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[1995] ZASCA 110
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Pangbourne Properties Ltd. v Gill & Ramsden (Pty) Ltd. (142/94) [1995] ZASCA 110; 1996 (1) SA 1182 (SCA); (21 September 1995)
CASE NO. 142/94
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between:
PANGBOURNE PROPERTIES LIMITED APPELLANT
and
GILL & RAMSDEN (PTY) LIMITED RESPONDENT
CORAM
: JOUBERT, F H GROSSKOPF, VAN DEN
HEEVER, HARMS et OLIVIER, JJA
HEARD
: 4 SEPTEMBER
1995
DELIVERED
: 21 SEPTEMBER 1995
JUDGMENT
HARMS JA/
2
HARMS JA:
The appellant applied to the Witwatersrand Local Division for an order
declaring that a valid and enforceable guarantee was contained
in an agreement
entitled "Cession" of 22 May 1989 and that, in its terms, the respondent had
guaranteed the obligations of M J H
Storm's Services (Pty) Ltd ("Storm") to the
applicant for the remaining period of a lease concluded on 13 October 1987. The
application
was dismissed with costs (by
Myburgh J) but leave to
appeal to this Court was subsequently granted by the court a quo.
In order to understand the terms of the cession, it is necessary to set
out some of the background to it. The lease referred to above,
was a lease
between Valjon Trust as lessor and Gill and Ramsden (Pty) Ltd, the respondent,
as lessee. Valjon Trust, shortly thereafter,
sold and transferred the leased
premises and the appellant, as a matter of law, became the lessor. The term of
the lease is to expire
only on 30 May 1997. The initial monthly rental was R20
000 and was to escalate annually at the compound
3
rate
of 10% per annum. It also provided that:
"The LESSEE shall -
10.1 not cede any of its rights nor delegate any of its obligations
nor
mortgage, pledge or encumber any of its rights under this Lease
without
the LESSOR'S prior written consent, which consent shall not
be
unreasonably withheld;
10.2 not sub-let nor permit anyone else to occupy nor part
with
possession of the leased premises or part thereof without
the
LESSOR'S prior written consent, which consent shall not
be
unreasonably
withheld."
During April 1989, the appellant
was approached by the respondent to release it from the lease and to accept
Storm as lessee in its
stead. In response, the appellant sent to the respondent
a draft agreement. It provided for a substitution of Storm but, in addition,
contained a provision requiring the respondent to guarantee the obligations of
Storm. The respondent, in reply, requested that the
guarantee be removed from
the draft agreement and in support of its request provided a favourable bank
report on the ability of Storm
to pay R23 000 per month for 8 years. This
proposal was rejected and the respondent was informed that the
appellant
4
required it "to stand behind" Storm. As an alternative the
appellant expressed its willingness to consent to a sublease. The reaction
by
the appellant was due to the fact that the respondent was a member of a group of
companies quoted on the Johannesburg Stock Exchange
whilst Storm was, as far as
the appellant was concerned, an unknown entity. A sublease did not eventuate,
but a delegation did. I
quote it in full and, for the sake of convenience,
paragraph numbers have been added.
"CESSION
[1] We, Gill and Ramsden Proprietary Limited here and after referred to as
the Cedent, herein represented by
NORMAN GEOFFREY LONG
being duly authorised by a resolution of the Board of Directors
dated
1989 do hereby cede, assign, transfer and make over
to M J H Storms Services Proprietary Limited, here and after referred to as
the Cessionary as from
June 5, 1989,
all our right, title, interest,
claim and demand in and under the agreement of lease entered into between the
Valjon Trust and Gill
and Ramsden Proprietary Limited over the premises
demarcated on the plan attached to the lease dated 13 October 1987 relating to
Erf 270 Tulisa Park Township, Johannesburg. [2] It is recorded that the property
has been sold to Erf 270 Tulisa Park Share Block
Proprietary Limited subsequent
to the lease being signed and that Pangbourne Properties Limited is the owner of
the share block which
has exclusive use of said Premises and is now the lessor
in terms of the lease.
5
[3] The cedent warrants that it is not in breach of any of its
obligations in terms of the Lease and that it will not be in breach
or in
default of such obligations on the effective date.
[4] This cession is granted subject to Gill and Ramsden Proprietary
Limited guaranteeing the obligations of M J H Storms Services
Proprietary
Limited to the lessor for the remaining period of the lease.
[5] The Cession is subject to the Cedent concluding a written
sublease
with the Cessionary in regard to an area of the leased
building situated
on the premises forming the subject matter of the
Lease on such terms
and conditions as may be acceptable to the
Cessionary in its sole
discretion, within a period of thirty days of
the date of signature of this
Agreement. [6] A copy of the lease
first mentioned together with
annexures is attached and marked
Annexure A.
DATED at JOHANNESBURG this 9TH day of
MAY
1989.
AS
WITNESS for: Gill and Ramsden Pty Limited
(Signed) (Signed)
DIRECTOR
[7] We, M J H Storms Services Proprietary Limited herein represented by
MICHAEL JOHN HARRISON STORM
being duly authorised by a resolution of the
Board of Directors dated
8th May
1989 do hereby accept cession and
transfer as from
June 5.
1989 of the aforementioned Agreement of lease
dated 13 October 1987 from Gill and Ramsden Proprietary Limited subject to all
the
terms and conditions thereof which we undertake faithfully to perform and
carry out.
[8] The costs of preparation of this agreement including stamp duty shall
be payable by the parties in equal shares.
6
DATED at
DURBAN
this 16 day of
MAY
1989.
AS WITNESS for: M J H Storms Pty Ltd
(Signed)
(Signed
)
DIRECTOR
[9] And we, Pangbourne Properties Limited herein represented by John Ray
Whiting being duly authorised by a resolution of the Board
of
Directors dated do hereby consent to this
Cession upon the terms and conditions set out above, and undertake to advise
Gill and Ramsden Pty Limited of any default on the part
of the cessionary within
14 days of such default.
DATED at SANDTON this 22 day of May 1989.
AS WITNESS for: Pangbourne Properties Ltd.
(Signed)
(Signed
)
DIRECTOR"
It is common cause that a written sublease was concluded as envisaged by
clause 5 and, according to the deponent on behalf of the
respondent, all the
parties proceeded, from June 1989, on the basis that the property had been
leased by Storm. As far as clause
4 is concerned, no
separate
guarantee was provided. The case of the appellant is that the clause was in its
own right a guarantee by the respondent of
Storm's obligations in terms of the
lease. According to the respondent it contained
7
a
suspensive condition (or a condition precedent) which had not
been
fulfilled. The latter contention was upheld by the court below.
The issue
is germane because Storm, having changed its name
prophetically to Cul
de Sack Carriers (Pty) Ltd, was provisionally
wound up on 27 January
1993. The provisional liquidator cancelled the lease and the company
was
subsequently finally wound up.
I have made reference to some of the background facts that
had
given rise to the conclusion of the cession and, more particularly,
clause 4
thereof. That was done in the light of this dictum of Innes
CJ in Glenn
Brokers v Commercial General Agency Co Ltd
1905 TS 737
at
740-741:
"In reading a document like this, we are justified in looking at the
circumstances under which the guarantee was given, and the position
of the
various parties concerned. That is necessary in order to enable us rightly to
understand and to place ourselves in the position
of the parties at the time.
But, having done that, I do not think we should gather from the circumstances
what the parties meant,
or what it is fair and equitable to think they meant,
and then see whether we can ingeniously so read the document as to deduce that
meaning from its language. The right method is first to have regard to the words
of the document, and if they are definite and clear
we must give effect to them.
In every case where a document has to be construed so as to arrive at the
intention of the
8
parties, if a meaning is apparent upon the face of the document, that is the
meaning which should be given to it. The tendency of
the older authorities,
Roman-Dutch and English, was to place a strict and adverse construction upon a
document of suretyship. On
the other hand, later cases — in England at any
rate — rather tend in the opposite direction. I think the proper rule
is
that without bias — without prejudice one way or the other — we
should ascertain from the words of the document the
intention of the parties,
and if the words have a clear and definite meaning we should give effect to
it."
ft appears to me that the time may be ripe for this
Court to reconsider the limitations placed in this statement' on the use of
"surrounding
circumstances" in interpreting documents. The present instance does
not, however, require it and I shall regard myself bound by the
restraints set
out. The parties are agreed upon two matters arising from the agreement. First,
and in spite of its title, it is not
a cession but rather a contract of
substitution incorporating a cession of rights and delegation of obligations.
The second is that
the guarantee of clause 4 was, in its context, intended to be
a suretyship and not a primary obligation (cf List v
'According to Caney The Law of Suretyship (4th ed) p 74 n12, what was
said by Innes C J accords with what has since been said in Delmas
Milling Co Ltd
v Du Plessis
1955 (3) SA 447
(A) at 454 (per Schreiner JA).
9
Jungers
1979 (3) SA 106
(A); Norex Industrial Properties (Pty)Ltd v
Monarch South Africa Insurance Co Ltd
1987 (1) SA 827
(A)). For the sake of
consistency, I shall continue to refer to the agreement by its title namely
"cession".
In reaching the conclusion that clause 4 of the cession contained a
suspensive condition, Myburgh J reasoned in essence along these
lines: The words
"subject to" denote a condition precedent and thus, read in isolation, clause 4
incorporates one. Seen from a contextual
point of view, clause 5 contains a
suspensive condition and clause 4 is similarly worded; also, the obligations of
clause 1 and 3
are in the present tense whilst that of clause 4 relates to the
future.
The phrase "subject to" has no a priori meaning. Reference to any
dictionary establishes that
.2
In statutory contexts it is often used
to establish what is dominant and what is subordinate (cf Rennie NO v
2
Cf Alpenstow Ltd and Another v Regalian Properties
plc
[1985] 2 All ER 545
(Ch D) at 551d-552b in connection with "subject to
contract".
10
Gordon and Another NNO
1988 (1) SA 1
(A)
at 21D-22D). In contractual
settings, especially insurance
contracts, it is usually used to create a suspensive condition, but also (always
depending on the context)
a resolutive condition (SA Eagle
Versekeringsmaatskappy Bpk v Steyn
[1991] ZASCA 109
;
1991 (4) SA 841
(A) at 848 B-D). Frumer v
Maitland
1954 (3) SA 840
(A) is
an example of an instance where, in
a contract, it simply introduced a
condition of the contract, i e a
material term (in contradistinction to a suspensive or resolutive
condition)/
The cession states explicitly what its effective date was to be: in
clause 1 it is said that the making over of the lease would take
place as from
June 5, 1989; and that is repeated in clause 7. Clause 5, on the other hand,
made the cession "subject to" the respondent
concluding a written sublease with
Storm within 30 days of the date of signature (22 May 1989). In other words, the
cession was to
come into operation
before
the final date for the
conclusion of the sublease. This, in my judgment,
3
To my mind Colman J erred in his interpretation of
this case in Vizirgianakis v Karp
1965 (2) SA 145
(W) at 146 G-H.
11
shows conclusively that clause 5 did not contain a
suspensive but rather a resolutive condition. One cannot, therefore, argue that
the use of the phrase "subject to" in clause 5 leads to the conclusion that the
same phrase created a suspensive condition in clause
4. On the contrary, clause
5 provides a clear indicium that the parties did not necessarily use the phrase
in clause 4 in its conventional
contractual meaning of creating a suspensive
condition.
I am of the view that the phrase was used in clause 4 to denote that the
cession was to be subservient to the guarantee, in other
words, and to use an
Afrikaans equivalent, the cession was "onderworpe aan" the guarantee. It does
not mean that the guarantee had
to follow upon, and suspend, the cession. This
view is consistent with the grammatical usage of the present participle
"guaranteeing".
A present participle expresses an action now going on (cf
Concise Oxford Dictionary s v "present'"). It has, generally, an active
meaning.
(For a full discussion of the subject see T Mc Arthur (ed) The Oxford Companion
to the English Language (1992) s v
12
"participle".)
Swan, Practical English Usage, p 454, gives as an example
of the use
of a present participle the sentence "(c)an you see the girl
dancing
with your brother?" He then formulates the rule that an
adjectival
present participle clause can only be used to describe
actions that happen
around the same time as the main verb. It will
be recalled that the main
verb ("is granted") in clause 4 was in the
present tense. It follows from
this, and having regard to the
linguistic approach (much favoured by Mr
Levin on behalf of the
respondent), that clause 4, on its own, was an
unconditional
guarantee.
This conclusion is confirmed by reference to another comparison between
clauses 4 and 5. The latter set a time limit of 30 days for
the conclusion of
the sublease. Clause 4, which was of the essence to the appellant and
respondent, contained no time limit. To suggest
that it was the intention of the
parties to have allowed a reasonable time for the provision of a guarantee does
not, in the context
of this agreement make commercial sense. It also does not
make commercial sense for an offeror
13
(the respondent in this case) to make his offer subject to his own
volition (the provision of a guarantee). In the light of the fact
that the
agreement was a tripartite agreement, there was no conceivable reason why an
honest businessman would have made the rights
and obligations of the third party
subject to his own whim. The respondent had an urgent desire to have it
substituted as lessee.
That could only be done with the appellant's consent. The
appellant had insisted upon a guarantee. The effective date had been agreed
upon. There was no reason to postpone it or to make it uncertain. It was also
argued on behalf of the respondent that it is inconceivable
that the terms of a
valuable guarantee would be left as vague and uncertain as the guarantee of
clause 4. It is true that the appellant
may have required a stricter deed of
suretyship containing, e g, a waiver of the exceptiones, a liability in solidum
and so forth.
On the other hand, the appellant had received the offer as
formulated in clause 4. The appellant may have placed a measure of trust
in the
bona fides of the respondent. In any event, deeds of suretyship in this simple
form have stood the test of
14
time (cf Norex case supra).
I am thus satisfied that the
appellant was entitled to the declaratory order sought.
In the
result the appeal is upheld with costs, including the costs of two counsel. The
order of the court a quo is set aside and for
it is substituted an
order:
(a) declaring that a valid and enforceable guarantee exists in the "Cession"
of 22 May 1989 (Annexure "A6" to the founding affidavit)
in terms whereof the
respondent, as surety, guaranteed the obligations of Cul de Sack (Pty) Ltd
(formerly M J H Storm's Services
(Ply) Ltd) to the applicant for the remaining
period of the lease (Annexure "A3" to the founding affidavit);
and
(b)
for
costs, including the costs of two
counsel.
15
L T C HARMS JUDGE OF APPEAL
JOUBERT, JA )
F H GROSSKOPF, JA ) Agree
VAN DEN
HEEVER, JA )
OLIVIER, JA )