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[2019] ZASCA 178
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Shepherd Real Estate Investments (Pty) Ltd v Roux Le Roux Motors CC (1318/2018) [2019] ZASCA 178; 2020 (2) SA 419 (SCA) (2 December 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1318/2018
In
the matter between:
SHEPHERD
REAL ESTATE INVESTMENTS (PTY)
LTD APPELLANT
and
ROUX
LE ROUX MOTORS
CC RESPONDENT
Neutral
citation:
Shepherd Real Estate
Investments (Pty) Ltd v Roux Le Roux Motors CC
(1318/2018)
[2019] ZASCA 178
(2 December 2019)
Bench:
Ponnan, Leach and Nicholls JJA and
Weiner and Dolamo AJJA
Heard:
21 November 2019
Delivered:
2 December 2019
Summary:
Contract – validity of –
agreement that the rental and costs shall be mutually agreed upon in
writing between the landlord
and the tenant when the right of renewal
in a lease is exercised – void for vagueness.
ORDER
On
appeal from
:
Western
Cape Division of the High Court, Cape Town (Davis J sitting as court
of first instance):
1 The appeal is upheld with costs,
including those of two counsel.
2 The order of the court below is set
aside and replaced with the following:
‘
(a)
The application succeeds with costs, including those of two counsel.
(b) The respondent and all those
holding title under it, if any, are ordered to vacate the property
described as Erf 562, Mbekweni,
Paarl, Western Cape Province,
situated on the corner of Jan van Riebeeck Drive and Wamkelekile
Street, Mbekweni, Paarl, Western
Cape Province, held by the applicant
under title deed number T065358/10 (the property), within 14
(fourteen) calendar days of the
date of this order.
(c) In the event of the respondent
failing to comply with paragraph (b) hereof, the Sheriff or his/her
lawful deputy for the area
in which the property is situated is
directed to eject the respondent and all persons and/or entities
found to be in occupation
of the property.’
JUDGMENT
Ponnan
JA (Leach and Nicholls JJA and Weiner and Dolamo AJJA concurring):
[1]
To borrow from Kirby P in
Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd
:
[1]
‘
The
problem presented by this case is not by any means unique. Courts and
lawyers may expect the agreements of business people to
be clear and
complete. Unfortunately, in the market place, agreements often fall
short of these lawyerly desires.’
Kirby
P’s observations are particularly apposite to this matter,
which concerns the interpretation of a clause in a written
agreement
of lease (the agreement) that reads:
‘
Such
renewal for the second lease renewal period, shall be on terms and
conditions in compliance with the Landlord’s then
standard
letting policy, except that there shall be no right of further
renewal and that the rental and costs shall be mutually
agreed upon
in writing between the Landlord and the Tenant when the right of
renewal is exercised. The provisions of this clause
will only apply
if the Tenant shall at all times have faithfully and punctually
performed all its obligations under this Lease.’
(The relevant
clause)
[2]
The agreement was concluded on 7 November 2007 between Shepherd
Industrial Commercial Real Estate CC (Shepherd Industrial) and
the
respondent, Roux Le Roux Motors CC, pursuant to which, the former let
to the latter, a commercial property situated at the
corner of Jan
van Riebeek Drive and Wamkelekile Street, Paarl (the property) for
the purpose of conducting the business of a petrol
station. The
commencement date of the lease was 1 December 2007. It was to endure
for an initial term of five years, with a renewal
period of ‘5
plus 5 years’. The rental at commencement was R 18 000 per
month, escalating at 8 per cent per annum
over the initial term.
[3]
Clause 6 of the lease agreement, headed
‘Renewal Period’, provided:
‘
The
Tenant shall have the option to renew this Lease of the Premises for
a further period as set out in the Terms of Lease subject
to the
following:
6.1
The strict adherence & compliance to all terms and conditions of
this agreement by the Tenant and all moneys due being paid
by him;
6.3
The Tenant requesting such renewal in writing from the Landlord no
later than 6 (Six) months prior to the expiry of the lease
period.
The Landlord will remind the Tenant to exercise the option 8 (Eight)
months prior to the expiry of the lease period.
Such
first renewal period shall be on terms and conditions in compliance
with this agreement and the rental payable by the Tenant
to the
Landlord during the option period shall be increased on each
anniversary of the commencement date by 8% of the monthly rental,
which was payable during the year proceeding the option period.’
This
was followed by the relevant clause.
[4]
The respondent validly exercised the option in terms of clause 6
during the initial term and the agreement came to be renewed
for ‘the
first renewal period’, namely a second five-year term. The
second five-year term was due to end on 30 November
2017. Prior
thereto, on 11 October 2017, Shepherd Industrial ceded its rights and
delegated its obligations under the agreement
to the appellant,
Shepherd Real Estate Investments (Pty) Ltd.
[5]
When the respondent attempted to exercise the second option to renew
for a third five-year term, the appellant adopted the stance
that it
was amenable to the proposed renewal at an agreed rental of R150 000
per month, plus VAT. In response, the respondent
contended that a
fair rental was an 8 per cent per annum escalation on the then
prevailing rental. That, however, was not acceptable
to the
appellant. Nor was the suggestion that the dispute be referred to
arbitration in terms of clause 34, which provided:
‘
34.
Arbitration
34.1
In the event of any dispute arising between the parties as to the
true intent and meaning of this agreement or the implementation
thereof, such dispute shall be determined by an arbitrator who shall
be an advocate of at least five years standing agreed upon
by the
parties and failing agreement appointed by the President from the
time being of the Cape Bar Council.
34.2
The decision of such arbitrator shall be final and binding on the
parties and the award and awards interim or final of such
arbitrator
may be made an order of any competent Court in South Africa on the
application of any party.’
[6]
The ensuing exchange of correspondence proved fruitless and
eventually, the appellant, contending that inasmuch as there had
been
no renewal and the lease agreement had expired by effluxion of time,
applied to the Western Cape Division of the High Court,
Cape Town
inter alia for the ejectment of the respondent.
[2]
In
support of the application it was stated on behalf of the appellant:
‘
13.
First, the applicant does not have a “standard letting policy”
(I am advised that this is something that the applicant
can
unilaterally determine). Secondly, and most importantly, the rental
amount in respect of any possible further / extended 5
year period is
neither determined nor determinable. The applicant and the respondent
are required to agree on the rental amount
payable in respect of the
property before the lease can again be extended for a third 5 year
period. They have not done so (I will
elaborate on this later). I am
advised that the above quoted portion of clause 6 of the conditions
of lease is, as such, nothing
more than an agreement to agree and is
void for vagueness. It is also worth mentioning at this juncture that
clause 28 of the conditions
of lease provides that the lease
agreement “constitutes the whole agreement between the parties
and no warranties or representations
whether express or implied shall
be binding on the parties other than as recorded [in the lease
agreement]”.
14.
I am advised that the second submission made in the aforegoing
paragraph is an established principle that has been determined
and
settled by the Supreme Court of Appeal in the judgment of
Roazar
CC v The Falls Supermarket CC
[2017] JOL 39326
(SCA). There is
undoubtedly no obligation on either the applicant or the respondent
to negotiate in good faith or to reach an agreement
on a rental
amount that is objectively reasonable. The respondent is also not
entitled to ask this court or any third party to
create an agreement
of lease by determining the rental amount. In other words, if no
agreement is reached in respect of the rental
amount then no rental
agreement comes into existence.
.
. .
16.
I am further advised that the only possible way to have cured the
vagueness and invalidity of clause 6 of the conditions of
lease (as
quoted above) would have been the inclusion of an express
deadlock-breaking mechanism (e.g. a formula or the appointment
of an
expert to make a binding determination – see for instance
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005
(2) SA 202
(SCA) and
Makate
v Vodacom Ltd
2016
(4) SA 121
(CC)). There is no deadlock-breaking mechanism contained
in the lease agreement. In particular, the general arbitration clause
requiring certain disputes relating to the interpretation and
enforcement of the lease agreement is not a deadlock-breaking
mechanism
(it is a means of resolving a dispute relating to an
existing contract and not the determination of an essential term of
prospective
contract). Given the provisions of the lease agreement in
this matter a court (or arbitrator) will be tasked to create an
agreement
on behalf of the parties. I am advised that this would
undermine the principles set out by the Supreme Court of Appeal and
the
Constitutional Court in the cases cited in this paragraph 16.
Written and oral arguments shall be presented to this Honourable
Court on this point, if necessary.’
[7]
The response from Mr Dupre le Roux, the controlling mind of the
respondent, was:
‘
Subject
to the content of paragraph 4.1 to 4.14 and 11 above, it is denied
that the rental amount cannot be determined or is not
determinable.
That occurred already when the first 5 year renewal was implemented
from 1 December 2012. I also deny that the lease
is an agreement to
agree and is void for vagueness.’
The
relevant portions of paragraphs 4.1 to 4.14 and 11 read:
‘
4.2
The parties to the lease voluntarily agreed to arbitration, with no
right to appeal, in respect of disputes arising from the
true intent
and meaning of the lease or the implementation thereof;
.
. .
4.5
. . . There are, however, a number of provisions in clause 6 that
were never discussed, negotiated or agreed to during negotiations
(“the negotiations”) between myself, acting on behalf of
the CC and Mr Shepherd, representing the cedent, whose rights
and
obligation now vest in Applicant, when the lease was agreed to
verbally between myself and Mr Shepherd, acting as said, including
when our continuing common intention came into existence (“the
common intention”) prior to and existing during the
signing of
the lease on 7 November 2007;
.
. .
4.8
during the negotiations between Mr Shepherd and I, it was
specifically verbally agreed, constituting a part of the common
intention,
that the lease period and renewal period, added together,
would endure for at least 15 years, at the negotiated reasonable
rental
and the reasonable escalation of 8% in the rental per annum,
as confirmed in the terms and the conditions, having regard to clause
6, but excluding the last paragraph thereof;
4.9
the content of the last paragraph of clause 6, heavily relied upon by
Applicant and Mr Shepherd for the allegations contained
in par 12,
13, 14 and 16 of the affidavit was never discussed or referred to
during the negotiations. It was never agreed to and
did not become
part of the common intention. Moreover, Mr Shepherd, who was
responsible for the drafting of the lease, apparently
used the
cedent’s standard form of contact, but did not bring the last
paragraph of clause 6 to my attention. I did not notice
or expect
that provision as part of the lease, having regard to clauses 6, 10,
15 and 16 of the terms and clause 6, excluding the
last paragraph
thereof (“the final paragraph”). I also had no reason for
believing that it would, being contrary to
our common intention.
Clause 15 of the terms, after all, provides expressly for a renewal
period of 5 + 5 years and clause 10 of
the terms fixed the escalation
rate at 8%. The presence of the final paragraph as part of clause 6
is the result of a
bona fide
mistake or the intentional act of
Mr Shepherd, and does not reflect the common intention. That
provision is contrary to the terms
and the common intention. It was
never envisaged or agreed that we would have to renegotiate any
renewal or the terms thereof,
as is suggested by Mr Shepherd;
4.10
accordingly, the CC would be entitled to rectification of the lease
by deleting the whole of the final paragraph of clause
6 of the
lease, and also the phrase “such first renewal period” in
the penultimate paragraph of clause 6, substituting
therefor the
words “the renewal periods as set out in clause 15 of the terms
of lease” in order to give effect to the
common intention;
.
. .
4.12
alternatively, (apart from the fact that the 8% escalation in rental
and the rental were agreed in terms of the lease as reasonable),
if
rectification were to be refused, I submit that it was a tacit term
of the lease that the escalated rental, in respect of the
last 5 year
renewal would be a reasonable rental, and should be determined by Mr
Shepherd and I, both acting
arbitrio boni viri
, which could be
established and determined objectively, moreover, that we would be
obliged to establish such reasonable rental
in that manner, i.e.
reasonable rental as the yardstick. That tacit term derives from the
common intention, inferred from the express
terms of the lease
referred to and the applicable surrounding circumstances alluded to
above;
.
. .
11.
Only the express provisions of the lease (excluding the final
paragraph of clause 6) are admitted, as contained in annexure
“SS2”,
subject to the content of paragraphs 4.1 to 4.14 above.’
[8]
The application failed before Davis J, who dismissed it with costs,
but granted leave to the appellant to appeal to this court.
In
dismissing the application, the learned judge reasoned:
‘
Given
the way in which the provision in respect of which the option for the
second renewal was framed, Mr la Grange, who appeared
together with
Mr van Loggerenberg on behalf of the applicant, referred to the
Constitutional Court’s decision in
Makate
v Vodacom Ltd
2016 (4) SA 121
(CC) at para 97 where the court held:
“
Currently
the position in our common law is that an agreement which was
negotiated in good faith is enforceable if it provides for
a deadlock
breaking mechanism in the event of the negotiating parties not
reaching consensus.”
In
other words, the invalidity of an option to renew a lease agreement
that requires the parties to agree on the rental amount payable
during the contemplated renewal period is cured only if there is a
requisite deadlock breaking mechanism contained in the option.
In
this connection the decision in
Southern Port Developments (Pty)
Ltd v Transnet Ltd
2005 (2) SA 202
(SCA) assumes importance. In
Southern Port Developments
, supra, the option to renew a lease
agreement contained the following express provision:
“
Should
the parties be unable to agree on any of the terms and conditions of
either the definitive agreement or of the alternative
agreement
within 30 days of the date of any notice given by either such parties
to the other of them requiring such agreement then
the dispute shall
be referred for decision to an arbitrator agreed on by the parties.”
At
para 17 Ponnan JA held:
“
The
express undertaking to negotiate in good faith in this case is not an
isolated edifice. It is linked to a provision that the
parties, in
the event of their failing to reach agreement, will refer such
dispute to an arbitrator whose decision will be final
and binding.
The final and binding nature of the arbitrator’s decision
renders certain and enforceable what would otherwise
have been an
unenforceable preliminary agreement.”’
[9]
Davis J concluded:
‘
On
the basis of the law as analysed in this judgment, this dispute is
not a case of an agreement such as that which vexed the Court
in
Roazar
,
supra, but rather one that falls within the scope of a lease which
contains a deadlock breaking mechanism. Once it is held that
the
lease exists and that the parties needed to employ the contractually
created deadlock breaking mechanism, in respect of implementation
it
stands to reason that the very basis upon which the applicant’s
relief is predicated is fundamentally flawed. There is
no need to
exercise a discretion to stay the proceedings in that the arbitration
mechanism needs to be employed. It is the indicated
and intended
deadlock breaking mechanism. If the outcome of any arbitration fails
to satisfy one of the parties then an application
for review, is of
course always open to that party.
Given
the approach that I have adopted, there is no need for me to deal
with the further defences, namely of rectification of the
contract
nor of the existence of the tacit term. In short, there is a
mechanism to resolve the impasse between the parties. It
should have
been employed.’
[10]
In arriving at the conclusion that the application had to fail, Davis
J placed much reliance on
Southernport
Developments (Pty) Ltd v Transnet Ltd
.
[3]
Given the
juristic debate that
Southernport
appears
to have provoked,
[4]
it may be
useful to retrace our steps and revisit some essential propositions.
In
Hillas
& Co Limited v Arcos Limited
,
[5]
Lord Wright
expressed the view that:
‘
There
is then no bargain except to negotiate, and negotiations may be
fruitless and end without any contract ensuing; yet even then,
in
strict theory, there is a contract (if there is good consideration)
to negotiate . . . .’
That,
however, was rejected in
Courtney
and Fairbairn Limited v Tolaini Brothers (Hotels) Ltd
.
[6]
According
to Lord Denning MR:
‘
That
tentative opinion by Lord Wright does not seem to me to be well
founded. If the law does not recognise a contract to enter
into a
contract (when there is a fundamental term yet to be agreed) it seems
to me that it cannot recognise a contract to negotiate.’
[7]
Lord
Diplock added:
‘
I
agree and would only add my agreement that the dictum – for it
is no more – of Lord Wright . . . to which Lord Denning
MR has
referred, though an attractive theory, should in my view be regarded
as bad law.’
[8]
Lawton
LJ agreed with both Lord Denning MR and Lord Diplock.
[11]
In
Walford
v Miles
,
[9]
the House of
Lords affirmed the correctness of
Courtney
v Fairbairn.
Lord
Ackner took the view that:
‘
The
reason why an agreement to negotiate, like an agreement to agree, is
unenforceable is simply because it lacks the necessary
certainty.’
[12]
That position obtained in other jurisdictions, such as Canada, New
Zealand and until
Coal
Cliff
,
in Australia as well. In
Coal
Cliff
,
Kirby P discussed the principles relating to contract formation and
agreements to negotiate. He recognised that courts will not
enforce
an agreement to agree, but observed, after considering the American
literature on the subject, ‘. . . I do not share
the opinion of
the English Court of Appeal that no promise to negotiate in good
faith would ever be enforced by a court’.
[10]
[13]
In
United
Group Rail Services Limited v Rail Corporation New South Wales
,
[11]
Allsop P
expressed the view that:
‘
[Kirby
P], if I may respectfully put it this way, was cautiously, but
decidedly, putting the view that an agreement to negotiate
in good
faith might be enforceable, depending on its terms and context. Kirby
P was dealing with, if I may say so, the blunt uncompromising
and
generally expressed views of Lord Denning and Lord Diplock in
Courtney
.
His Honour was not stating an all encompassing generalised test or
formula.’
[14]
In
Trawl
Industries of Australia Pty Ltd v Effem Foods Pty Ltd
,
[12]
the Court of
Appeal made the point that uncertainty and incompleteness were
distinct concepts. Samuels JA said:
‘
However,
as I have observed [the] argument on appeal was not that the contract
was uncertain, but, I infer, that it was incomplete,
and a contract
that is incomplete is one that requires further agreement; or, in the
present case, subsequent negotiation.’
Later,
he cited with approval the following from
Booker
Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd
:
[13]
‘
It
is established by authority, both ancient and modern, that the court
will not lend their aid to the enforcement of an incomplete
agreement, being no more than an agreement of the parties to agree at
some time in the future. Consequently, if the lease provided
for a
renewal “at a rental to be agreed” there would clearly be
no enforceable agreement.’
[15]
Allsop P drew on this important distinction in
United
Group Rail Services Limited
.
[14]
He stated:
‘
In
Trawl
,
Samuels JA made the valuable point (by reference to the learned
authors, Greig and Davis in their text
The
Law of Contract
)
that uncertainty and incompleteness were different concepts. I agree.
Samuels JA also considered that
Booker
may not be consistent with Kirby P’s views in
Coal
Cliff
.
I disagree.
Booker
concerned
incompleteness;
Coal
Cliff
concerned
uncertainty.’
Allsop
P added:
‘
Whilst
this necessarily incomplete review of authorities reveals that the
law in Australia is not settled as to the place of good
faith in the
law of contracts, this Court should work from the position that it
has said on at least three occasions . . . that
good faith in some
degree or to some extent, is part of the law of performance of
contracts.
.
. .
‘
In
relation to
Courtney
,
the reasoning of Lord Denning MR equated an agreement to negotiate
with an agreement to agree. The latter is, of course, not
enforceable. . . . It does not follow, however, that an agreement to
undertake negotiations in good faith fails for the same reason.
An
agreement to agree to another agreement may be incomplete if it lacks
essential terms of the future bargain. An agreement to
negotiate, if
viewed as an agreement to behave in a particular way may be
uncertain, but is not incomplete.’
[15]
[16]
Thus, although the position in relation to ‘agreements to
negotiate in good faith’ remains a complex one in Australia
in
the light of
Coal
Cliff Collieries,
[16]
courts
there, like other comparable jurisdictions, will not enforce ‘an
agreement to agree’. That accords as well with
the position in
our law. As Schutz JA made plain in
Premier,
Free State, and Others v
Firechem
Free State (Pty)
Ltd:
[17]
‘
An
agreement that the parties will negotiate to conclude another
agreement is not enforceable, because of the absolute discretion
vested in the parties to agree or disagree . . . . Such a discretion
was vested in the parties as they were to sign “a contract”
the precise terms of which were not fixed in the letter of
acceptance, which, unlike the Action Committee’s
recommendation,
did not refer to annexure B. As the Tender Board
neither awarded a contract for the whole of the Free State nor
exactly followed
that Committee’s recommendations as to
demarcation, the elusive annexure B, whatever it did contain, could
not have served
as the contract to be signed. There was, accordingly,
room for a breakdown in negotiations before a contract was concluded.
The
position is similar to that described in
Namibian
Minerals Corporation Ltd v Benguela Concessions Ltd
[1996] ZASCA 140
;
1997
(2) SA 548
(A) at 567A-C:
“
Since
this provision was couched as a suspensive condition, it cannot, in
my judgment, be said that the parties could have intended
to have had
a binding agreement simply upon the exercise of the option. They had
expressly agreed that only a fuller arrangement
would have bound them
to the joint venture. Fulfilment of the condition was necessary and
the condition required
consensus
of the parties. It is thus not a case where the exercise of the
option would have given rise to a contract and that other terms
would
merely have been left for later negotiation and agreement. I
therefore am of the view that the exercise of the option could
not
have given rise to a contract with certain or ascertainable terms and
that on this ground the “farm-in” clause
is void for
vagueness.”’
[17]
The proper approach in an enquiry such as the present depends upon
the construction of the particular agreement. Accordingly,
it becomes
necessary to analyse the relevant paragraph to decide whether its
proper characterisation is merely an agreement to
agree or whether it
contained legally enforceable obligations. This was not a case where
an external arbitrator was nominated to
resolve certain outstanding
differences. An arbitrator would have been ill-equipped to fill in
the blanks or resolve the questions
that the parties could not. An
arbitrator certainly could not give effect to arrangements that the
parties themselves had not concluded
and then require the party, who
is resisting, to continue with the ongoing relationship. Nor, for
that matter could the arbitrator
simply invoke certain vague,
ill-defined objective standards. But, there is a further
insurmountable difficulty in the path of
the respondent in this case.
It is this: the arbitration clause did not survive the agreement.
Thus, once the agreement terminated
by effluxion of time, the
respondent could no longer invoke the arbitration clause.
[18]
In
Southernport
(para 16), reference was made to the three
situations adverted to by Kirby P in
Coal Cliff
, namely:
(i)
‘In many contracts it will be plain that the promise to
negotiate is intended to be a binding legal obligation to which
the
parties should be held. The clearest illustration of this class will
be cases where an identified third party has been given
the power to
settle ambiguities and uncertainties. . . . But even in such cases,
the court may regard the failure to reach agreement
on a particular
term as such that the agreement should be classed as illusory or
unacceptably uncertain. . . . In that event the
court will not
enforce the agreement’;
(ii)
‘In a small number of cases, by reference to a readily
ascertainable external standard, the court may be able to add
flesh
to a provision which is otherwise unacceptably vague or uncertain or
apparently illusory. . . ’; and
(iii)
‘Finally, in many cases, the promise to negotiate in good faith
will occur in the context of an “arrangement”
(to use a
neutral term) which by its nature, purpose, context, other provisions
or otherwise makes it clear that the promise is
too illusory or too
vague and uncertain to be enforceable’.
[19]
Southernport
added: ‘[t]he principles enunciated in
Coal
Cliff Collieries
accord with our law. The first and third situations alluded to by
Kirby P are covered, respectively, by
Letaba
Sawmills
(supra)
and
Firechem
(supra).’
The agreement in
Southernport
fell
into the first category. This agreement, like
Booker
,
[18]
is concerned
with incompleteness. It accordingly falls into the third.
[19]
[20]
It follows that the high court misconceived the enquiry and that its
conclusion on this leg cannot be supported.
[21]
Turning to the respondent’s rectification defence: The defence
was not raised, as one would have supposed, right at the
outset of
the dispute. The respondent only took issue with the relevant
paragraph. For the rest, the agreement would appear to
be a true
reflection of the common intention of the parties. Even then, the
explanation advanced for the presence of the relevant
paragraph is
that it was as a result of a ‘
bona
fide
mistake or [an] intentional act . . . and does not represent the
common intention of the parties’. A party is entitled to
rectification of a written agreement which, through common mistake
incorrectly records the agreement which the parties intended
to
express in the written agreement. Here, on Mr Le Roux’s own
version, there is no common mistake. Relying on
Gralio
(Pty) Ltd v D E Claassen (Pty) Ltd
,
[20]
the
respondent contended that as the appellant had not sought a referral
to oral evidence, it was entitled on the application of
the
Plascon-Evans
Rule
[21]
to have the
court adjudicate the rectification defence in its favour.
[22]
The fallacy of the respondent’s argument is this; as Streicher
JA pointed out in
Boundary
Financing v Protea Property
:
[22]
‘
Rectification
of an agreement does not alter the rights and obligations of the
parties in terms of the agreement to be rectified:
their rights and
obligations are no different after rectification. Rectification
therefore does not create a new contract; it merely
serves to correct
the written memorial of the agreement. It is a declaration of what
the parties to the agreement to be rectified
agreed. For this reason
a defendant who contends that an agreement sued upon does not
correctly reflect the agreement between the
parties may raise that
contention as a defence without the need to counterclaim for
rectification of the agreement (see
Gralio
(Pty) Ltd v D E Claassen (Pty) Ltd
1980
(1) SA 816
(A)
at 824A-C).’
[23]
Here, acceptance of the respondent’s contention will result not
in rectification, but the creation of a new contract
for the parties.
Moreover, the respondent relied on the relevant paragraph in support
of its main defence. But, relying on the
provision for the purposes
of its main defence and seeking to escape it for the purposes of its
alternative defence is mutually
incompatible. ‘No person can be
allowed to take up two positions inconsistent with one another, or as
is commonly expressed
to blow hot and cold, to approbate and
reprobate’.
[23]
What is
more, the defence raised is plainly contrived. To borrow from
Plascon-Evans,
the
allegations of the respondent are so far-fetched or clearly untenable
that a court would be justified in rejecting them merely
on the
papers. After all ‘a person who signs a contractual document
thereby signifies assent to the contents of the document,
and if
these subsequently turn out unfavourably there is no one to blame but
him- or herself’.
[24]
[24]
There remains the further alternative defence, namely that ‘it
was a tacit term that the rental, in respect of the last
five-year
renewal would be a reasonable rental and should be determined . . .
arbitro boni viri’.
First, this defence is
incompatible with the previous defences. Second, a tacit term,
explained Corbett JA,
‘
.
. . is a provision which must be found, if it is to be found at all,
in the unexpressed intention of the parties . . . The Court
does not
readily import a tacit term. It cannot make contracts for people; nor
can it supplement the agreement of the parties merely
because it
might be reasonable to do so. Before it can imply a tacit term the
Court must be satisfied, upon a consideration in
a reasonable and
businesslike manner 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.'
[25]
Third,
and this flows from the second, no such necessary implication can
possibly arise, because, given the express terms of the
agreement
there plainly can be no room for importing the alleged tacit term
asserted by the respondent. Indeed, as it was put it
in
Robin
v Guarantee Life Assurance Ltd
:
[26]
‘
A
tacit term cannot be imported into a contract in respect of any
matter to which the parties have applied their minds and for which
they have made express provision in the contract. As was said by Van
Winsen JA in
SA
Mutual Aid Society v Cape Town Chamber of Commerce
1962
(1) SA 598
(A)
at 615D:
“
A
term is sought to be implied [a tacit term in the terminology
of
Alfred
McAlpine
]
in an agreement for the very reason that the parties failed to agree
expressly thereon. Where the parties have expressly agreed
upon a
term and given expression to that agreement in the written contract
in unambiguous terms, no reference can be had to surrounding
circumstances in order to subvert the meaning to be derived from a
consideration of the language of the agreement only. . . .”’
It
follows that the further alternative defence must also fail.
[25]
In the result:
1 The appeal is upheld with costs,
including those of two counsel.
2 The order of the court below is set
aside and replaced with the following:
‘
(a)
The application succeeds with costs, including those of two counsel.
(b) The respondent and all those
holding title under it, if any, are ordered to vacate the property
described as Erf 562, Mbekweni,
Paarl, Western Cape Province,
situated on the corner of Jan van Riebeeck Drive and Wamkelekile
Street, Mbekweni, Paarl, Western
Cape Province, held by the applicant
under title deed number T065358/10 (the property), within 14
(fourteen) calendar days of the
date of this order.
(c)
In the event of the respondent failing to comply with paragraph (b)
hereof, the Sheriff or his/her lawful deputy for the area
in which
the property is situated is directed to eject the respondent and all
persons and/or entities found to be in occupation
of the property.’
_________________
V M Ponnan
Judge of Appeal
APPEARANCES:
For
Appellant:
M
H van Heerden SC (with him N J A van Loggerenberg)
Instructed
by:
Karel
Brink & Associates, Strand
Rosendorff
Reitz Barry Attorneys, Bloemfontein
For
First to Third Respondents:
J W Olivier SC
Instructed
by:
Werksmans
Attorneys, Cape Town
McIntyre
van der Post, Bloemfontein
[1]
Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd
(1991) 24 NSWLR 1
at 19.
[2]
The
appellant sought an order in these terms:
‘
1.
confirming that the lease agreement concluded between the respondent
and Shepherd Industrial & Commercial Real Estate
CC
(registration number 1996/044978/23) on 7 November 2007 (“the
lease agreement”) (including the terms of lease,
the
conditions of lease, all the annexures thereto, addendums / written
variations and deeds of suretyship in respect thereof)
ceded to the
applicant on 11 October 2017, having been already renewed for a
further five year term, lapsed / expired at the
end of 30 November
2017 by the effluxion of time;
2. confirming that the
respondent and all those holding title under it, if any, are in
unlawful occupation of the property,
being occupied for commercial
purposes, described as Erf 562, Mbekweni, Paarl, Western Cape
Province, situated on the corner
of Jan van Riebeeck Drive and
Wamkelekile Street, Mbekweni, Paarl, Western Cape Province, held by
the applicant under title deed
number T065358/10 (“the
property”);
3. directing that the
respondent and all those holding title under it vacate the property
within 14 (fourteen) calendar
days from the granting of the
requested order in this application;
4. directing that the
respondent complies with its obligations in terms of clause 17.18 of
the conditions of lease (attached
to the lease agreement) by doing
all things reasonably necessary to ensure that the property is fit
for occupation by a new tenant
on the first business day following
the date the property is vacated, including the repair of any damage
that may have been caused
to the property during the subsistence of
the lease period (the period from 1 December 2007 to 30 November
2017) and the holding-over
period;
5. failing such departure,
directing the Sheriff of this Honourable Court or his/her lawful
deputy for the area in which
the property is situated to eject the
respondent and all persons and/or entities found to be in occupation
of the property;
6. authorising and directing
the Sheriff of this Honourable Court to do all things necessary in
order to give effect to
prayers 4 and 5 above;
7. confirming that in terms of
clause 9.2 of the conditions of lease (attached to the lease
agreement), the respondent is
liable for the reasonable costs that
may be incurred, at the applicant’s sole discretion, in
respect of cleaning, clearing
and restoring the property to its
original condition at the time when the respondent took occupation
thereof, fair wear and tear
excepted;
8. the
respondent be ordered to pay the reasonable costs to be incurred by
the applicant in respect of cleaning, clearing
and restoring the
property to its original condition at the time when the respondent
took occupation thereof, fair wear and tear
excepted’.
[3]
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005
(2) SA 202 (SCA); [2005] 2 All SA 16 (SCA).
[4]
In
Indwe Aviation v
Petroleum Oil and Gas Corporation of SA
2012 (6) SA 96
(WCC) para 23, Blignaut J stated: ‘The question
of the validity of an agreement to negotiate a further agreement has
received
much attention in the case law. The former general approach
in our law was that an agreement to negotiate a further agreement is
too vague to be enforceable. The judgment of Ponnan AJA in
Southernport
. . ., however, is indicative of a more flexible approach.’
See also P Schoeman
Agreements
to agree in South African Law – a balancing act between
certainty and fairness
LLM
Dissertation University of the Witwatersrand (2014); H Schultz ‘What
is a lease without rent’ 13(2)
Juta’s
Business Law
51; C Lewis
‘The uneven journey to certainty in contract’
(2013) 76
THRHR
80
; L T C Harms ‘The Puisne Judge, The chaos theory and the
common law’ (2014) 131
SALJ
3.
[5]
Hillas &
Co Limited v Arcos Limited
[1932] UKHL 2
;
[1932] All ER 494
at 505-507.
[6]
Courtney
and Fairbairn Limited v Tolaini Brothers (Hotels) Ltd
[1975]
1 All ER 716.
[7]
Ibid at
720.
[8]
Ibid.
[9]
Walford
v Miles
[1992]
2 AC 128
;
[1992] 1 All ER 453
at 460.
[10]
Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd
(1991) 24 NSWLR 1
at 24.
[11]
United
Group Rail Services Limited v Rail Corporation New South Wales
[2009]
NSWCA 177
para 43.
[12]
Trawl
Industries of Australia Pty Ltd v Effem Foods Pty Ltd
(1992) 27 NSWLR 326
at 343.
[13]
Booker
Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd
[1982] HCA 53
;
(1982)
149 CLR 600
at 604.
[14]
United
Group Rail Services Limited v Rail Corporation New South Wales
[2009]
NSWCA 177
para 50.
[15]
Ibid para
61 and 64.
[16]
J
Carr-Gregg ‘
Coal
Cliff Collieries v Sijehama’
1992
AMPLA Yearbook 629. See also
Con
Kallergis Pty Ltd (t/a Sunlighting Australasia Pty Ltd) v Calshonie
Pty Ltd (Formerly C.W. Norris Pty Ltd)
,
unreported judgment of the Court of Appeal, Supreme Court of
Victoria, 25 March 1997; (1997) 14 BCL 201 (Vic CT App) at 24 which
stated: ‘Some of the writing in this area seeks to suggest
that there can be only one answer to the general question whether
an
agreement to negotiate is enforceable. The discussion by the members
of the courts who decided
Coal
Cliff
and
Trawl
Industries
,
as well as the discussion by Giles, J. of the problems he had to
consider in
Hooper
Bailie
and
in
Elizabeth
Bay
show that the question may be more complex than the simple statement
of it may suggest and that the answer to the problem may
vary
according to the precise terms of the agreement. They suggest that
it is only when all of the circumstances are known that
it can be
seen whether the obligations of the parties (described as “to
negotiate”) can be identified with certainty.’
[17]
Premier,
Free State, and Others v
Firechem
Free State (Pty) Ltd
2000 (4) SA 413
(SCA);
[2000] 3 All SA 247
(A) para 35.
[18]
Supra fn 13.
[19]
See also
Roazar
CC v The Falls Supermarket CC
[2017] ZASCA 166
;
[2018] 1 All SA 438
(SCA);
2018 (3) SA 76
(SCA)
para 13, where Tshiqi JA reiterated that ‘As a general rule an
agreement that the parties will negotiate to conclude
another
agreement is not enforceable because of the absolute discretion
vested in the parties to agree or disagree’.
[20]
Gralio
(Pty) Ltd v D E Claassen (Pty) Ltd
[1980]
1 All SA 423
(A);
1980
(1) SA 816
(A) at 824A-C, held: ‘Indeed (leaving
aside cases in which the contract is by law required to be in
writing), a defendant
who raises the defence that the contract sued
upon does not correctly reflect the common intention of the parties,
need not even
claim formal rectification of the contract; it is
sufficient if he pleads the facts necessary to entitle him to
rectification
and asks the Court to adjudicate upon the basis of the
written contract relied upon by plaintiff as it stands to be
corrected.’
[21]
The rule
was expressed as follows in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
[1984] 2 All SA 366
(A);
1984 (3) SA 623
(A) at 634-635: ‘. .
. where in proceedings on notice of motion disputes of fact have
arisen on the affidavits, a final
order, whether it be an interdict
or some other form of relief, may be granted if those facts averred
in the applicant's affidavits
which have been admitted by the
respondent, together with the facts alleged by the respondent,
justify such an order. The power
of the Court to give such final
relief on the papers before it is, however, not confined to such a
situation. In certain instances
the denial by respondent of a fact
alleged by the applicant may not be such as to raise a real, genuine
or
bona
fide
dispute of fact. . . . If in such a case the respondent has not
availed himself of his right to apply for the deponents concerned
to
be called for cross-examination under Rule 6 (5) (g) of the Uniform
Rules of Court . . . and the Court is satisfied as to
the inherent
credibility of the applicant's factual averment, it may proceed on
the basis of the correctness thereof and include
this fact among
those upon which it determines whether the applicant is entitled to
the final relief which he seeks. . . . Moreover,
there may be
exceptions to this general rule, as, for example, where the
allegations or denials of the respondent are so far-fetched
or
clearly untenable that the Court is justified in rejecting them
merely on the papers. . . ’.
[22]
Boundary
Financing Limited v Protea Property Holdings (Pty) Limited
[2008]
ZASCA 139
;
2009 (3) SA 447
(SCA);
[2009] 2 All SA 7
(SCA)
para 13.
[23]
Hlatswayo
v Mare and Deas
1912
AD 242
at 259.
[24]
G B
Bradfield
Christie’s
Law of Contract in South Africa
7
ed
(2016) at 205.
[25]
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
[1974]
3 All SA 497 (A);
1974
(3) SA 506
(A) at 532G-533A.
[26]
Robin v
Guarantee Life Assurance Co Ltd
[1984] ZASCA 72
;
[1984]
2 All SA 422
(A);
1984
(4) SA 558
(A)
at 567C-D. See also
Pan
American World Airways Incorporated v SA Fire and Accident Insurance
Company Ltd
[1965]
3 All SA 24 (A);
1965
(3) SA 150
(A)
at 175C.