Brink v Premier of the Free State Province and Another (3167/07) [2007] ZAFSHC 125 (13 November 2007)

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[2007] ZAFSHC 125
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Brink v Premier of the Free State Province and Another (3167/07) [2007] ZAFSHC 125 (13 November 2007)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case No. : 3167/07
In
the case between:-
LOIS
BRINK
Applicant
and
THE
PREMIER OF THE FREE STATE PROVINCE
1
st
Respondent
THE
MEC: DEPARTMENT OF PUBLIC WORKS,
2
nd
Respondent
ROADS
AND TRANSPORT OF THE FREE STATE
PROVINCE
_____________________________________________________
HEARD
ON:
1
NOVEMBER 2007
_____________________________________________________
JUDGMENT:
WRIGHT,
J
DELIVERED ON:
13
NOVEMBER 2007
[1] The applicant in this
matter, which concerns the interpretation of a second option in a
lease agreement, is Lois Brink and respondents
respectively the
Premier of the Free State Province and the MEC for the Department of
Public Works, Roads and Transport.
[2] The applicant
requests a declaratory order declaring her exercising the said option
contained in a written lease between her and
the Provincial
Government concluded on 3 November 1997 to be lawful and legally
binding, and further declaring her renewal of lease
for the period
from 1 October 2007 to 30 September 2012 to be valid. She also
requests a mandamus ordering the respondents to comply
with their
obligations in terms of the extended lease and to pay the costs of
the application jointly and severally on an attorney
and client
scale.
[3] Although there is a
dispute between the parties whether annexure “LB8” to the
replying affidavit or annexure “MM1” to
the opposing affidavit
constitutes the lease, it is common cause that the lease has been
concluded and implemented for 10 years,
and that the relevant clause
which has to be interpreted is contained in both the abovementioned
documents.
[4] The
lease, which was entered into after a public tender process, made
provision for an initial period of five years from 1997
to 2002 and
for two further options in respect of two further consecutive periods
of five years.
[5] The applicant duly
informed the second respondent that she was exercising the first
option with regard to the period from 2002
to 2007, and applicant
therefore leased the property described as “the Pleasure Resort at
Jim Fouche” until the 30
th
September 2007.
[6] On the 29
th
January 2007 the applicant forwarded a letter by facsimile to the
second respondent exercising her second option to extend the lease
for the further five years from 1 October 2007 to 30 September 2012.
The letter contains the following paragraph:
“
It is my view that the options
contained in the agreement are such that the second option which I
hereby exercise, will be on the
same terms and conditions as
contained to in the existing agreement of lease, including the annual
escalation of rentals. There
is in my opinion thus no other
conditions to be negotiated.”
[7] The second respondent
replied on the 2
nd
February 2007 to this missive succinctly stating:
“
4. Please be advised that as we did
the previous year whereby we gave notice that the Department will not
renew or extend the leave
(sic).”
[8] A further letter
dated 13 February 2007 sent by applicant’s attorney contained the
following passage:
“
Kindly advise as to the possibility
of having a round table discussions regarding the renewal of the
lease for the final period of
5 years, failure which our client will
have to approach the High Court with an Application for a Declarity
Order as to her right
of a further extention in terms of the existing
agreement.”
The letter was marked
“WITHOUT PREJUDICE”, but attached to the applicant’s founding
affidavit.
[9] A final reminder
elicited the following response from the second respondent:
“
...
there is no second option to be exercised by your client.
Alternatively, the Department does not consider itself bound by the
second option if it does not exist at all.”
Accordingly the present
application was lodged.
[10] Although both
parties referred to other disputed reasons why the application should
succeed or fail, (e.g. the applicant referring
to an amount of two
million rand spent in upgrading the resort and respondent referring
to an offer of more than double the existing
rental) their counsel
both agree that these (and various other aspects) are irrelevant and
that the actual dispute between the parties
relates to the question
whether applicant could unilaterally renew the lease. They also are
ad idem
that this question depends on the interpretation of the relevant
clause in the agreement.
[11] The
clause in question reads as follows:
“
The
LEASE is for a period of five (5) years from 1 October 1997 to 30
September 2002, with the proviso that the LESSEE shall have
an option
to extend the lease period for a period of five (5) years with a
second option of 5 years
on
the same and/or new conditions as will be mutually agreed
,
excluding a further right to renewal. The LESSEE shall give written
notice to the LESSOR six (6) months in andvance of his or her
intention to renew the contract
and
all negotiations with regard to the renewal of the contract shall be
concluded four (4) months before the initial contract lapses.
If the
LESSEE does not give written notice six (6) months before the
contract lapses
or
if all negotiations are not concluded four (4) months before the
contract lapses, this option to renew expires.”
(My
underlining.)
[12] Before setting out
the arguments of both legal representatives with regard to the
interpretation of the above clause, which mainly
relates to the
interpretation of the words “and/or” and whether mutual agreement
is necessary before the option can be exercised,
it is necessary to
refer shortly to certain applicable principles.
[13] The basic rule for
interpreting contracts has been set out as follows in
COOPERS
& LYBRAND AND OTHERS v BRYANT
[1995] ZASCA 64
;
1995 (3) SA 761
(A) 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 the 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.”
[14] Since the option in
question refers to a lease, it is necessary to bear in mind that the
essentialia
of a lease are:
“
(a) that the lessor is to give and
the lessee to receive the temporarily use and enjoyment of the
property;
the property which is leased; and
the rent.”
See Cooper,
Landlord
and Tenant
,
2
nd
Edition, p. 3.
POTCHEFSTROOM
MUNICIPALITY v BOUWER
1958 (4) SA 384
(T) at 384C – D.
[15] Options entitling a
lessee to renew a lease frequently contain a stipulation that the
renewal is subject to conditions to be
mutually agreed upon. If the
lessee should unilaterally exercise such an option, this will not
result in a lease. See Cooper
op.
cit.
p.
13. This does not, however, result in the option itself being
invalid. The effect of such a clause has been set out by Hathorn
JP
and quoted as follows in
BILODEN
PROPERTIES (PTY) LTD v WILSON
1946 NPD 736
at 739:
“
But
when, as here, the lessee is given the right to a renewal ‘upon
terms to be arranged’ the meaning is changed and full effect
must
be given to the phrase I have just quoted, and, in my opinion, it is
clear that unless terms are arranged there is no renewal.
This does
not mean that the right of renewal is valueless. On the contrary it
has great value, for it obliges the lessor to negotiate
and it
prevents him from refusing pointblank to let to the lessee, and it
also prevents him from letting to a third person upon terms
which the
lessee is willing to accept.”
[16] Although there is
also a dispute whether the words “on the same and/or new conditions
as will be mutually agreed” refer to
the first and the second
options, or only to the second, this aspect is not decisive. Having
regard to the precise wording of the
whole clause it seems more
probable that they only refer to the second option. The parties
evidently did not consider negotiations
necessary when the first
option was exercised.
[17] It
is also common cause that the words “and/or” must be interpreted
both disjunctively as well as conjunctively.
[18] The
applicant’s counsel, Mr. Van der Walt, argued that the applicant
has the right to unilaterally exercise the option in view
of the
following:
(a) With reference to
certain dictionary meanings of the word
option
(“a thing that is or may be chosen - the freedom or right to
choose ...”),
and
(“used to introduce an additional comment or interjection”) and
or
(“used to link alternatives”), he argued that the applicant had
the right to choose to exercise the option on:
(i) the same conditions;
(ii) altogether new
conditions (to be mutually agreed upon); or
the same and new
conditions.
(b) He argued that if it
was the intention of the parties that negotiations should always take
place the word “or” would not have
been used in the last sentence
of the clause. (It must, however, be pointed out that it is also
possible for both parties to agree
that the same conditions would be
applicable.)
(c) He also argued that
if the parties intended that the lessor would in any case have the
right to negotiate, the contract would
probably have read:
“a
second option of five years on conditions to be negotiated.”
(d) Further, building on
(a) above, he argued that the word “and” was necessary to make
provision for a choice between only new
conditions, and partly the
same and partly new conditions.
(e) The
following arguments set out in his supplementary heads of argument:
“Die
woorde ‘
as will be
mutually agreed
’ staan in
direkte sinsverband met die woorde ‘
new
conditions
’ en bepaal
bygevolg dat wanneer die applikante se keuse op nuwe voorwaardes,
hetsy uitsluitlik of tesame met die bestaande voorwaardes,
val daar
deur die partye onderhandel sal moet word.
Die
woorde ‘
as will be
mutually agreed
’ staan
egter nie in direkte sinsverband met die woorde ‘
on
the same
’ nie. Dit is
daarvan geskei in die opsig dat alleen bestaande voorwaardes ter
sake kan wees, maar daarby gevoeg wanneer bestaande
sowel as
addisionele nuwe voorwaardes ter sake is.”
(f) According to the
other terms of the contract there was no obvious reason why
negotiations would be necessary. He specifically
referred to the
escalation clause, but also to other terms of the contract which,
according to him, would not require amendment during
the period of
the lease.
(g) If there is doubt to
which interpretation should be accepted, the interpretation resulting
in the extension of the lease should
be preferred to an
interpretation resulting in the possible non-extension thereof as the
result of the failure to conclude successful
negotiations. In this
respect he referred to the following cases:
BURROUGHS
MACHINES LTD v CHENILLE CORPORATION OF SA
1964
(1) SA 669
(W) op 670 G – H;
SNYMAN EN ANDERE v
ODENDAALSRUS PLAASLIKE OORGANGSRAAD
1998 (2) SA 297
(O) op 312 C - F;
ROODE
v MORKEL
1976 (4) SA 989
(A) op 993 A – C.
[19] Mr. Claasen, arguing
for the respondents, relied on the following submissions:
(a) That the option was
conditional as a result of the words underlined above in the clause
because of the following:
(i) The lessee shall give
written notice to the lessor six months in advance of his or her
intention to renew the contract;
(ii) All negotiations
with regard to the renewal of the contract shall be concluded four
months before the initial contract lapse;
and
(iii)
The second option of five years to be exercised in the same and/or
new conditions
as
will be mutually agreed
.
(b) That the applicant
did not have a unilateral right to extend the lease on the same
conditions;
(c) That
the words “and/or” should be interpreted cumulatively.
He referred to the
following cases:
REESKENS
v REGISTRAR OF DEEDS
1964 (4) SA 369
(N) at 372 F;
S
v BENNIE
1964 (4) SA 192
(ECD);
BERMAN
v TEIMAN
1975 (1) SA 756
(WLD) op 757 D - H;
DU
TOIT EN ‘N ANDER v BARCLAYS NASIONALE BANK BPK
1985 (1) SA 563
(A) op 370 D – I.
A contract should not be
interpreted to allow any word to be unnecessary or not to have a
meaning which may influence the interpretation
of the contract as a
whole. In this respect he referred to the following words appearing
in
REX
v STANDARD TEA AND COFFEE COMPANY (PTY) LTD
1951 (4) SA 412
(A) 416 G – H:
“...
and it appears to me that the Notice can and should be construed so
as not to treat as
pro non
scripto
either of the words
mentioned.”
(e) He also argued with
reference to
ARONSON
v STERNBERG BROTHERS (PTY) LTD
1985 (1) SA 613
(A) at 621 – 622 that the option would not be
invalid
if it contains the words in question. These words had the effect as
already set out in paragraph 15 of this judgment.
(f) He also relied on the
two other sentences of the clause, and especially the word “and”
in the following sentence:
“The
LESSEE shall give written notice to the LESSOR six (6) months in
advance of his or her intention to renew the contract
and
all negotiations with regard to the renewal of the contract shall be
concluded four months before the initial contract lapses.”
He argued that the word
“and” is indicative that there would be notice, as well as
negotiations. With regard to the last sentence
of the clause and the
word “or” in that clause, he argues as follows in his
supplementary heads of argument:
“
Duidelik
is die sinnetjie voor die woordjie ‘or’ gerig op die skriftelike
kennisgewing ses maande vooraf. Dit is ‘n absolute
sine
qua non
. Indien geen
kennisgewing plaasvind nie, dan verval die opsie. Die laaste
gedeelte van die sin na die woordjie ‘or’ is ook
duidelik. Dit
kan slegs van toepassing wees nadat daar ‘n kennisgewing uitgegaan
het. Met ander woorde, dit beteken ek gee kennis
plus
alle onderhandelinge moet afgehandel word vier maande voor
verstryking van die kontrak. Daar
moet
dus onderhandel word.”
[20] After considering
the arguments as summarised in the last two paragraphs, I have come
to the following conclusions:
(a) There would have been
no problem if only the word “or” had been used in the underlined
sentence. In that case the applicant
would have had a choice to
renew the lease on the same conditions.
Effect must be given to
the use of the word “and”.
I have noted the various
cases with regard to the interpretation of the words “and/or”,
and find the interpretation favoured
by
DU
TOIT EN ‘N ANDER v BARCLAYS NASIONALE BANK BPK
,
supra
to be the most useful. This Court is in any case bound by this
decision. It is firstly mentioned that these words are not
ambiguous.
This means, of course, that no extrinsic evidence is
admissible with regard to the interpretation of the contract. I
have already
mentioned that the parties are in agreement that all
other considerations referred to in paragraph 10 hereof, are
irrelevant and
that the only source of interpretation is the words
of the contract itself on the basis as set out in paragraph 13
hereof. In
the
DU
TOIT
-case
the words in question referred to a suretyship where the surety
accepted liability for the debts of “A and/or B”. The
following
interpretation was given by Botha JA on p. 570 G – I of the
report:
“
Kry
'n mens nou 'n borgstelling waarin die borg hom teenoor die bank
verbind vir die betaling van die toekomstige skuld van "A
en/of
B", dan skyn dit my redelik duidelik te wees wat deur die
uitdrukking "en/of" beoog word. Met die vermelding
van twee
hoofskuldenare is daar die inherente vooruitsig dat op 'n gegewe
tydstip òf A alleen, òf B alleen, òf beide A en B geld
aan die
bank kan skuld wat die bank van die borg sal wil verhaal. Om net op
die bewoording van die dokument af te gaan, lyk dit vir
my redelik
duidelik dat daar deur middel van die uitdrukking "en/of"
beoog word om voorsiening te maak vir al drie die
moontlikhede wat ek
genoem het. As op enige gegewe tydstip slegs A, maar nie B nie, geld
aan die bank skuld, kan die borg vir A se
skuld aangespreek word; as
slegs B skuld, en nie A nie, kan hy vir B se skuld aangespreek word;
en as beide A én B geld skuld, kan
hy vir albei se skuld aangespreek
word. In so 'n samehang is ek van mening dat dit 'n heel natuurlike,
en selfs voor-die-hand-liggende,
uitleg van die uitdrukking "en/of"
is, om al drie die moontlike gevalle te dek soos ek aangedui het.”
(d) The contract must be
interpreted bearing in mind the interests of both the lessee and the
lessor. It seems to me that both parties
could agree that the lease
could be extended on the same conditions and/or new conditions (or on
only the one or the other), and
that Mr. Van der Walt’s argument to
the contrary is subjective. The words “as will be mutually
agreed”, therefore refer to
both methods of extension (on the same
or new conditions or both).
(e) This
view is substantiated by Mr. Claasen’s argument with regard to the
use of the words “and” and “or” in the last
two sentences of
the clause.
(f) Mr. Claasen’s
argument that neither the two interpretations will lead to invalidity
is also correct, and therefore Mr. Van der
Walt’s reliance on the
cases
mentioned
in paragraph 18(g) hereof has less persuasive value.
(g) Considering the
clause as a whole it seems likely that the parties intended that
after ten years of the lease had expired, the
parties should have the
right to possibly negotiate new terms in view of changing
circumstances, and this is precisely what the words
of the clause,
construed as a whole, have achieved. The respondents were, however,
not entitled to refuse to negotiate.
[21] The parties are also
in agreement that as the respondents took the view that the lease
could not be extended, and flatly refused
to negotiate, it was
necessary for the applicant to approach the court to obtain the
necessary relief. Applicant abandoned its prayer
for costs on an
attorney and client scale, and merely asked for party and party
costs. Although Mr. Claasen did not concede that
the applicant
was entitled
to
the costs, he did not strenuously oppose applicant’s request, or
argue to the contrary, and did not provide any persuasive argument
why costs should not be allowed in favour of applicant.
[22] A draft order (on
the alternative basis as argued by applicant) has been prepared by
the applicant’s counsel to which the respondents’
counsel agreed
(except as far as the costs are concerned). This order was drawn in
Afrikaans as were the applicant’s papers, and
I propose therefore
to give the order directly in terms of the draft order. The
respondents should bear in mind the rights given
to the holder of an
option to renew a lease subject to negotiations with regard to the
conditions as set out above, and that the
second respondent should
always allow the applicant to match the highest tender, or offer,
received in respect of the renewal of
the lease.
[23] The
following order is made:
“
1. Dit
word verklaar dat die verhuurder (die Provinsiale Regering van die
Vrystaat Provinsie) nie geregtig was om summier en sonder
dat
bona
fide
onderhandelinge tussen die huurder (die applikante) en die verhuurder
omtrent ‘n verdere verlenging van die huurkontrak, ‘LB1’
tot
die funderende beëdigde verklaring soos vervang, gevoer was, die
huurder se versoek om ‘n verdere verlenging van die huurkontrak
te
weier nie.
2. Die
verhuurder word gelas om onderhandelinge met die huurder aan te knoop
oor die moontlike verdere verlenging van die huurkontrak
ingevolge
die bepalinge van klousule 2 daarvan tot en met 30 September 2012,
hetsy op dieselfde of ander voorwaardes of ingevolge
‘n kombinasie
van die bestaande en ander voorwaardes.
3. Ten einde die aanvang
van die onderhandelingsproses te reël, word dit gelas dat:
3.1 die verhuurder binne
21 dae na die verlening van hierdie bevel ‘n skriftelike
uiteensetting van die voorwaardes waarop die verhuurder
bereid sou
wees om die huurkontrak te verleng, aan die applikante se prokureur
van rekord moet beteken;
3.2 die
huurder binne 14 dae na die aflewering van die uiteensetting in
paragraaf 3.1 gemeld, haar skriftelike aanvaarding van sodanige
voorstelle of enige skriftelike teenvoorstelle aan die respondente se
prokureur van rekord moet beteken; en
3.3 die verhuurder en die
huurder nadat daar aan paragrawe 3.1 en 3.2 voldoen is, indien
ooreenkoms dan nog nie bereik is nie, verplig
sal wees om oor ‘n
verdere tydperk van drie kalendermaande bereken vanaf die eerste dag
van die maand opvolgend op die maand waartydens
aan paragraaf 3.2
voldoen is, redelikerwys, sonder vooroordeel en
bona
fide
onderhandelinge te voer ten einde te poog om ooreenkoms te bereik oor
die voorwaardes waarop ‘n verdere verlenging van die huurkontrak
tot en met 30 September 2012 kan geskied.
4. Gedurende die tydperk
in paragraaf 3.3 gemeld, sal dit die partye vrystaan om die Hof te
nader vir ‘n verlenging van sodanige
tydperk, mits en indien dit
sou blyk dat enige van die partye in versuim is om redelikerwys,
sonder vooroordeel en
bona
fide
onderhandelinge omtrent die verdere verlenging van die huurkontrak
tot en met 30 September 2012 en die voorwaardes daarvan, te voer.
5. Indien die verhuurder
en die huurder daarin sou slaag om ‘n ooreenkoms te bereik omtrent
die verlenging van die huurkontrak tot
en met 30 September 2012, sal
sodanige ooreenkoms in skrif vervat word en deur die verhuurder en
die huurder, of hul gemagtigde verteenwoordigers,
onderteken word,
alvorens dit bindind sal word.
6. Hangende die duur van
die onderhandelinge voormeld hetsy gedurende die aanvanklike termyn
of enige verlenging daarvan, of gedurende
die beregting van enige
aansoek om ‘n verlening van die termyn waartydens onderhandelinge
gevoer moet word, en tot tyd en wyl ‘n
skriftelike huurkontrak soos
in paragraaf 5 beoog gesluit is, of tot tyd en wyl die
onderhandelinge ingevolge die bepalinge van hierdie
bevel tot ‘n
einde sou kom, sal die bepalinge en voorwaardes van die huurkontrak
mutatis
mutandis
van toepassing bly, en sal sodanige huurkontrak alleen ten einde loop
indien die partye nie ‘n skriftelike ooreenkoms bereik nie.
In
sodanige omstandighede sal die huurkontrak beëindig word op die
laaste dag van die maand onmiddellik opvolgende op die maand
waartydens die onderhandelingstydperk, of enige verlenging daarvan,
verstryk het.
7. Die respondente word
gesamentlik en afsonderlik, die een te betaal die ander vrygestel te
word, gelas om die applikante se koste
te betaal.”
_____________
G.F. WRIGHT, J
On
behalf of applicant: Adv. D.J. Van der Walt
Instructed
by:
Symington
& De Kok
BLOEMFONTEIN
On
behalf of respondents: Adv. J.Y. Claasen
Instructed
by:
Staatsprokureur
BLOEMFONTEIN
/sp