application of the
“golden rule” of interpretation is fully set out in
Coopers and Lybrand and Others v Bryant 1995(3) SA 761(A) at
767A-E
and it can be summed up as that after having ascertained
the literal meaning of the word or phrase in question regard must be
had
to:
(a) 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;
(b) the background circumstances which explain the
genesis and purpose of the contract, i.e. to matters probably present
to the
minds of the parties when they contracted.
[52] Extrinsic evidence regarding the surrounding
circumstances must be applied when the language of the document is on
the face
of it ambiguous, by considering previous negotiations and
correspondence between the parties showing the sense in which they
acted
on the document save direct evidence of their own
interpretation. See
Delmas Milling Co. Ltd v du Plessis 1953(3) SA
447(A) at 454 G-H and 455A; Van Rensburg en Andere v Tante en Andere
1975(1) SA 279(A)
at 305 C-E.
[53] The weight of English decided authorities has shown
that the word “outgoing” is a word of wide ambit and that
it
must be widely construed to include not merely rates, taxes and
assessments imposed on the property but also insurance premiums,
mortgage instalment repayments, repairs, utilities housekeeping and
house hold expense. See
Midgley and Another v Coppock (1879); re
Duke of Cleveland, Wolmer, supra, Dependable Upholstery Limited v
Brasted (Mckenzie)Third
Party [1931] 1KBD 29; Re Jacobs and Steadmans
Contract
[1942] All ER 195
; Chamberlain v Chamberlain [1974] 1 All
ERCA 3 and Jones v Kernott
[2010] 3 All ER 423.
[54] All this demonstrates that the word “outgoing”
is larger than the words “rates, taxes” specifically
referred to in the clause under consideration. When a word of general
import is used the doctrine of
ejusdem generis
does not apply.
See
Arding v Economic Printing and Publishing Co.
79 LT 420
at
622.
[55] The word “outgoing” in its widest sense
may cover even more than what the parties to an agreement could
possibly
have contemplated. The word “outgoing” has been
held capable of a wider meaning than words such as “rates,
taxes
and assessments” which are only applicable to periodical
recurrent charges in respect of the premises. See
Foulger v Arding
[1902] 1KB 702-703 at p707.
[56] The words “rates, taxes” establish and
complete the genus of all charges, duties, impositions, levies and
tariffs
on the property in question.
[57] The object in using the expression “and other
outgoings” in the clause under consideration was to make it
clear
that the expression was intended to include all other
expenditures incurred in relation to the property which were not
specifically
mentioned in the clause. Accordingly, the word “other”
does not extend some case of
ejusdem genesis
with the
proceeding words “rates, taxes”.
[58] The expression “and other outgoings”
immediately follow the specific words “rates, taxes” and
this
shows that the parties intended to use it in its widest possible
sense. See
Peter v Minister of Law and Order
1990 (4) SA 6(E)
at
10B.
[59] The object in using the expression “and other
outgoings” was to make it clear that the clause was intended to
exclude
rates, taxes and any other charges of any kind which would
become payable after the transfer of the property.
[60] As a corollary to the right of ownership and the
right to receive rent, the respondent was duty bound to secure,
protect, maintain
and to keep the property in an acceptable condition
and in a state fit for rent and it was required to bear and pay such
regular
expenditures until the transfer of the property to the
appellant. It, therefore, follows that the said regular expenditures
were
in the contemplation of the parties and thereby falling within
the purview of the written agreement. This is evident from the
testimony
of Tisdal (respondent’s project manager) that the
outgoing expenses were to be paid by the respondent until the
transfer
of the property. In the reconciliation statement dated 15
June 2004, the expenses relating to security, garden services,
general
cleaning, fire protection and maintenance are itemized and
classified as outgoing expenses.
[61] The taxes paid by the owner of the property in
respect of his or her ownership are not incidental or
ejusdem
genesis
with the expenses of management. See
Glasgow
Corporation
[1898] AC 631
at 640.
[62] The expression in question intended to include all
other expenditures in relation to the property other than rates,
taxes and
charges of any kind which might be imposed on the property
after the transfer of the property though were not
ejusdem genesis
with rates and taxes which existed on the date.
[63] The expenses relating to security, gardening,
general cleaning, maintenance and protection of the property may not
fairly come
within the meaning of rates, taxes, assessments or
impositions payable by the owner or the occupier in respect of the
property.
[64] The expression “other outgoings” did
not intend to cover rates and taxes but it was inserted in order to
cover
“other” expenses viz. those relating to security,
fire protection, general cleaning, gardening and maintenance of the
property which were on the date of the agreement regular expenses
payable by the respondent. It therefore stands to reason that
the
only reasonable inference to be drawn in the circumstances is that
these expenses were in the contemplation of the parties.
In the
premises, the parties were reasonably expected to provide for the
payment of expenses other than rates and taxes.
[65] The expenditure incurred by the appellant was
connected with the ordinary occupation of the premises. The work has,
in fact,
been done and paid for. The expenses incurred by the
appellant, in paying for such services, were supposed to have been
paid by
the respondent as the owner. The appellant did not have the
right to deduct the impositions and the payments it had made for the
services rendered on the property from its rental. The appellant is
entitled, as it has paid for such services, to recover from
the
respondent.
[66] The parties made an agreement in perfectly clear
and unambiguous terms that apart from the rates and taxes, the
respondent
would bear and pay all “other outgoings” until
the registration of transfer of the property. I therefore, see no
ground
whatever for thinking that the word “outgoings” as
used in the clause under consideration is intended to be used other
than in its ordinary general meaning and that it must be confined to
rates and taxes which might be imposed on the property. See
Tubbs
v Wynne
[1897] 1 QB 74
at 77-80; Stockdale v Ascherberg [1904] 1KB
447 CA at 449-50.
This cannot be the only meaning attached to the
word “outgoing”.
[67] In my view the expression “other outgoings”
ought to be construed in the larger and popular sense as including
every expense in relation to the property which in the ordinary
course of occupation and management would be required in order to
maintain, protect, secure and to keep it in a fit state for rent. See
re Duke of Cleveland Estates, Wolmer (Viscount) v Forrester (1894)
1CA, 164.
[68] The expenditures in relation to security,
gardening, general cleaning, maintenance and protection services were
properly incurred
and reasonably necessary to keep the condition of
the property at an acceptable standard. See also
Trust Company of
Australia Ltd v Skiwing (Pty) Ltd (2006) 68 NSWLR366;
[2006] NSWCA
387.
Skiwing (Pty)Ltd vTrust Company Ltd (RLD)
[2010] NS WAD TAP73
paragraph 5.
[69] According to Abdoola, the garden services, clearing
of the vegetation and general cleaning were purely done in order to
keep
the property in a presentable state for the lessees. There was a
lot of vegetation growing on the premises and it needed continuous
maintenance. There was also a water pipe burst which had to be fixed
and the sprinkler system to be maintained regularly.
Conclusion
[70] Prior to registration of transfer of the property
the respondent had, apart from the payment of rates and taxes, a duty
to
pay the expenses relating to security, gardening, general
cleaning, fire protection and maintenance of property.
[71] The weight of decided authorities supports the view
that the word “outgoings” is quite wide to cover all
expenses
incurred in relation to the property. The word “outgoings”
was therefore not intended to cover rates and taxes but all
other
expenditures incurred in relation to the property. Accordingly, it
follows that the expression “other outgoings”
includes
amounts payable in respect of security, gardening, general cleaning,
maintenance and fire protection services provided
to the property.
[72] Accordingly, I find it safe to conclude that the
appellant is entitled to claim indemnity from the respondent company
in respect
of such payments.
Order.
[73] In the result, the appeal succeeds. The order of
the Court a
quo
is set aside in favour of the one reading as
follows:
(a) The respondent is ordered to pay to the appellant
the sum of R271 227,66, being the total amount it expended on various
services,
provided to the property over the period of six months
prior to the registration of the transfer, relating to security,
gardening,
general cleaning, fire protection and maintenance.
(b) The respondent pays the costs of the appeal.
____________________
MURUGASEN J
I agree
____________________
SEEGOBIN J I agree
____________________
MADONDO
J It is so ordered.
Date of reserved: 19 November 2010
Date of Judgment: 28 February 2011
Counsel for the Appellant: (Adv Lennard)
Instructed by: LOCKHAT & ASSOCIATES
C/O WEAKLEY GREENE PARAU
REF: DONNA PARAU
Counsel for the Respondent: (Adv Ungerer)
Instructed by: MESSRS HAMILTON ATTORNEYS
C/O TOMLINSON MNGUNI JAMES
REF: B J NICHOLSON