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[2020] ZASCA 45
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Kooij and Others v Middleground Trading 251 CC and Another (1249/18) [2020] ZASCA 45 (23 April 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case no: 1249/18
In
the matter between:
WILMA
PETRU KOOIJ
and
MAGDALENA
MARIA KRUGER
and
JACOBUS
CHRISTOFFEL
KRUGER
APPELLANT
(In
their capacities as Trustees of Daleen Kruger Trust
(IT:
1972/96)
and
MIDDLEGROUND
TRADING 251 CC
FIRST RESPONDENT
DIRK
JAKOBUS
FOURIE
SECOND RESPONDENT
Neutral
citation:
Wilma Petru Kooij v
Middleground Trading 251 CC and Another
(1249/18)
[2020] ZASCA 45
(23 April 2020)
Coram:
MBHA, ZONDI and MOLEMELA JJA and LEDWABA and KOEN
AJJA
Heard
:
20 February 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication
on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 10h00 on 23 April
2020.
Summary:
Contract – interpretation of –
dominant right granted not lease - importation of tacit term –
permanent supervening
impossibility of performance.
ORDER
On
appeal from:
Gauteng Division of
the High Court, Pretoria (Moultrie AJ, Van Niewenhuizen J concurring,
sitting as a court of appeal):
The appeal is dismissed
with costs.
JUDGMENT
Molemela
JA (Mbha and Zondi, JJA, and Ledwaba and Koen AJJA concurring)
Introduction
[1] Central to this
appeal is a determination of the nature and consequences of the
agreement entered into by the appellant, the
Daleen Kruger Trust (the
Trust) and the first respondent, Middleground Trading 251 CC
(Middleground).
Background facts
[2]
On 30 September 2005, the Trust, duly represented by its trustee, Mr
Kruger, entered into an agreement with Middleground, duly
represented
by its director, Mr Fourie. The agreement was, in its heading,
described as ‘Rent and rental Agreement’
.
It recorded that the Trust was the owner of a farm on which
Middleground would be allowed to
prospect,
mine or harvest peat
[1]
from
a
specified
portion
thereof, which mainly constituted a wetlands area, in consideration
for a minimum amount of R15 000.00 per month (minimum
amount
payable). The agreement commenced on 30 September 2005 and was
initially for a fixed period of three years. Middleground
was
entitled to exercise the option to extend the agreement for a further
period of three years. It did so twice, thereby extending
the life of
the contract to 30 September 2014.
The
salient provisions of the agreement, loosely translated, are as
follows:
[2]
‘
1.
THE PARTIES AND THE PROPERTY
1.3
The property in respect of which the rights are granted is the
designated marshland and sections where peat is located on the
farm .
. . as indicated in the attached diagram . . . .The peat section is
depicted in red on the diagram plus the designated section
of
approximately five hectares on which associated business activities
may be undertaken, and the designated roads.
2.
GENERAL
2.2
Subject to the conditions set out in this agreement and for the
duration of the contract period [the Trust] hereby leases the
property to [Middleground] for purposes of giving it the exclusive
right to solely prospect, extract or mine for peat and / or
to
harvest peat on the property.
3.
CONTRACT PERIOD
3.4
[Middleground] may only cancel the agreement if:
3.4.1
[Middleground] is prohibited from harvesting peat in terms of new
legislation; or
3.4.2
the peatland is depleted and peat can no longer be harvested on it.
3.5
In the event of a dispute as to whether the peat resources is
depleted, the dispute will be referred for arbitration. The
arbitrator
shall be appointed by the Department of Agriculture.
[Middleground] will continue paying its monthly rentals until the
arbitrator
makes their decision, or until the dispute is settled. If
it is found that the peat resources is depleted, [Middleground] will
be entitled to a refund of the rent paid during the period when there
was no peat to mine.
3.6
Any form of
vis major
will be a valid reason for
[Middleground] not to perform its operations in terms of this
agreement, if it results in a permanent
impossibility.
4.
PAYMENT
4.1
[Middleground] will pay [the Trust] the minimum rental amount of
R15 000.00 per month, plus VAT, for the lease of the property
and in addition an amount of R25.00 per cubic meter will become
payable any additional volume of peat that is extracted in excess
of
600m
3
per month. The amount of R15 000.00 shall
escalate at the rate of 10 per cent per annum.
4.2
The payment of the sum of R15 000.00 per month, for the lease of
the property and the granting of the rights in terms of
the agreement
is a prepayment of the amount of R25.00/m
3
(R25 per cubic
metre) (plus VAT if it is applicable), for the peat extracted by
[Middleground] monthly.
4.3
The amount of R15 000.00 per month will be taken into account
against the amount that is due to [the Trust] for the peat
that is
extracted in terms of the agreement and for which [Middleground]
compensates [the Trust]. The calculation will be done
monthly and the
reconciliation thereof will be done monthly. Payment will be made 30
days after month-end.
4.4
The amounts payable for the peat extracted will be R25.00 per cubic
metre and will escalate at the rate of 10 per cent per annum.’
[3]
It is common cause that for some time prior to the conclusion of the
aforesaid agreement, peat had been extracted from the Trust’s
property by an entity known as Stander Veen CC (Stander Veen) under a
licence issued by the Department of Environmental Affairs
(the
Department).
At the time of the
conclusion of the agreement between the Trust and Middleground,
Stander Veen was still the authorised licence
holder even though it
was no longer extracting peat from that property. It appears that
Middleground and Stander Veen had a separate
arrangement regarding
Middleground harvesting the peat under Stander Veen’s licence.
This separate arrangement deserves no
further mention in this appeal,
as nothing turns on it.
[4]
Following the conclusion of the contract, Middleground took
possession of the Trust’s property. However, for the first
ten
months of the contract, no peat was extracted from the property as
Middleground was still setting up its business operations.
Despite
this, Middleground paid the agreed minimum amount of R15 000.00
per month and submitted monthly reconciliation statements
that
reflected the amounts paid to the Trust as credits.
[5]
On 19 August 2011 the
Department of Environmental Affairs
(the
Department)
issued a
notice (pre-notice) indicating its intention to issue a Compliance
Notice and/or Directive (Compliance Notice) in terms
of ss 28(4)
and/or 31L of the
National Environmental Management Act, 107 of 1998
and/or a directive in terms of s 31A of the Environment Conservation
Act, 73 of 1989
,
because of
what it contended was ‘environmental degradation and serious
harm caused by the unlawful activities conducted’
on the
property. The pre-notice was addressed to the Trust, Middleground and
Stander Veen. On 30 August 2011, the three entities
jointly submitted
representations to the Department in an effort to fend off the
allegations made therein. Notwithstanding those
representations, on
17 November 2011, the Department proceeded to issue a Compliance
Notice
against the Trust,
Middleground and Stander Veen. It was served on the three entities on
28 November 2011. The Compliance Notice
directed that the extraction
of peat be stopped forthwith, that all the machinery and implements
used for the mining thereof be
removed from the property within
5
days of the issuance of that order,
and that all access points to the designated property be barricaded.
[6]
Middleground, the Trust and Stander Veen jointly tried to negotiate
with the Department for the withdrawal of the Compliance
Notice. When
that failed, they launched an urgent application against the
Department in the Gauteng Division of the High Court,
Pretoria (High
Court) in December 2011. Based on the legal advice they subsequently
obtained, they withdrew that application and
lodged an appeal to the
Minister of Environmental Affairs (the Minister). Although an
undertaking was made promising to secure
the Minister’s
response by 31 January 2012, the decision refusing that appeal was
only made on 26 June 2013. Middleground
subsequently decided to
institute an application reviewing the Department’s decision to
issue the Compliance Notice
and setting it aside. The Trust was
cited as one of the respondents in that application as a party having
an interest in the matter.
[7] In the intervening
period, Middleground had, in accordance with the Compliance Notice
issued by the Department, stopped harvesting
peat and had removed its
equipment from the Trust’s property. The last recorded payment
made by Middleground to the Trust
was for the month of February 2012.
Considering Middleground to be in default of its payment obligations,
the Trust sent a letter
in May 2012, demanding payment of, what
it termed, ‘arrear rental’. Further correspondence was
exchanged between
the parties but the issue could not be resolved
amicably. The Trust then sent a letter purporting to cancel the
agreement and demanded
payment of an amount of R1 051 796.99
in respect of ‘rental due and payable’ for the period 1
March 2012
to 30 September 2014’.
Litigation History
[8]
In an action instituted in the Magistrate’s Court, the Trust,
citing Middleground as a first respondent by virtue of being
a
‘lessee’ of the peatland and Fourie as the second
respondent on account of the suretyship that he signed in respect
of
Middleground’s indebtedness, claimed payment of the amount of
R1 051 796.00.
The
case pleaded by the Trust was that
the
parties had entered into a lease agreement, the consequence whereof
was that Middleground would remain bound by its terms until
the
agreement was terminated by effluxion of time.
[9]
The first argument advanced by Middleground was that the agreement
concluded by the parties was not one that could be characterised
as a
common law lease of immovable property, but was one in terms of which
the Trust granted Middleground the right to prospect
for and harvest
peat on the property and activities related thereto, for an agreed
consideration. Following from that, the primary
defence raised was
that, on a proper interpretation of the agreement, the amounts
payable by Middleground in terms of the agreement
were only payable
for so long as Middleground was able to legitimately exercise its
right to prospect for, and to mine and/or harvest
peat. This defence
also sought to invoke a tacit term to the effect that the amounts
payable by Middleground were payable only
for so long as Middleground
was able to legitimately exercise its rights to prospect for and to
mine and/or harvest peat.
[10]
Middleground further pleaded that the issuance of the Compliance
Notice resulted in it no longer being able to continue with
peat
extraction operations on the property, as a result of which
performance in terms of the agreement became impossible. Lastly,
Middleground asserted that the issuance of the Compliance Notice
constituted
vis major
of a permanent nature as contemplated in clause 3.6 of the agreement,
which entitled it to terminate the agreement. The Magistrate
dismissed the action on the basis that there was a supervening
impossibility that prevented Middleground from exercising its rights
in terms of the agreement. The Trust subsequently appealed against
that judgment to the Gauteng Division of the High Court (High
Court).
[11]
In upholding the magistrate’s dismissal of the Trust’s
claim, the High Court held that, on a proper construction
of the
contract, the minimum monthly payment constituted a prepayment in
respect of peat to be mined, which was subject to a set- off
based on the reconciliations done on a monthly basis. It held that
even though the payment was categorised as ‘rent’
it was
not an amount that the Trust was entitled to retain irrespective of
the volume of peat Middleground had extracted. It held
further that
the tacit term contended for by Middleground was reasonable and
necessary in view of the fact that the minimum monthly
payment
constituted a prepayment.
[12] The High Court thus
upheld Middleground’s reliance on a tacit term excusing it from
the obligation to pay the minimum
monthly payment for the period when
peat could not be extracted between February 2012 and September 2014.
It held that given that
finding,
it was not
necessary to decide the question whether the Compliance Notice
constituted a permanent impediment excusing Middleground
from the
obligation to pay the minimum monthly amount on the basis of the
defence of supervening impossibility of performance.
T
he High
Court held that what the Department sought to prohibit by virtue of
the Compliance Notice was peat extraction per se. It
found that it
could therefore not be said that the issuance of the
Compliance Notice and Middleground’s consequent inability
to legitimately carry out its peat extraction activities were as a
result of its failure to comply with the required authorisations
or
legislation.
The High Court
dismissed
the appeal. Aggrieved by the decision of the High Court, the Trust
applied for and was granted leave to appeal to this
Court against the
judgment of the High Court.
The submissions of the
parties
[13]
Before us it was contended on behalf
of the Trust that the agreement in question was
sui
generis
, but that the lease element
thereof formed an integral part of the agreement. It was further
contended that even in the event that
the agreement is considered not
to be a nominate agreement of lease, the terms thereof clearly
provide for a continuous obligation
to make payment by Middleground
irrespective of whether peat was extracted or not. Middleground, on
the other hand, persisted with
the defences it had raised. It
contended that the agreement was not a lease but a right granted to
it for the mining of peat; that
the minimum monthly payment
constituted a prepayment for the peat to be extracted and, properly
construed, not rental. Lastly,
it contended that the prohibition on
the extraction of peat by virtue of the Compliance Notice
amounted to a permanent supervening
impossibility of performance
envisaged in the parties’ agreement.
The issues for
determination
[14] The issues for
determination in this Court are threefold. First, whether the written
agreement entered into by the parties
was an agreement with
significant features of a lease of immovable property, with the
monthly payments constituting rental as alleged
by the appellant, or
whether, as Middleground contends, it was merely an agreement
granting it the right to extract peat from the
Trust’s
property, with the prepayments being consideration paid in advance
for the right to prospect for, mine and harvest
peat. Second, whether
a tacit term should be imported into the agreement, the effect
thereof being that the amounts payable by
Middleground would be
payable to the Trust only for so long as Middleground was able to
legitimately carry out its rights to prospect
for, and to mine and/or
harvest peat. Third, whether the Department’s issuance of the
Compliance Notice during November 2011
constituted
vis major
of
a permanent nature as contemplated in the parties’ agreement.
Discussion
The nature of the
contract
[15]
At the crux of this matter is the interpretation that has to be given
to the agreement concluded by the parties. The principle
enunciated
decades ago by Wigmore in relation to the construction of contracts
still applies: once a contract is concluded by the
parties, it
becomes the only memorial of their jural act ‘and all other
utterances of the parties on that topic are legally
immaterial for
the purpose of determining. . . the terms of their act’.
[3]
Since then, the general principles applicable to the interpretative
process have been restated in a plethora of cases. Although
the
objective meaning of a provision is determined both with reference to
its language and in the light of its factual context,
the ‘inevitable
point of departure’ is the language of the provision.
[4]
In
Natal
Joint Municipality Pension Fund v Endumeni Municipality
,
[5]
this Court stated that regard must be had to the language used,
viewed in context. In
Novartis
v Maphil
,
[6]
the position was restated as follows:
‘
.
. . This court has consistently held, for many decades, that the
interpretative process is one of ascertaining the intention of
the
parties – what they meant to achieve. And in doing that, the
court must consider all the circumstances surrounding the
contract to
determine what their intention was in concluding it. KPMG, in the
passage cited, explains that parol evidence is inadmissible
to
modify, vary or add to the written terms of the agreement, and that
it is the role of the court, and not witnesses, to interpret
a
document. It adds, importantly, that there is no real distinction
between background circumstances, and surrounding circumstances,
and
that a court should always consider the factual matrix in which the
contract is concluded – the context – to determine
the
parties’ intention.’
[7]
[16]
With those principles in mind, I turn now to consider the relevant
provisions of the agreement
in the light of the agreement as a whole and in the light of all
relevant circumstances.
[8]
C
ounsel
for the Trust submitted that the manner in which the parties
conducted themselves after the conclusion of the contract should
be
accepted as part of the surrounding circumstances from which the true
intention of the parties can be established. It is true
that a Court
can, when interpreting a contract, have regard to the parties’
subsequent conduct in order to determine what
they intended.
[9]
This Court has, however, made it clear that the use of such evidence
is circumscribed. It laid down that such evidence may be accepted
subject to three provisos. First, the evidence must be indicative of
a common understanding of the terms and meaning of the contract.
Second, the evidence may be used as an aid to interpretation and not
to alter the words used by the parties. Third, that evidence
must be
used as conservatively as possible.
[10]
[17]
The evidence we were urged to take into account as evidence of
subsequent conduct related to the reconciliation statements
submitted
monthly to the Trust in accordance with clause 4.2 of the agreement.
The Trust made much of the fact that in the statements
in question,
the amounts paid by Middleground were referred to as ‘rental’.
On the other hand, Middleground contended
that the fact that the
amounts paid to the Trust had always been reflected as credits in the
reconciliation statements was an indication
that the amounts in
question constituted prepayments for the peat and not rental.
Middleground urged us to take special note of
the fact that during
the initial ten months when prior to it starting with its business
activities for the extraction of peat,
the reconciliation statements
it had submitted showed that the amounts that were paid for those
months had increased cumulatively
culminating in a credit of
R150 000.00, as opposed to being appropriated monthly, without
being carried forward as a cumulative
total as one would expect with
rentals paid for the use of leased property in a conventional lease
of immovable property.
[18]
Another argument relied upon by the Middleground was that Mr Kruger
had confirmed that in the months where less than 600 cubic
metres of
peat was removed, a credit for the difference was given to
Middleground. These arguments were borne out by the reconciliation
statements that Middleground prepared and submitted to the Trust,
which the Trust never queried. The Trust contended that Mr Kruger
had
in his evidence, pointed out that he questioned Mr Fourie about the
credits reflected in the reconciliation statements, as
it was not
reflective of the true intention of the parties. According to him, Mr
Fourie had explained that the payments were reflected
as a credit
purely for purposes of deriving a book-keeping advantage for
Middleground. He had accommodated Middleground in that
arrangement
purely for the sake of maintaining good relations. It appears that
the parties did not have a clear common understanding
on this aspect
and therefore did not satisfy the first proviso set out in the
Urban
Hip Hotels
judgment.
[19]
The Trust also sought to place reliance on the correspondence it had
sent to Middleground, claiming arrear rental. In its response,
Middleground had not disputed the existence of the lease but made
certain proposals for the Trust’s consideration. The Trust
contended that the correspondence exchanged between the parties was
indicative of both parties’ understanding that the agreement
they had concluded was a lease. It is clear from the record that the
correspondence in question was sent in the midst of legal
steps the
parties were taking to challenge the Compliance Notice. According to
Mr Fourie, the correspondence was exchanged with
a view to a
settlement of all disputes between the parties. Notably, Middleground
had also sent a letter to the Trust pointing
out that it was far
ahead with its payments. Clearly, the evidence pertaining to the
amounts reflected as a credit and the correspondence
exchanged
between the parties by no means established that the conduct of
Middleground was consistent only with the nature of the
agreement
being a lease. The threshold laid down in
Urban
Hip Hotels
for the acceptance of
evidence of subsequent conduct as part of the surrounding
circumstances was therefore not met.
[20]
It was contended on behalf of the Trust that the very fact that
Middleground had not filed a counterclaim reclaiming the amount
that
it regarded as the remaining prepayment was a clear indication that
the agreement the parties had in mind was an ordinary
lease
agreement, with the amounts paid constituting rental due. It is not
for this court to descend into the realm of speculation
regarding the
reasons behind Middleground not filing a counterclaim against the
Trust in respect of the amounts it considered to
have been pre-paid
for the period during which peat was not extracted. There could be a
variety of reasons why it chose not to
do so, other than that sought
to be inferred. What is clear from Middleground’s amended plea
is that not only did it deny
indebtedness to the Trust in the amount
claimed, but it also pleaded its entitlement to a credit in the
amount of R228 918.38
in relation to amounts paid in advance.
The non-filing of a counterclaim is therefore of no moment.
[21]
It is now convenient to consider the true nature of the agreement
concluded by the parties, on the basis of the principles
mentioned
earlier in the judgment. Much was made of the fact that the agreement
was expressly described as one of ‘letting
and hiring’
(‘huur en verhuur') and that the minimum monthly payment
payable by Middleground to the Trust was referred
to as ‘rental’
(‘huur') in the agreement and in the reconciliation statements
that were prepared by Middleground.
According to the Trust, the
amount of R15 000.00 payable per month constituted a rental
obligation. It was contended on behalf
of the Trust that Middleground
had to occupy the property in order to extract the peat and that
without the use and enjoyment of
the property, it would not have been
able to do so. The agreement could therefore not exist without the
lease element, so the argument
went.
[22]
It is well-established that the label attached to an agreement is
not, of itself, determinative of its character. It is the
nature of
the performance agreed upon by the parties that determines its true
nature.
[11]
I
agree with the Trust’s contention that the agreement had a
lease element because Middleground had to have access to the
property
in order to extract the peat. However, that is not, by and of itself,
a conclusive indicator that the parties entered
into a lease
agreement. Access to the property was simply an incident of its right
to prospect and mine for and harvest peat. It
is trite that a Court
tasked with interpreting an agreement must consider the interrelation
between the provisions that are in
issue and the rest of the
document.
[12]
[23]
As correctly pointed out in
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
,
[13]
every
contract must be given a commercially sensible meaning. Where more
than one meaning is possible, a sensible meaning should
be preferred
to one that leads to ‘insensible or unbusinesslike results, or
one that undermines the apparent purpose’.
[14]
Considering the terms of the agreement as a whole, it is evident that
various provisions thereof tend to show that the lease element
was of
less significance. The property in respect of which the rights had
been granted was described as marshland, with the remaining
area
being for activities ancillary to peat extraction.
[15]
Furthermore, the agreement expressly provided that the property in
question made available to Middleground
solely
for prospecting, mining and harvesting of peat.
[16]
[24]
While clause 4.1 characterised the minimum monthly payment of the sum
of R15 000.00 as rental, clause 4.2 categorically
stated that
the same amount was in respect of both the rental
and
the granting of the right to extract peat from the property.
[17]
In the same clause, the same amount was described as a ‘prepayment’
for the peat to be extracted, calculable at R25.00
per cubic
metre.
[18]
Whereas it was
contended on behalf of the Trust that the minimum monthly payment of
R15 000.00 pertained to the lease component
of the agreement, it
is clear from the computation stipulated in clause 4.1 and 4.2, that
the entire sum of R15 000.00 payable
monthly was linked to the
actual quantity or volume of peat to be extracted. Thus, the
prepayment mentioned in clause 4.2 was not
a prepayment of rental
within the contemplation of a common law lease, but constituted a
prepayment of the consideration payable
for peat.
[25]
In addition to the above, clause 4.3 recorded that Middleground would
compensate (‘vergoed’) the Trust for the
peat extracted,
that the amount of R15 000 would be set off against the amount
due to the Trust in respect of the peat actually
extracted, and that
Middleground would be responsible for reconciling the accounts every
month. Interpreted in the context of the
whole agreement, it is clear
that clause 4.3 provides for the payment of a monthly amount of
R15 000.00 as a prepayment
for peat to be extracted on the
property on the express understanding that the prepayment of the
R15 000.00 for the peat would
be taken into account against the
amount owing to the Trust for peat extracted in terms of the
agreement. Similarly, where less
peat than the specified volume of
600 cubic metres was extracted, this was factored in as a credit when
reconciling the accounts.
The payments would later be reconciled with
the value of the peat actually extracted. I agree with the contention
made on behalf
of Middleground, that this is an aspect that is
irreconcilable with a common law lease. It seems to me that the lease
element was
merely aimed at entitling Middleground to access the
property to do
whatever
was reasonably necessary to mine for peat. Granting a party access to
property in order to enable it to access property
for purposes of
attaining its ultimate goal of mining is not a characteristic that is
found exclusively in lease agreements and
cannot, without more,
justify the characterisation of the agreement as a lease.
[19]
[26]
Another relevant
provision
is
clause
3.4.2, which entitles Middleground to cancel the agreement if the
peat resources were depleted and peat could no longer be
harvested.
This is another feature that is irreconcilable with a lease
agreement, as a lessee ordinarily has no right to take any
of the
substance of the leased property
[20]
or dispose of the property (
ius
abutendi
)
but only has the right to enjoy it (
ius
fruendi
)
and the right to use it (
ius
utendi
).
[21]
The
ius
abutendi
has
been considered to be a principal feature of the right to mine.
[22]
The fact that Middleground was granted the right to cancel the
agreement when the peat was depleted is, in my view, the clearest
indication that the parties regarded the extraction of peat as the
substratum of the agreement. I am persuaded that a
businesslike consideration of all the provisions of the agreement and
the surrounding circumstances reveals that the dominant right
conferred in the parties’ agreement is not a lease,
but
the
ius
abutendi
.
[23]
Thus, on a proper construction of the parties’ agreement, the
inescapable inference is that the minimum monthly payment was
not
rental but constituted a prepayment in respect of peat,
which
would be taken into account and reflected in the reconciliation
statements on a monthly basis.
[27]
In the light of my aforesaid conclusion, it is not strictly necessary
to consider whether Middleground was justified in asking
this Court
to import its suggested tacit term into the agreement. I, however,
deal briefly with the argument simply in the interest
of
completeness. A tacit term
is
based
on
an inference of what both parties must or would necessarily have
agreed to, but which, for some reason or other, remained
unexpressed.
[24]
It
is trite that the onus
to
prove the material from which the inference is to be drawn rests on
the party seeking to rely on the tacit term.
[25]
Before
a
court
can
infer a
tacit
term, it
must
be
satisfied,
on
a
reasonable and businesslike consideration of the terms of the
contract and the admissible evidence of surrounding circumstances,
that an implication necessarily arises that the parties intended to
contract on the basis of the suggested term.
[26]
In
Wilkins
NO v Voges
,
[27]
this Court pointed out that, since it can be assumed that
the
parties to a commercial contract are intent on concluding a contract
which functions efficiently, a term will readily be imported
into a
contract if it is necessary to ensure its business efficacy.
[28]
The tacit term proposed by Middleground is that the minimum monthly
payments were payable only for so long as Middleground
was able
legitimately to carry out the peat extraction activities. This
proposed tacit term is fully compatible with the express
terms of the
agreement and the surrounding circumstances. It is a term that will
render the parties’ agreement
fully
functional
.
[28]
It is plain that it could
never
have been envisaged that Middleground would be expected to pay for
the peat that it did not extract. Middleground has thus
established a
basis for the importation of the tacit term it proposed. For that
reason too the appeal must fail.
[29]
The Trust asserted that even if that tacit term could be imported, it
would not apply where
Middleground's inability to legitimately carry out its peat
extraction activities ‘was brought about
by [Middleground's]
failure to comply with the then existing permit and/or authorisations
and/or legislation’ in the course
of its business activities.
In the succeeding paragraphs, I show that this assertion is devoid of
any merit.
[30]
It is common cause that the cessation of the extraction of peat was
on account of a Compliance Notice issued by the Department
not only
against Middleground but also against
the
Trust and Stander Veen
.
One of the reasons proffered by the Department for the issuance of
the Compliance Notice was that Middleground was not entitled
to
extract peat under the authorisation granted by it to Stander Veen.
It was also of the view that the problem with the extraction
of peat
was ‘peat extraction as a whole’. It is of significance
that t
he Trust had expressly
exonerated Middleground from any culpability, both in relation to
compliance with the applicable authorisations
and the method of
extracting peat. This is apparent from the representations jointly
made by Middleground, the Trust and Stander
Veen in response to the
pre-notice issued against the three entities, which are recorded in
the Compliance Notice. The three entities
had taken the same stance
when they, in a joint objection lodged against the issuance of the
Compliance Notice, collectively refuted
all the allegations of fault.
[31]
As stated before, during 2013, Middleground filed an application for
review against the Department and several other respondents.
The
Trust was cited as one of those respondents. In its founding
affidavit, Middleground made several exculpatory averments in
response to the allegations made in the Compliance Notice. Insofar as
the Trust did not file an affidavit denying the correctness
of
Middleground’s assertions, it has made common cause with its
denials. Against these exculpatory statements jointly made
by the
Trust, Stander Veen and Middleground, the submissions attributing
fault to Middleground amounts to a vacillation on the
part of the
Trust on this important issue.
[32] In any event,
regardless of any non-compliance that may have been attributable to
Middleground in relation to authorisation,
it is clear from the
following provisions of the Compliance Notice that the Department,
having received complaints about the impact
of peat harvesting on
water quality, was opposed to peat extraction per se:
‘
12.2.
You claim that an official from the DAFF “created a legitimate
expectation. . . that . . . the flotation method was
sanctioned by
the State and would hold no adverse consequences for our clients . .
. ”. The [Department] will hasten to remind
you that the
problem with the extraction is not with the flotation method as such,
but peat extraction as a whole (particularly
where this is unlawful),
whether by flotation or any other method;
.
. .
12.5.4
“Alterations to wetlands such as the removal of peat may not
only cause changes in the structural, biological
and physico-chemical
properties of the system, but may also affect the functionality of
the system. . .”
.
. .
16.7.1
The excavation of the peat and the manner in which it has taken place
has exceeded the capacity of the peatland to recover
and has
therefore resulted in degradation to the degree that the peatland has
been destroyed . . . .”
16.7.3
“Research has indicated that recovery of a peatland impacted to
this degree is, for all practical purposes, impossible
. . . .”
[33]
It is the afore-mentioned attitude expressed by the Department that
forms the basis of Middleground’s plea that it was
not liable
to continue with the prepayments for peat on account of
vis
major
of a permanent nature. It is trite that where performance of an
obligation by a party to an agreement becomes impossible after
the
conclusion of the agreement, that party is discharged from liability
if it was prevented from performing its obligation by
vis
major,
[29]
but not if the impossibility was due to its own fault.
[30]
In this matter, the parties expressly stipulated that Middleground
would be discharged from its obligations if the
vis
major
was of a permanent nature.
[31]
It
was contended on behalf of the Trust that Middleground could, in any
event, not avail itself of that defence, as the prohibition
against
the extraction of peat was a consequence of Middleground’s
fault due to its non-compliance with applicable authorisations
and
prescribed methods of extracting peat.
[34]
It was contended on behalf of the
Trust that the mere issuance of the Compliance Notice did not
constitute a permanent impossibility
of performance contemplated in
the parties’ agreement as the leased property remained suitable
for the purpose it was leased.
It was further contended that the fact
that Middleground was not allowed to harvest and remove peat pending
the setting aside of
the Compliance Notice had no impact on the
suitability of the property for the purpose it was leased. In my
view, this contention
holds no water, as it fails to take into
account that the property was intended solely for the extraction of
peat.
[35]
It
is clear from various clauses of the Compliance Notice, mentioned
earlier in the judgment, that the Department seemed implacably
opposed to peat mining at the peatland situated on the Trust’s
property.
Not
only were the parties ordered to stop with the extraction of peat
forthwith, but they were also ordered to remove all the machinery
and
implements used for the extraction of peat from the premises. They
were also ordered to barricade the premises to prevent access
thereto. As the Compliance Notice was a directive that was issued in
terms of various statutory provisions, it constituted administrative
action and would therefore remain in force until set aside.
[32]
These were objective facts that showed that the performance of
Middleground’s obligations was impossible.
[36]
It was further contended that an expeditious recourse to the courts
to set aside the Compliance Notice would probably have
resulted in
the resumption of the extraction of peat. I am unable to attribute
any tardiness to Middleground in the processes it
followed. Clearly,
the matter was
entirely out of Middleground's hands until at least July 2013, when
the Minister declined the internal appeal.
Middleground
could not have approached the Court again without the final outcome
of the appeal. Sight must not be lost of the fact
that the Trust was,
all along, one of the parties against whom the Compliance Notice was
issued. It was part and parcel of the
appeal that was lodged. If
there was any way of expediting the outcome, then that avenue was
equally available to the Trust.
Subsequent
to July 2013, the only option open to Middleground was to seek to
review and set aside the Compliance Notice and the
Minister's appeal
decision.
[37]
The Trust considered the application for review to be a ruse as
Middleground had indicated that it no longer intended harvesting
peat
on the property. In his evidence, Fourie indicated that Middleground
was still pursuing the application in respect of the
findings
imputing fault to it and the order prescribing remedial steps that it
must take. In Middleground’s founding affidavit
in support of
the application for review, Fourie as the deponent, explained that
Middleground’s decision not to continue
extracting peat was ‘a
practical and commercial decision’, bearing in mind that
Middleground had ‘immobilised
its operations fully’ and
that the contract would terminate by effluxion of time in September
2014. All things considered,
the explanation proffered by
Middleground is reasonable.
[
38]
The Trust contended that Middleground had been tardy in launching the
application for review, as it was only launched 9 months
after the
dismissal of the internal appeal. In the founding affidavit
supporting the application for review, Fourie pointed out
that the
delay in launching that application was partially caused by the fact
that Middleground received the outcome of the appeal
belatedly. It
thereafter had to have various consultations with counsel in order to
chart the way forward. When Middleground launched
the application for
review, it simultaneously asked for an order condoning the late
filing of its application. Notably, the Trust
did not oppose that
application. Its criticism pertaining to tardiness is therefore
misplaced.
In any
event, I am inclined to agree with the High Court’s finding
that the stance taken by the Department with regards to
peat
extraction as a whole made it highly unlikely that litigation in the
courts would have been finalised before the contract
expired at the
end of September 2014.
[39]
Considering
all the
circumstances set out in the foregoing paragraphs, I am persuaded
that
Middleground has discharged the
onus of showing that the supervening impossibility was of a permanent
nature and that it was in
no way attributable to its fault. The High
Court cannot be faulted for any of its findings. It follows that the
appeal must fail.
[40] The appeal is
dismissed with costs.
________________________
MOLEMELA JA
JUDGE OF APPEAL
Appearances
For
appellant: L W De Koning SC
Instructed
by: Robert Schoeman Attorney
c/o
Van Schalkwyk Attorneys, Pretoria
Honey
Attorneys, Bloemfontein
For
respondents: B H Swart SC
Instructed
by: Japie van Zyl Attorneys
c/o
Couzyn, Hertzog & Horak, Pretoria
Symington
De Kok Attorneys, Bloemfontein
[1]
Peat
is plant material mostly found in wetlands. It is generally
considered to be a fossil fuel. Due to its water retention and
filtration capabilities, it is also used as a soil mixture or
compost.
[2]
The
agreement concluded between the parties was recorded in Afrikaans.
The relevant terms thereof were couched as follows:
‘
1.
DIE PARTYE EN DIE EIENDOM
1.3
Die eiendom waaroor die regte verleen word is die uitgewysde
vleiland en gedeeltes waarop veen voorkom op die plaas ... soos
per
kaart hierby aangeheg ... Die veen gedeelte word aangedui in rooi op
die kaart plus die uitgewysde gedeelte van ongeveer
5 hektaar waarop
die gepaardgaande besigheidsaktiwiteite op uitgeoefen kan word, en
die uitgewysde paaie.
2.
ALGEMEEN
2.2
Onderworpe aan die voorwaardes van hierdie ooreenkoms en vir die
duur van die kontraktermyn verhuur die [Trust] hiermee aan
[Middleground] die eiendom om die alleen reg te verkry om alleenlik
vir veen te prospekteer, om veen te ontgin, om vir veen te
myn en om
veen op die eiendom te oes.
3.
KONTRAKTERMYN
3.4
[Middleground] mag die ooreenkoms slegs kanselleer as:
3.4.1
[Middleground] deur nuwe wetgewing verbied word om die Veen te oes;
of
3.4.2
die veenland uitgeoes is en veen nie meer daarop geoes kan word nie.
3.5
Ingeval van ‘n dispuut of die veen land uitgeoes is, sal die
dispuut vir arbitrasie verwys word. Die arbiter sal deur
die
Departement van Landbou aangewys word. [Middleground] sal steeds
voortgaan met die maandelikse huurbetalings totdat die arbiter
sy
besluit maak, of totdat die dispuut geskik is. Indien bevind word
dat die veenland uitgeoes is, sal [Middleground] geregtig
wees op
terugbetaling van die huurgeld, betaal vir die maande terwyl die
veenland uitgeoes is.
3.6
Enige vorm van
vis major
sal
‘n geldige rede vir [Middleground] daar stel om nie sy
werksaamhede in terme van hierdie ooreenkoms uit te oefen nie,
indien dit permanente onmoontlikheid tot gevolg het.
4.
VERGOEDING
4.1
Vir die huur van die eindom sal [Middleground] die [Trust] die
minimum huur bedrag van R15 000-00 (Vyftien duisend rand),
plus
BTW per maand betaal en ‘n verdere bedrag van R25-00 per
kubieke meter per maand betaal vir die Veen wat verwyder
is van meer
as 600m
3
veen
per maand. Die bedrag van R15 000-00 sal jaarliks met die
persentasie van 10% eskaleer.
4.2.
Die betaling van die bedrag van R15 000-00 per maand, vir die
huur van die eiendom en vir die verlening van die regte
in terme van
die ooreenkoms is ‘n vooruitbetaling van die bedrag van die
betaling van R25-00 / m
3
(R25
per kubieke meter) (plus BTW indien van toepassing), vir die Veen
wat per maand deur [Middleground] verwyder is.
4.3
Die bedrag van R15 000-00 per maand sal verreken word teen die
bedrag wat aan die [Trust] verskuldig is, vir die veen
wat ingevolge
die bepalings van die ooreenkoms verwyder is en waarvoor
[Middleground] die [Trust] vergoed. Die verrekening sal
maandeliks
gedoen word en sal daar maandeliks ‘n rekonsiliasie van gedoen
word. Betaling sal geskied 30 dae na maand-einde.
4.4
Die bedrag vir betalings van die Veen van R25-00 per m
3
Veen
verwyder sal jaarliks met 10% eskaleer.
.
. . . ’
[3]
J
H Wigmore,
Evidence
3 ed (1940) at 2425;
National
Board (Pretoria) (Pty) Ltd v Estate Swanepoel
1975 (3) SA 16
(A) 26A-C. Also
see
Venter v Birchhotlz
1972 (1) SA 276
(A) at 282.
[4]
KwaZulu-Natal
Joint Liaison Committee v MEC for Education, KwaZulu-Natal and
Others
[2013] ZACC 10
;
2013 (4) SA 262
(CC) para 128.
[5]
Natal
Joint Municipality Pension Fund v Endumeni Municipality
[2012] ZASCA 13; 2012 (4) SA 593.
[6]
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
[2015] ZASCA 111
;
2016 (1) SA 518
(SCA) para 27.
[7]
Ibid
para
27.
[8]
Natal
Joint Municipality Pension Fund v Endumeni Municipality
,
note 5 above, para 24.
[9]
Urban
Hip Hotels (Pty) Ltd v K Carrim Commercial Properties (Pty) Ltd
[2016] ZASCA 173
para 21.
[10]
Ibid.
[11]
F
du Bois
Wille’s
Principles
of South African Law
9
ed
(2007) at 740;
Ferndale
Crossroads Share Block (Pty) Ltd and Others v City of Johannesburg
Metropolitan Municipality and Others
[2010] ZASCA 126
;
2011 (1) SA 24
(SCA) para 14.
[12]
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
[2009]
ZASCA 154
;
2010 (2) SA 498
(SCA) para 13.
[13]
Ibid.
[14]
Endumeni
Municipality
,
n
ote
5 above para 18.
[15]
Clause 1.3 of the agreement.
[16]
Clause 2.2 of the agreement.
[17]
In
clause 4.2, even though the minimum monthly amount is identified as
being ‘
vir
die huur van die eiendom’,
it
is specifically stipulated that it ‘is 'n vooruitbetaling van
die bedrag van die betaling van R25-00 / m3 (R25 per kubieke
meter)
(plus BTW indien van toepassing), vir die Veen wat per maand deur
[Middleground] verwyder is.’
[18]
Clause 4.2 of the agreement.
[19]
Clause
1.3 of the agreement.
Also
see note 6 above.
[20]
F
du Bois
Wille’s
Principles of South African Law
9 ed (2007) at 907.
[21]
See
Neebe
v Registrar of Mining Rights
1902
TS 65
; Ex Parte
Lanham’s
Executors
1908
TS 330.
[22]
See
Drymiotis
v Du Toit
1969
(1) SA 631
(T);
[1969] 2 All SA 158
(T) at 633A-B.
Anglo
Operations Ltd v Sandhurst Estates (Pty) Ltd
2007 (2) SA 363
(SCA) at 363H-I.
[23]
Compare
Bozzone
and Others v Secretary for Inland Revenue
1975
(4) SA 579
(A) at 586.
[24]
City
Of Cape Town (CMC Administration) v Bourbon-Leftley and Another NNO
2006
(3) SA 488 (SCA).
[25]
Wilkins
NO v Voges
[1994] ZASCA 53
;
1994
(3) SA 130
(A) at 136H – 137B.
[26]
Alfred
Mcalpine
and
Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506
(A);
[1974] 3 All SA 497
(A)
at
532-533.
[27]
Wilkins
NO v Voges
[1994] ZASCA 53
;
1994
(3) SA 130
(A);
[1994] 2 All SA 349
(A) at 136H – 137B.
[28]
Ibid.
[29]
W E Cooper
Landlord
and Tenant
2 ed (1994) at 201 defines
vis
major
as a superior power or force which cannot be resisted or controlled.
[30]
F
du Bois
Wille’s
Principles
of South African Law
9 ed (2007) at 849.
[31]
Clause 3.6 of the agreement.
[32]
See
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004
(6) SA 222
(SCA)
;
[2004] 3 All SA 1
(SCA)
at
242A-C.