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[2019] ZASCA 32
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Visagie & Associates CC and Another v Small Enterprise Finance Agency Ltd (262/2018) [2019] ZASCA 32 (28 March 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Non-Reportable
Case
no: 262/2018
In
the matter between:
M
VISAGIE & ASSOCIATES
CC FIRST
APPELLANT
MULLARD
HAMLET
VISAGIE SECOND
APPELLANT
And
SMALL
ENTERPRISE FINANCE AGENCY
LTD RESPONDENT
Neutral
citation:
Visagie & Associates CC & another v Small
Enterprise Finance Agency Ltd
(262/2018)
[2019] ZASCA 32
(28
March 2019)
Bench:
Majiedt, Swain, Zondi and Mocumie JJA and Rogers AJA
Heard:
04 March 2019
Delivered:
28 March 2019
Summary:
Law of Contract – whether terms of lease tacitly relocated
into settlement agreement.
ORDER
On
appeal from
: Western Cape Division, Cape Town (Ndita and Boqwana
JJ sitting as court of appeal):
1
The appeal is upheld with costs.
2
The order of the high court is set aside and substituted with the
following:
‘
The
appeal is upheld with costs. The order of the Magistrate’s
Court, Kuilsrivier, is set aside and substituted with the following:
“
The
application is dismissed with costs”’.
JUDGMENT
Mocumie
JA (Majiedt, Swain and Zondi JJA and Rogers AJA concurring):
[1]
This appeal concerns the alleged breach of the terms of a settlement
agreement. Related thereto, is the question whether the
terms of an
earlier lease agreement had been tacitly relocated into the
settlement agreement. The appeal, which is before us with
the special
leave of this court, is directed against the judgment and order of
the Full Bench of the Western Cape High Court, Cape
Town (Ndita and
Boqwana JJ) (the high court). The high court dismissed an appeal
against an order of the Magistrate’s Court,
Kuilsrivier,
upholding a claim by the respondent, Small Enterprise Finance Agency
Ltd. The respondent sought judgment in terms
of Magistrate’s
Court Rule 27(9) in respect of the alleged non-fulfilment of the
terms of a settlement agreement against
the appellants, M Visagie &
Associates CC and Mr Mullard Hamlet Visagie.
[2]
The first appellant, the first defendant in the magistrate’s
court, had leased premises from Business Partners Ltd, which
sold the
premises to Khula Enterprise Finance Ltd, which later changed its
name to Small Enterprise Finance Agency Ltd, the present
respondent.
The second appellant – the sole member of the first appellant –
had bound himself as surety and co-principal
debtor for the due and
proper fulfilment of the obligations of the first appellant. The
lease agreement was concluded on 16 July
2001 and endured from 1 July
2001 until 30 June 2004 when it expired by the effluxion of time. In
terms thereof, monthly rental
of R503.36 for the first year, R553.70
for the second year and R609.07 for the third year was payable. The
rentals were payable
monthly in advance by the first working day of
each calendar month.
[3]
It is common cause that after the expiry of the initial lease period,
the first appellant remained in occupation and the lease
agreement
continued on a month to month basis. The first appellant fell into
arrears with the payment of the rental which led the
respondent to
cancel the agreement in an email dated 30 September 2013 which reads:
‘
[Y]our
client did in fact have a lease agreement with the landlord, which
had expired and he was unwilling to renew…
We
therefore reject his offer and have no alternative but to give your
client 30 days’ notice to vacate on 31 October 2013.’
[4]
On 28 January 2014 the respondent instituted legal action against the
appellants in which it claimed, amongst others, confirmation
of the
cancellation of the lease agreement and payment of the amount of
arrear rental. In their plea, the appellants admitted that
they were
bound by the terms of the lease agreement. However, they denied that
they had breached any of its terms. The appellants
filed a
counterclaim in which they sought payment of the sum of R80 000 for
unjust enrichment arising from improvements which they
alleged they
had effected to the leased premises.
[5]
On the date of trial, 18 July 2016, the parties settled the matter on
certain terms which they embodied in a settlement agreement.
The
settlement agreement was made an order of court. Its salient terms
were as follows. The respondent withdrew its claim and in
turn the
appellants withdrew their counterclaim based on unjust enrichment.
The appellants agreed to pay the respondent’s
legal costs as
from December 2013 up to 18 July 2016 and to vacate the premises by
30 September 2016. The scale on which the costs
were to be paid, was
not specified.
[6]
Clause 10 of the settlement agreement provides:
‘
As
the rental claim
until May 2016
is hereby settled (the claim
currently before the court), the [appellants] will pay all rental due
and payable as from June 2016,
until they vacate the leased premises’
Clause
12 states:
‘
Should
the [appellants] fail to make payment herein or fail to make payment
timeously
and in accordance with the terms set out in clauses
1 to [11] … then and in such event:
12.1
The full balance of the debt will immediately become due and
payable;
12.2
The [appellants] agree that the [respondent] shall immediately
become entitled to obtain judgment against the [appellants] for the
full balance of the debt, which will be calculated as follows’
(Emphasis added.)
Clause
17 provides as follows:
‘
Notwithstanding
anything contained herein, the [appellants] hereby agree and
acknowledge that this Settlement Agreement shall not
constitute a
novation of the [respondent’s] claim against the [appellants]
and is merely the confirmation of an existing
debt.’
[7]
The respondent, asserting that
the appellants were in breach of the settlement agreement, invoked
the provisions of clause 12 and
applied for judgment to be entered
against the appellants in terms of rule 27(9).
[1]
It was common cause that, subsequent to the conclusion of the
settlement agreement, rentals were paid as
follows:
(a) the July rental was paid on 4 July
2016;
(b) the August rental was paid on 11
August 2016; and
(c) the September rental was paid on 2
September 2016. These payments were accepted by respondent without
demur.
[8]
The appellants opposed the application. They contended that all
rental payments were made, the last one on 2 September, prior
to the
date on which they were to vacate the leased premises. The appellants
further contended that payments were tendered every
month. They were
not in arrears. They contended also that since the settlement
agreement did not specify by when monthly payments
had to be made,
nor the scale of the costs, the payments they made were timeous. The
appellants refused to pay costs on the attorney
and client scale.
Costs thus had to be paid on the party and party scale and not the
attorney and client scale as the respondent
demanded.
[9]
The magistrate’s court found that the failure of the appellants
to pay the rental amounts monthly in advance on or before
the first
working day of each calendar month constituted a breach of the
settlement agreement. This conclusion was based on its
finding that
the terms of the lease agreement, more particularly in respect of the
date when rentals had to be paid, had been tacitly
relocated into the
settlement agreement.
[10]
It held further that, as a consequence of the breach, the provisions
of clause 12 applied and granted judgment against the
respondents
with costs on an attorney and client scale. The appellants appealed
against the judgment of the magistrates’
court to the high
court. The high court dismissed the appeal. In dismissing the appeal,
the high court found that:
‘
The
only inference that can be drawn from the settlement agreement and
the surrounding facts is that at the time the settlement
agreement
was concluded, the parties were of the same mind that the appellants
occupied the leased premises on the terms contained
in the written
lease agreement. It is not unreasonable to conclude that the
settlement agreement was agreed upon on that basis.
The appellants
and the respondent’s imputed intention was that the terms of
the written lease agreement would apply to regulate
the former’s
obligation to pay rent for the period they would continue to lease
the leased premises from the respondent under
the terms of the
settlement agreement.’
In
conclusion it held ‘the parties intended to relocate the terms
of the lease agreement. It follows that the appellants were
in
arrears as payment was not tendered timeously and in accordance with
the terms of the lease agreement.’ It awarded costs
on an
attorney and client scale on the basis of the provisions of clause
12.2.3 and 13 of the settlement agreement.
[11]
In this court, it was common cause that the settlement agreement was
a product of a negotiated settlement between the parties.
It is clear
from the language and text of the agreement that it was meant to be
final and inclusive of all the issues that related
to the
lis
.
It was further common cause that:
(a) the settlement agreement contains
no express terms as to when payments had to be made;
(b) all the rentals were paid but the
payments were made after the first day of the month; and
(c) that at the time of the settlement
of the matter, the appellants had paid up all the arrears that were
not compromised by the
agreement.
The
issue and legal principles
[12]
The central issue is whether
the terms of the lease agreement had been tacitly relocated into the
settlement agreement. If so, the
rentals had to be paid monthly in
advance by the first working day of each month. Failure to do so
would trigger the provisions
of clause 12, outlined above. It is well
established that a tacit term is ‘an unexpressed provision of
the contract which
derives from the intention of the parties, as
inferred by the court from the express terms of the contract and the
surrounding
circumstances.
[2]
A court will be slow to import a tacit term into a written
contract.
[3]
[13]
In
Wilkins
this court said:
‘
A
tacit term, one so self-evident as to go without saying, can be
actual or imputed. It is actual if both parties thought about
a
matter which is pertinent but did not bother to declare their assent.
It is imputed if they would have assented about such a
matter if only
they had thought about it - which they did not do because they
overlooked a present fact or failed to anticipate
a future one. Being
unspoken a tacit term is invariably a matter of inference. It is an
inference as to what both parties must
or would have had in mind. The
inference must be a necessary one: after all, if several conceivable
terms are all equally plausible,
none of them can be said to be
axiomatic. The inference can be drawn from the express terms and from
admissible evidence of surrounding
circumstances.
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. The
practical
test for determining what the parties would necessarily have agreed
on the issue in dispute is the celebrated bystander
test.
Since
one may assume 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; conversely, it is unlikely
that the parties would
have been unanimous on both the need for and the content of a term,
not expressed, when such a term is not
necessary to render the
contract fully functional. The above propositions, all in point, are
established by or follow from numerous
decisions of our courts.
[4]
(Emphasis added; authorities omitted.)
[14]
As the appeal revolves around
the interpretation of a court order - the settlement agreement and
its relevant clauses – we
must apply the approach to
interpretation of contracts and legislation, outlined in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[5]
,
and
Novartis v
Maphil.
[6]
[15]
As stated, in respect of the
central issue, regard must be had to the express terms of the
settlement agreement, the surrounding
circumstances at the time of
the conclusion of the settlement agreement and the conduct of the
parties post the conclusion of the
settlement agreement. The starting
point is the express terms of the settlement agreement: one must
determine whether, in view
of its express terms, there is any room
for importing the alleged tacit term.
[7]
The express terms of the settlement agreement are neutral with regard
to the relocation of the original lease agreement. And it
also
contains no express term from which any inference can be
drawn.
[16]
The relevant surrounding circumstances are the following. At the time
of the conclusion of the settlement agreement there was
a history of
repeated non-payment of rental by the appellants. The respondent
refused to renew the lease agreement after the appellants
had
continued to occupy the leased premises without paying rental as
proposed by the respondent after it acquired ownership from
the
previous owner. In fact, despite this failure by the appellants to
pay rental timeously, the respondent accepted late payments
without
raising the issue that it was entitled to cancel the lease agreement
as provided for in the original lease agreement. Negotiations
between
the parties failed as the email dated 30 September 2013, referred to
in para 3 above, shows. There was resultant acrimony
between the
parties. By the time the settlement agreement was concluded and made
an order of court on 18 July 2016, the June and
July rentals had been
paid, but in neither case by the first day of the month in question
(the June rent was paid on 8 June, the
July rent on 4 July).
Considering the acrimony between the parties whether or not rental
was paid on the first day of each month
was not important to the
respondent. All the respondent wanted was to see the first appellant
vacate the leased premises. A factor
of some importance is that the
respondent received payments after the first working day of the
month, particularly in respect of
August 2016, without protest (the
August rent was paid on 11 August). The respondent took no action for
about a month in respect
of the ‘late’ August payment. A
delay in asserting rights which allegedly emanate from a tacit term
has a direct bearing
on the probabilities. (see
Wilkins v Voges
above, at 143B-D). The parties’ email exchanges show that
the dispute arose not because of alleged late payments, but due to
their different views on the scale on which the costs would be
payable by the appellants.
[17]
Viewed in its proper contextual setting and bearing in mind the
surrounding circumstances, the settlement agreement plainly
intended
to achieve two important objects as far as the respondent was
concerned:
(a) First, it enabled the forbearing
respondent to get its rentals for the period June- September 2016 and
to have the first appellant
vacate the premises by the end of
September 2016, clearly an important consideration for the
respondent; and
(b) Secondly, the unjust enrichment
claim by the appellants, which lingered in the background, would be
withdrawn.
Since
insistence that rental payments be made by the first day of each
month (something which had not historically occurred) may
have
jeopardized the achievement of these objects, one cannot find on a
balance of probability that the respondent would have held
out for
this strict term. That is why it was evidently content to receive
payments later in the month without objection. As stated,
its
subsequent discontent originated from the dispute about the scale of
the costs to be paid.
[18]
Having regard to the surrounding circumstances and the conduct of the
parties at the time of the conclusion of the settlement
agreement and
subsequently, I am not satisfied that the respondent discharged the
burden of proving a tacit term that ‘timeous’
payment
referred to in clause 12 means the first working day of the month.
This is so taking into consideration that even when
the parties
concluded the settlement agreement, the respondent did so when the
appellants had already been ‘late’ in
paying the rentals
for June and July and in a sense waived those arrears. It also
accepted late payment despite the clear language
of the forfeiture
clause under clause 12. Put differently, if the officious bystander
had asked the parties, when they concluded
their settlement, by what
date the rent would have to be paid, it is not more probable than not
that they would both have promptly
answered, ‘By the first day
of each month’. There may have been some discussion, with the
respondent being willing
to receive the rent at any time before the
appellants vacated on 30 September 2016.
[19]
Since the respondent failed to
prove a tacit term, one must consider what term the law would imply
in the absence of consensus.
In
Kerr’s
Law of Sale and Lease
,
[8]
Professor Glove adopts the view, correctly so, that absent an express
provision as to when rental should be paid i.e. in advance
or in
arrears, the common law applies, namely that rental is payable in
arrears after the lessor has fulfilled its obligation,
i.e. after the
lease had come to an end or after the end of each period in the case
of a periodical lease.
[9]
In this case the lease was a monthly one and the rental was therefore
payable on the last day of the month, alternatively at the
end of the
lease period, namely the date on which the appellants had undertaken
to vacate the leased premises, 30 September 2016.
From the
respondent’s conduct it has to be inferred that the fact that
rental was paid late for the outstanding months is
of no significance
in the scheme of things – as long as all arrears would have
been paid up by the time the appellants vacated
the leased premises
on the date agreed upon.
[20]
As stated, the respondent made an about turn after the conclusion of
the settlement agreement. When the settlement agreement
was concluded
the appellants were not required to pay the full outstanding balance
of the rental. They agreed to pay the rental
for June-September 2016
and to vacate the premises by 30 September 2016. They paid such
rental. They undertook to pay the respondent’s
costs of the
action which had been settled. The scale of the costs was not
stipulated in the settlement agreement, which meant
that the ordinary
party and party scale applied. The costs which the respondent
demanded from the appellants subsequently amounted
to R134 217.82
which were owed in respect of a trial which never ran and which was
clearly calculated on the attorney and client
scale. This demand
precipitated the present dispute. As stated, the respondent’s
delayed invocation of the clause 12 forfeiture
provisions, in respect
of the ‘late’ payments, is telling as far as the
probabilities are concerned.
[21]
In sum, the respondent failed in my view to discharge the onus of
proving that the terms of the original lease agreement as
to when
rental payments had to be made, were tacitly relocated into the
settlement agreement. The surrounding circumstances and
the parties’
subsequent conduct are at best for the respondent equivocal. The
respondent was not entitled to invoke the forfeiture
provisions in
clause 12, since there had been no breach by the appellant. For these
reasons the appeal must succeed.
[22]
In the result the following order is granted:
1.
The appeal is upheld with costs.
2.
The order of the high court is set aside and substituted with the
following:
‘
The
appeal is upheld with costs. The order of the Magistrate’s
Court, Kuilsrivier, is set aside and substituted with the following:
“
The
application is dismissed with costs”’.
________________
B
C Mocumie
Judge
of Appeal
APPEARANCES
For
Appellant: P J Tredoux
Instructed
by:
Raymond
McCreath Inc., Somerset West Webbers Attorneys, Bloemfontein
For
Respondent: J B Engelbrecht
Instructed
by:
Gideon
Pretorius Inc., Bellville Symington & de Kok, Bloemfontein
[1]
Rule 27(9) of the Magistrates Court Act stipulates:
‘
(a)
When the terms of a settlement agreement which was recorded in terms
of sub-rule (6) provide for the future fulfilment by
any party of
stated conditions and such conditions have not been complied with by
the party concerned, the other party may at
any time on notice to
all interested parties apply for the entry of judgment in terms of
the settlement.
(b)
An application referred to in this sub-rule shall be on notice to
the party alleged to be in default, setting forth particulars
of the
breach by the respondent of the terms of settlement.’
[2]
Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
1974 (3) SA 506
(A) at 531H.
[3]
Wilkins v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 136–137.
[4]
Wilkins v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 136 H– 37D. The
judgment has been cited with approval by this court in subsequent
cases. See Jacobs NO v Braaff
[2006] ZASCA 115
;
[2007] 4 All SA 966
(SCA) para 20.
[5]
Natal Joint Municipal Pension Fund v Endumeni Municipality [2012]
ZASCA 13; [2012] 2 All SA 262; 2012 (4) SA 593 (SCA).
[6]
Novartis v Maphil
[2015] ZASCA 111
;
2016 (1) SA 518
;
[2015] 4 All SA
417
(SCA).
[7]
Pan American World Airways Inc v S A Fire and Accident Insurance Co
Ltd
1965 (3) SA 150
(A) at 175C.
[8]
G Glove Kerr’s Law of Sale and Lease (4 ed) (2014) at 427-428
and cases cited therein.
[9]
Ibid.