Ferox Investments (Pty) Limited v Blue Dot Nursery CC t/a Jasmine Plant and Centre (2511/2004) [2004] ZAFSHC 114; [2006] 1 All SA 17 (O) (2 December 2004)

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[2004] ZAFSHC 114
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Ferox Investments (Pty) Limited v Blue Dot Nursery CC t/a Jasmine Plant and Centre (2511/2004) [2004] ZAFSHC 114; [2006] 1 All SA 17 (O) (2 December 2004)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case No. : 2511/2004
In
the matter between:
FEROX
INVESTMENTS (PTY) LIMITED
APPLICANT
and
BLUE
DOT NURSERY CC t/a JASMINE
RESPONDENT
PLANT
& BIRD CENTRE
HEARD ON:
21
OCTOBER 2004
JUDGMENT:
MUSI
J
DELIVERED ON:
2
DECEMBER 2004
[1] On 18 December 2000
the respondent entered into a lease agreement with Bonatla Property
Holdings Ltd (Bonatla) in terms of which
the respondent leased from
the latter certain premises in a business complex called Welkom Game
Centre wherein the respondent conducted
a nursery business. The
duration of the lease was eight years two months with effect from 1
August 2000. On 13 October 2003 the
applicant bought the property
from Bonatla and it is common cause that it has lawfully stepped into
the shoes of Bonatla and has
become the lawful lessor. It thus has
locus
standi
to bring the instant application. The relevant lease agreement is
annexed to the papers and marked as “JB2”.
[2] On 21 May 2004 the
applicant, through its attorneys, addressed a letter to the
respondent advising of its intention to cancel
the lease in terms of
clause 20 with effect from 30 June 2004 from which date the
respondent was required to vacate the premises.
The ground on which
cancellation was sought, is expressed as follows:
“
2.1 As
a result of certain recent structural damage to the building in which
the premises leased to you in terms of the agreement
are situate, our
client has elected to engage in reconstruction, renovation and the
re-building of such building.”
The respondent’s
response thereto was to deny, through a letter dated 26 May 2004
addressed to the applicant’s attorneys by its
attorneys, that there
was any damage to the premises which entitled the applicant to cancel
the contract. The respondent went further
to hint that the real
motive for the intention to cancel, was that the applicant wanted to
replace the respondent’s existing nursery
business with a KFC
outlet and a Tyre Fitment Centre.
[3] It turns out that
prior to the letter of cancellation aforesaid, the parties had been
engaged in negotiations involving proposals
to get the respondent to
relocate to another section of the complex or to accept monetary
compensation in exchange for the early
termination of the lease. The
negotiations deadlocked. It is clear from the relevant exchanges and
material filed in this regard,
that indeed the applicant wanted to
give the main complex a major facelift and replace the premises
leased to the respondent with
a KFC and a Tyre Fitment Centre.
[4] The
dispute in this matter centres on the interpretation of clause 20.2
which reads as follows:
“
20.2 (if)
there is destruction or damage to the building or parts thereof,
whether or not the premises are involved and the landlord
determines
to put an end to the tenancies in the building in order to engage in
reconstruction, renovation or rebuilding.”
[5] Mr. Bester, for the
applicant, has referred me to the golden rule of interpretation as
stated in
COOPERS
AND LYBRAND AND OTHERS v BRYANT
[1995] ZASCA 64
;
1995 (3) SA 761
AD at 767 E – F,
to the effect that “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”. He argued that the language of clause
20.2 was clear
and unambiguous, namely if there should be damage to the building or
parts thereof and the landlord decided on that
account to engage in
reconstruction, renovation or rebuilding, he would be entitled to
cancel the contract upon giving the tenant
a proper notice. He
interpreted the phrase “whether or not the premises are involved”
to mean that it did not matter that the
destruction or damage was on
the leased premises. In other words, so long as there was damage
elsewhere in the complex and the landlord
decided to renovate, it was
entitled to cancel. He referred to the Schedule to the contract and
submitted that the word “building”
did not refer to the building
of the premises leased by the respondent but rather to the complex as
a whole. He further submitted
that the word “damage” was not
qualified and any damage would suffice.
[6] Mr. Oberholzer, for
the respondent, submitted, on the other hand, that the grammatical
meaning of the words used in this clause
would lead to an absurdity
and inconsistency with the rest of the contract. He submitted that
the clause must be read in the context
of the contract as a whole and
bearing in mind its nature and purpose. He laid emphasis on the
nature and extent of the damage and
submitted that it could not have
been the intention of the parties that the applicant would be
entitled to cancel on the basis of
minor damage. He further
submitted that it had to be damage to the leased premises itself and
not damage unrelated to the portion
leased by the respondent. In
this regard, he pointed out that there was in fact no damage at all
to the latter portion. In any
event, even the damage in the main
complex was not of a serious nature and did not warrant a
cancellation, so Mr. Oberholzer argued.
[7] Now the golden rule
in the interpretation of contracts is to be followed, namely, that
the common intention of the parties must
be ascertained. This is
done not by relying on what the parties purported to intend, but
“what the language used in the contract
means, i.e. what their
intention was as expressed in the contract”. See
MIA
v D J L PROPERTIES (WALTLOO) (PTY) LTD AND ANOTHER
2000 (4) SA 220
TPD at 228 E.
The
first step in the process of ascertaining the common intention is to
adhere to the grammatical and ordinary meaning of the words
used,
unless this would result in some absurdity or repugnancy or
inconsistency with the rest of the document. See
COOPERS
AND LYBRAND AND OTHERS v BRYANT
supra
.
Now parties to contracts do not always use words in their usual,
literal meaning and it is the context in which they are used that
will indicate the particular meaning that the parties had in mind.
This is where the second step in interpretation of contracts
comes
in, namely, that the words used should not be considered in
isolation, but must be considered in the context of the particular
clause and the contract as a whole, bearing in mind the nature and
purpose of the contract. See
COOPERS
AND LYBRAND
supra
at 767 i to 768 B.
[8] Sometimes the
language of a contract may be ambiguous and open to different
interpretations. There are various rules of interpretation
that may
help to resolve the ambiguity, amongst which is what is referred to
as the equitable interpretation. See R H Christie
THE
LAW OF CONTRACT
4th Edition at 249 – 250.
The
learned author refers in this regard to
RAND
RIETFONTEIN ESTATES LTD v COHN
1937 AD 317
where
the following passage from an earlier judgment was cited with
approval:
“
The
Court will lean to that interpretation which will put an equitable
construction upon the contract and will not, unless the intention
of
the parties is manifest, so construe the contract as to give one of
the parties an unfair or unreasonable advantage over the other.”
The learned author
continues to state at 250:
“
It
should always be borne in mind that, even if a contract has been
drafted by a skilled draftsman, it has become the act of the parties
and should therefore be interpreted not in a subtle way that might
appeal to a lawyer but in the straight forward way that can be
presumed to represent the common intention of two business people or
farmers or whatever the parties might be, and of course an
interpretation
that does not give one party an unfair or unreasonable
advantage over the other is to be preferred to one that does.”
[9] It is against the
above background of the applicable legal position that I now turn to
consider the clause in question.
The language of clause
20.2 is not plain at all; in fact, it is complex. It consists of two
parts. The first ends with the phrase
“whether or not the party
the premises are involved” and then follows the second.
[10] I deal firstly with
the first part. The crucial words are “building” and “premises”.
Ordinarily building denotes a
wall structure, whereas premises
ordinarily referred to a site. In respect of a lease contract,
premises would normally comprise
the whole letting unit, open spaces
and buildings included. So that the buildings would normally form
part of the leased premises.
But that is clearly not the sense in
which the word “building” is used in this clause, for it is used
in contradistinction to
“premises”. In other words, it is not
used in its ordinary, literal sense.
[11] We shall therefore
have to look into the context both of the clause and the contract as
a whole to ascertain what the parties
intended it to mean. Mr.
Bester has referred to the schedule to the contract and contended
that the words “building” and “premises”
are defined there.
He contended that “building” refers to the whole complex whereas
“premises” refers to the portion of
the complex leased by the
respondent. But “premises” in the schedule is given as “erf
165, Welkom”, which is the plot on
which the whole complex is
situated. That would mean that “building” and “premises” are
synonymous, which cannot be correct.
It becomes necessary therefore
to look into the other clauses in the contract.
[12] Clause
12.1 reads in part:
“
The landlord shall be entitled at
all times during the period of this lease to complete the buildings
on the property and to effect
any repairs, alterations, improvements
and additions to the said building and for such purpose to erect
building equipment anywhere
on the property or in the building
(including the premises) …”
“
Buildings”
in the phrase “buildings on the property” clearly refers to all
buildings on the complex whereas “building” in
the phrases “in
the building” and “to the said building” refers to the whole
complex as a unit. This is reinforced by use
in brackets of the
words “including the premises”. Clause 3.2 provides in part that
the tenants’ share of the municipal rates
and taxes payable by the
landlord in respect of the “land or building” shall be determined
by multiplying the factor of the letable
area of the “premises”
divided by the total letable area of the “building” in which the
premises are located. The word building
in the phrase “land or
building” refers to the whole complex, and “building” in the
phrase “the total letable area of the
building” has the same
meaning. In my view, this is the same meaning in which the words are
used in clause 20.2. I do not think
that there can be any doubt that
“premises” in clause 20.2 refers, not to the whole complex as a
letting unit, but to the specific
portion leased by the respondent.
In the suretyship agreement, annexure “A” to the lease agreement,
the relevant portion is
described as shop 33. If there is any doubt
about the sense in which the word “premises” is used in this
clause, chapter 6 of
the lease contract dispels that.
It is not disputed that
the portion leased by the respondent comprises buildings as well as
the open spaces of the nursery and is
detached from the main complex,
so that reference to the premises includes both the buildings and the
open spaces of shop 33.
[13] The phrase “whether
or not the premises are involved” should therefore mean
irrespective of whether there is destruction
or damage on the leased
premises itself. Insofar as this part of clause 20.2 is concerned,
the interpretation contended for by Mr.
Bester, is therefore correct.
[14] The second part of
clause 20.2 is more problematic. It is ambiguous and can mean that
as long as there is damage, even of a
trivial nature, anywhere in the
property and the landlord decides to engage in reconstruction,
renovation or rebuilding, he can cancel.
In this sense, the crux of
the matter is the decision of the landlord. This is the
interpretation contended for by Mr. Bester.
Mr. Oberholzer
contended, on the other hand, that it could not have been the
intention of the parties that the landlord will be
entitled to cancel
even on account of the slightest of damage. He referred to the
nature and purpose of the contract and pointed
out that this is a
long term lease that was meant to give the tenant security of tenure.
[15] The alternative
interpretation postulates emphasis on the nature and extent of the
damage. In terms hereof the reconstruction,
renovation or
rebuilding, whichever is decided to engage upon, must relate to the
nature and extent of the destruction or damage
and must be justified
by it. In other words, the nature and extent of the damage must be
such that correction thereof necessitates
cancellation of the
contract. It is imperative to again consider the other clauses of
the contract, for an indication of what the
parties intended. One
needs go no further than the very chapter 20 under which the disputed
clause appears. Clause 20.1 is clear
and unambiguous and provides
for cancellation in event of destruction or severe damage to the
premises. It is significant that clause
20.2 is in fact an
alternative to 20.1. This suggests that as in clause 20.1
cancellation must be on account of destruction or damage,
albeit of a
lessor degree. Clause 20.4 also deals with cancellation on account
of damage and it is significant that the word “destruction”
is
omitted. It envisages the sort of damage that would be serious
enough to adversely affect the tenant’s use of the premises,
but
not so serious as to warrant termination of the lease; in which event
the tenant would be entitled to a remission of rental for
the
duration of the inconvenience. This would clearly apply to the sort
of damage that only necessitates renovations, as is the
case in the
instant matter where the applicant has been engaged in renovations in
the main complex.
[16] Now the respondent
has averred that none of the affected tenants in the main complex
have had their leases cancelled. Mr. Bester
countered this by saying
that it is not known whether the other tenants have the same contract
as the respondent and the respondent
did not aver in his answering
affidavit that this was so. This contention cannot stand. The
nature and the structure of the contract
is such that it can safely
be accepted that it is a standard document applicable to all the
tenants of the complex. In particular
the main body of the contract
containing “General Conditions of Lease” need no modifications to
apply to each and every tenant.
The difference between the tenants
would relate to their personal particulars, duration of the lease,
description and size of the
specific leased premises and rental,
which are all matters provided for in the schedule. Incidentally the
averment that the leases
of the other tenants have not been cancelled
is made in paragraph 10.15 of the answering affidavit and the
applicant did not deny
it in its replying affidavit.
[17] The use of the words
“destruction or damage” in clause 20.2 suggests that the damage
contemplated, although not of a severe
nature as in clause 20.1, must
nonetheless be serious. This is reinforced by the omission of the
word “destruction” in clause
20.4, which means that the damage
contemplated therein is of a less serious nature than that
contemplated in 20.2. By necessary
implication, for cancellation to
be justified in terms of clause 20.2 more serious damage must have
occurred and it would be the
sort of damage that would need more than
just renovations to remedy.
[18] Finally, the heading
of the whole chapter 20 is significant and reads: Damage or
Destruction. Cancellation in terms of all the
clauses herein must
therefore be on the basis of destruction or damage and the clauses
are in the order of the degrees of damage,
starting with the severe,
to the serious up to the less serious. A construction that ignores
the nature and extent of the damage
is therefore untenable.
[19] I hold therefore
that the correct interpretation of clause 20.2 is that in the event
of serious damage to the building as defined,
the landlord will to be
entitled to cancel the contract in order to engage in reconstruction,
renovation or rebuilding. This construction
is moreover in line with
the principle of equitable interpretation and will give none of the
parties an unfair or unreasonable advantage
over the other. And I
venture to suggest that the principle of equitable interpretation is
compatible with the values of fairness
and equality rooted in our
constitution and that parties entering into a contract would not
intend consequences that would impinge
on these values.
[20] Now these are motion
proceedings and insofar as there are disputes of act, the rule in
PLASCON-EVANS
PAINTS LTD v VAN RIEBEECK PAINTS (PTY) LTD
[1984] ZASCA 51
;
1984 (3) SA 623
AD
applies.
As far as the nature and extent of the damage in the building is
concerned, the applicant had, in the letter of cancellation,
annexure
“SJB5”, alleged structural damage as the reason for the
cancellation. This in a way implies an awareness that for
cancellation
in terms of clause 20.2 there had to be serious damage.
However, in its founding affidavit the applicant merely alleged that
the
building had suffered damage and in argument it adopted the
stance that it did not matter whether the damage was serious or not.

The version of the respondent was that the damage was not serious at
all and that renovations in the main building were merely for
the
purpose of giving the building a facelift. The renovations were
moreover not necessitated by whatever damage had been there,
but were
part of the applicant’s grand design to revamp the main complex and
introduce new businesses. Hence it wanted to replace
the nursery
with a KFC outlet and a Tyre Fitment Centre. On this version of the
respondent, which is not without merit, I find that
there was no
damage of the sort that entitled the applicant to cancel the contract
in terms of clause 20.2.
The
application is dismissed with costs.
_____________
H.M. MUSI, J
On
behalf of the applicant: Adv. A Bester
Instructed
by:
McIntyre
& Van der Post
BLOEMFONTEIN
On
behalf of the respondent: Adv. P.W. Oberholzer
Instructed
by:
Rosendorff
Reitz Barry
BLOEMFONTEIN
/spieterse