IN THE HIGH COURT OF SOUTH AFRICA EASTERN CAPE LOCAL DIVISION, PORT ELIZABETH In the matter between CASE NO: 126/2014 Date heard: 14 August 2014 Date delivered: 26 August 2014 KOUGA MUNICIPALITY Applicant And JEFFREYS BAY SKI-BOAT CLUB Respondent Agreement of lease duration for indeterminate period termination on notice whether periodic lease found agreement terminable at will of either party notice of termination effective Interpretation of lease whether clause requiring provision of alternative premises in event of termination by lessor entitling lessee to remain in occupation Held: obligation not reciprocal in nature termination of agreement effective continued occupation unlawful clause relating to provision of alternative premises constituting cause of action available to lessee notwithstanding termination of lease agreement Order of ejectment granted. JUDGMENT GOOSEN, J. [1] This is an application for the ejectment of the respondent from a property owned by the applicant. The facts are not in dispute. [2] During 1986 the applicant s predecessor in title concluded an agreement of lease with the respondent. A written lease agreement was signed, the effective date of which was 1 July 1986. The agreement provides that: Die huurtermyn is vir n onbepaalde tydperk, maar sal die partye die ooreenkoms kan beiendig met drie (3) maande skriftelike wedersydse kennisgewing tot die effek.
2 [3] Provision was made for payment of rental in an amount of R1.00 payable annually in advance on or before 7 July each year. [4] Clause 16 of the agreement provides that: Indien die VERHUURDER die huur opsê omdat die eiendom vir n ander doel benodig word, hetsy in terme van dorpsbeplanning of hetsy hoegenaamd enige ander rede, sal die VERHUURDER die HUURDER voorsien van n ander gebou van soortgelyke waarde en gelyke wat aan die doeleindes van klousule 4 voldoen. [5] On 7 January 2013 the applicant gave the respondent written notice of termination of the lease agreement giving the respondent 3 months within which to vacate the premises. It is common cause that the applicant indicated in the letter that it required the property for its own use. It is also common cause that the respondent disputed the entitlement of the applicant to terminate the agreement and that it relies, inter-alia, upon clause 16. In this regard the respondent takes the view that until it is provided with the alternative accommodation as envisaged by clause 16 it is not in unlawful occupation of the property. [6] Before turning to consideration of the applicant s case and the defences raised, it is necessary first to deal with a matter relating to the evidence properly before the court. In its answering affidavits the respondent put up an affidavit by Robert Bush, who was the chairperson of the respondent at the time that the lease agreement was concluded. That affidavit seeks to provide an explanation for clause 16 by pointing to considerations which were apparently within the contemplation of the parties at the time of concluding the agreement. In its reply the applicant foreshadowed an application to strike out the affidavit on the basis that its content is inadmissible and irrelevant to the adjudication of the issues in the application. At the hearing of the matter Mr Nepgen, on behalf of the applicant, moved for the striking-out of the affidavit on the basis, inter-alia that it
3 offends against the parol evidence rule. I was informed by Mr Mullins, for the respondent, that the striking-out is not opposed, and that in any event, the respondent did not intend to rely upon the contents of the affidavit. The affidavit plainly offends the parol evidence rule. Its content is therefore inadmissible and falls to be struck out. [7] I turn now to the merits of the application. It is appropriate to begin with the first defence raised by the respondent. This was to the effect that the lease is a periodical lease and as such notice of termination must be given in such a manner that the notice period expires at the end of the period provided for in the lease (i.e. on 6 July of any one year). Since the notice that was given purported to terminate the lease before the expiry of the lease period, it is invalid and therefore ineffective. On this basis, therefore, the respondent s continued occupation of the property is not unlawful and no order of ejectment may be granted against it. [8] The applicant countered this argument by pointing to the terms of the lease, indicating that the period of the lease is unspecified but that it may be terminated at the will of either party on notice. This is specifically provided for in clause 1 of the lease agreement. It was therefore submitted that the lease fell into that category of agreements the duration of which was at the will of either party and therefore that it was not a periodical lease. [9] AJ Kerr in Law of Sale and Lease, 1 when dealing with the duration of lease agreements, states that lease agreements fall into three categories, namely those for a fixed period; those for an unspecified period which are terminable at the instance either of the lessor or lessee or both; and those which are also for an indeterminate period but continue for defined periods e.g. daily, monthly or yearly. 1 3 rd Ed p271
4 [10] In relation to periodic leases the authorities all indicate that such leases may be terminated on reasonable notice to a party and that the period of the notice, in order to be effective, must coincide with the period of the lease. Thus where notice is given the notice period must terminate at the end of the period of the lease. [11] The argument advanced by the respondent would be definitive of the application if it is found that the agreement of lease is indeed a periodic lease. That requires consideration of the terms of the agreement itself and an appropriate construction of the terms within the context of the agreement as a whole. Clause 1, as already mentioned, states unequivocally that the agreement is for an indeterminate period. It however goes on to specify that the agreement may be terminated by either party upon provision of a defined notice period. Clause 2 deals with the rental payable as well as the period for which rental is payable and how that rental is to be paid. It provides for payment of a nominal rental annually in advance. [12] The provision of a specified period for the payment of rental does not, in my view mean that the agreement is therefore a periodic agreement. Lease agreements whether of a fixed term or an indeterminate term ordinarily provide for the payment of rental within defined periods. In this instance the agreement specifically accords to both the lessor and lessee a right to terminate the agreement on notice. That, in my view, places the agreement within the second category of agreements referred to by Kerr. Accordingly the contentions regarding the effectiveness of the notice terminating the lease agreement do not apply. [13] In this instance the applicant gave written notice of three months in duration, and there can be no doubt that the notice was effective and validly issued. The only question is whether the reference to three months refers to calendar months. Nothing however turns on this since the respondent has remained in occupation
5 for a substantial period beyond the termination of the notice period even if it is taken to refer to calendar months. [14] The second defence raised by the respondent is based on an alleged waiver. In this regard the respondent, relying upon the fact that the respondent had paid the rental in advance for a period of 50 years, sought to argue that the applicants acceptance of the payment of rental in advance constituted a waiver of its right to terminate the agreement until the expiry of the 50 year period. Reliance was placed on Watts v Goodman 1929 WLD 199 at 200. [15] The case of Watts involved the acceptance of rental by the lessor in wholly different circumstances to that which applies here. In that case the lessee was obliged to effect certain improvements to the leased property. That obligation was breached. The lessor thereafter accepted payment of the rental due in terms of the agreement in full knowledge of the lessee s breach. The court, at p 213, quoted with approval an earlier judgment in Sher v Maynier (1918, WLD. 29) where it was said that: The rule of English law and the law administered in this country agree in this, that the receipt of rent by a landlord for a period subsequent to a breach of a lease entitling the landlord to forfeit the lease, with full knowledge of the forfeiture of the lease, amounts to a waiver of the right to forfeit. The rule in English law appears also to be that the receipt of rent in the same circumstances without prejudice also operates as a waiver. But the forfeiture is not waived by the mere receipt of rent accrued before the breach, nor by receipt of rent after motion brought for ejectment on account of the breach. [16] For similar cases where the issue of waiver arising consequent upon acceptance of rental is discussed see Penny s Properties Ltd v South African Cabinet Works Ltd 1947 92) Sa 302 (C) at 310 and Joosub Ltd v Moosa 1947 920 Sa 1120 (C) at 1122. In these cases the acceptance of rental had occurred subsequent to the breach or the stipulated time to vacate the property. It was held that the defence of waiver could be raised and upheld subject to the discharge of the onus which ordinarily rests on the party relying on an alleged waiver.
6 [17] The acceptance of the payment of rental in advance does not without more constitute a waiver of the lessor s right to terminate a lease agreement. The payment of rental in advance ordinarily entitles the lessee to no more than to have the advance payment applied in reduction of the rental as and when it falls due (see De Wet v Union Government 1934 AD 59 at 68, 71; Arundel Mansions (Pty) Ltd v Hendry 1969 (3) SA 576 (T) at 578E). [18] The respondent further argued that upon a proper contextual interpretation of the lease agreement it must be found that clause 16 imposed a reciprocal obligation upon the applicant to provide the respondent with a suitable alternative building of similar value to that constructed by the respondent on the property. It was argued that any other construction would have the effect of enriching the applicant at the expense of the respondent, since it was the respondent who developed the property for its use as contemplated by the lease agreement. The respondent therefore contended that it was not obliged to vacate the property pursuant to the cancellation of the agreement, until such time as the applicant met its obligations in terms of clause 16 [19] The applicant contended that clause 16 is, in the first instance, not a provision which provides for reciprocal obligations on the part of the parties. The applicant argued that the defence raised by the respondent was in the nature of the exceptio non adempleti contractus. That defence, it was submitted, was misplaced since the applicant, in terminating the lease agreement, was not seeking to enforce by way of specific performance any obligation in terms of the agreement. It was further submitted that the right to claim ejectment upon lawful termination of the agreement, as contemplated by the lease agreement, arose ex lege and not ex contractu. To the extent that clause 16 imposed upon the applicant an obligation to furnish alternative premises to the respondent the clause does not require the delivery of such alternative accommodation as a condition precedent to the respondent vacating the property. It was therefore
7 argued that at best for the respondent it would be entitled to rely upon the clause in separate and unrelated proceedings. It could not, so the argument went, hold over until such time as the applicant honours its obligations in terms of clause 16. [20] In interpreting the agreement meaning must be assigned to the words used in the agreement having regard to the context of the provision or provisions in the light of the agreement read as a whole. In Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) 593 (SCA) at paragraph 18 the approach is summarised as follows: Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective, not subject. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used. To do so in regard to a statute or statutory instrument is to cross the divide between interpretation and legislation; in a contractual context, it is to make a contract for the parties other than the one they in fact made. The inevitable point of departure is the language of the provision itself, read in context, and having regard to the purpose of the provision in the background to the preparation and production of the document. (Footnotes omitted) [21] What is apparent, and is common cause between the parties, is that the purpose of the agreement was to enable the respondent to develop upon the leased property a facility for use by it and its members as a ski-boat clubhouse. It is clear from the agreement that a nominal rental was to be paid for the use of the property for an indefinite period. The agreement itself makes provision for termination by either party upon three months written notice. Clause 7 of the agreement also provides for summary termination of the agreement by the lessor in the event of a breach of any of the obligations undertaken by the lessee and specifically provides for immediate occupation by the lessor. In terms of clause 9, the lessee is not entitled to effect any improvements upon the property without the prior written consent of the lessor. The clause specifically records that any
8 improvements effected to the property become the sole property of the lessor without payment of any compensation to the lessee. [22] It is in this overall context, and having regard to the purpose of the agreement, that clause 16 is to be interpreted. In particular, clause 16 must be read in the context of the provisions providing for termination of the agreement. The language of clause 16 makes it clear that the obligation to provide a similar building of similar value which could be utilised as a ski boat clubhouse only arises if the lessor terminates the agreement because it requires the property for some other purpose. The language also indicates that the obligation arises once the agreement is terminated. It is clear from the language of clause 16 that it does not require that an alternative building be provided prior to or as a condition precedent to the obligation to vacate the property upon lawful termination as provided by clause 1. [23] In ESE Financial Services (Pty) Ltd v Kramer 1973 (2) SA 805 (C) at 808 809, the principles for determining reciprocity of obligations in a contract are stated as follows: In a bilateral contract certain obligations may be reciprocal in the sense that the performance of one may be conditional upon the performance, or tender of performance, of the other. This reciprocity may itself be bilateral in a sense that the performance, or tender of performance, of them represent concurrent conditions, that is, each is conditional upon the other. A ready example of this would be delivery of the res vendita and payment of the purchase price under a cash sale (see Crispette and Candy Co. Ltd. v Oscar Michaelis, N.O. and Another 1947 (4) SA 521 (A) at 537). Alternatively, the reciprocity may be one sided in that the complete performance of his contractual obligation by one party may be a condition precedent to the performance of his reciprocal obligation by the other. In other words the obligation is, though interdependent fall to be performed consecutively. An example of this would be a locatio-conductio operis whereunder the conductor operis is normally obliged to carry out the work which he is engaged to do before the contract money can be claimed. In such a case, the obligation to pay the money is conditional on the performance of the obligation to carry out the work, but, of course, the converse does not apply (see e.g. Kamaludin v. Gihwala, 1956 (2) SA 323 (C) at p. 326; de Wet and Yeats: Kontraktereg, 3 rd ed., p.139.) Reciprocity of obligations does not depend, however, merely on the time fixed for the performance thereof. Thus, the mere fact that the contract specifies that the obligations or due to be performed on the same day, does not lead to the inference that the parties intended them to be
9 reciprocal (see: Strydom v. Van Rensburg, 1949 (3) SA 465 (T) at p. 467). For a reciprocity to exist there must be such a relationship between the obligation by the one party and that due by the other party as to indicate that one was undertaken in exchange for the performance of the other and, in cases where the obligations are not consecutive, vice versa. (see de Wet and Yeats, Kontraktereg, p.138; Myburg v. Central Motor Works, 1968 (4) S.A. 864 (T) at page 865; Anastasopoulos v. Gelderblom, 1970 (2) S.A. 61 (N) at p. 636). [24] It is instructive that the applicant s right to terminate the agreement was not qualified by the respondent s contractual right to remain in occupation until such time as the contractual obligation to provide alternative accommodation was honoured by the applicant. Clause 16 provides no time for performance of the contractual obligation it imposes upon the applicant. [25] In my view, the obligation imposed upon the applicant in terms of clause 16 is not a reciprocal obligation in the sense that the applicant is precluded from terminating the agreement and claiming possession of the property until such time as it has provided an alternative building for use by the respondent. [26] The argument by the respondent that such a construction would give rise to an insensible and unbusinesslike result which defeats the object and purpose of the agreement, loses sight of the specific provision in clause 9, which provides that any improvements effected to the property become the sole property of the applicant and the applicant is not obliged to compensate the respondent for such improvements. It was therefore specifically contemplated by the parties that such improvements as would be affected to the property would not give rise to any reciprocal obligation to compensate the respondent in the event of the agreement being terminated. It was argued that clause 16 was introduced to meet this eventuality and to provide some protection for the respondent in the circumstances. It may well be so. If however the parties had intended that an alternative building would be provided as a condition precedent to the vacation of the building by the respondent then a specific term to that effect could easily have been incorporated into the agreement. It was not. The intention of the parties must therefore be discerned with reference to the interpretation of the
10 language used in the agreement. That language suggests that the applicant s obligation to provide a suitable alternative building is one which exists separately from the obligation of the respondent to vacate the building. The latter is an obligation which arises ex lege and upon lawful termination of the agreement. The respondent is accordingly not entitled to seek performance of the applicant s obligations in terms of clause 16 prior to vacating the property (cf. Dawnford Investments CC and another v Schuurman 1994 (2) SA 412 (N) at 418B). [27] In the light of the conclusion to which I have come it is not only unnecessary but also inappropriate to deal with the further argument advanced by the applicant, namely that such obligation as arises in terms of clause 16 is unenforceable by reason that clause 16 is void for vagueness, alternatively, that it is an invalid obligation by reason of certain statutory prescripts. Those aspects no doubt will feature in any action to enforce the obligations imposed by clause 16. [28] It follows that the applicant is entitled to the order that it seeks. The applicant s notice of motion seeks an order that the respondent vacate the property within ten days of the date of the order. In my view the respondent ought to be afforded a reasonable opportunity to vacate the property. I shall therefore make provision for such a reasonable period within which the respondent must vacate the property. [29] In the result I make the following order: 1. The respondent and all those persons who occupy Erf 1389, Jeffreys Bay and the structures erected thereon ( the Property ), through respondent be evicted from the property, and are to vacate the property within one month of the date of this order. 2. Failing compliance with the order in paragraph 1 above, the Sheriff of this Court is authorised to take whatever measures are required to effect the
11 eviction of the Respondent and those persons who currently occupy the property through it. 3. The Respondent is ordered to pay the costs of the application. G. GOOSEN JUDGE OF THE HIGH COURT Appearances For the Applicant Adv. J. J. Nepgen Instructed by C. W. Malan Jeffreys Bay Inc. c/o Schoeman Oosthuisen For the Respondent Adv. N. Mullins Instructed by Michael Randell Attorneys