IN THE HIGH COURT OF SOUTH AFRICA (CAPE OF GOOD HOPE PROVINCIAL DIVISION)

IN THE HIGH COURT OF SOUTH AFRICA (CAPE OF GOOD HOPE PROVINCIAL DIVISION) In the matter between: Case Number: 1865/2005 CHRISTOPHER MGATYELLWA PATRICK NDYEBO NCGUNGCA CHRISTOPHER MZWABANTU JONAS 1 st Plaintiff 2 nd Plaintiff 3 rd Plaintiff vs VICTORIA & ALFRED WATERFRONT PROPERTIES (PTY) LTD 1 st Defendant VICTORIA & ALFRED WATERFRONT (PTY) LTD 2 nd Defendant AFRICAN OXYGEN LIMITED 1 st Third Party CUISINE INTERNATIONAL 2 nd Third Party PATRICK NDYEBO NCGUNGCA 3 rd Third Party CHRISTOPHER MZWABANTU JANOS 4 th Third Party JUDGMENT delivered on:23-03-07 KLOPPER AJ: INTRODUCTION: In this matter the defendants V & A Waterfront Properties (Pty) Ltd and Victoria and Alfred Waterfront (Pty) Ltd and the second third party, Cuisine International CC have agreed on a number of facts and issues, which are contained in a stated case.

2 In terms of the stated case first defendant has accepted liability on the basis of negligence with respect to the plaintiffs claims which were caused by an explosion and fire on the premises leased to the second third party. It is common cause, however, that the gas leak that caused the explosion occurred outside the leased premises on common area (see par 7 of the stated case). The parties also agreed that the relevant lease was renewed and concluded between the first defendant and the second third party. By agreement, the parties have also stipulated that the only issue for this Court to determine is: whether, on a proper construction of clause 17.4 of the lease, the Second Third Party is liable to indemnify the First Defendant in respect of the Plaintiff s claims where such claims relate to damages caused by the First Defendant s negligence 2

3 THE CLAUSE Clause 17.4 of the agreement reads as follows: THE TENANT will indemnify the LANDLORD and hold him harmless from and against all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/ or damage to property arising from or out of any occurence (sic) in, upon, or at the leased premises, or the occupancy or use by the TENANT of the leased premises and V & A Waterfront or any part thereof, or occasioned wholly or in part by any act or omission of the TENANT, its officers, employees, agents, concessionaires, suppliers, contractors or customers. In case the Landlord shall, without fault on its part, be made a party to any litigation commenced by or against the TENANT, then the TENANT shall indemnify the LANDLORD and hold it harmless against all claims and shall pay all costs, expenses and legal fees (including Attorney and client fees) reasonably incurred or paid by the Landlord in b (sic) connection with such litigation. Counsel for both the defendants and the second third party indicated that they required the Court to consider the following issues in deciding the stated issue: 3

4 a) the meaning of the word occurence (sic) and; b) whether the indemnity clause includes claims based on the negligence of the landlord. The landlord in this matter is the first defendant who is claiming the indemnity. The tenant is the second third party. I will use the traditional spelling of the word occurrence below. THE WORD OCCURRENCE Mr Burger for the defendants in his argument has indicated that he is of the view that the occurrence referred to is the occurrence, which gave rise to the loss of life and personal injury. In his view this was the explosion, which occurred on the leased premises. He referred the Court to a case Minster Investments Ltd and Others v Hyundai Precision & Industry Co Ltd and Another (1988) 2 LLR 621 (QB) where the court held that the harmful event occurred not where the actions of the tortfeaser took place, but where the negligent documents were received. 4

5 He contends furthermore that the leaking gas by itself did not cause death or injury and therefore the occurrence referred to in the context of Clause 17.4 must be the explosion and fire. Mr Oosthuizen SC in his argument holds a different view. In his opinion the damages in the instant case arise from a gas leak outside the leased premises and not from any occurrence on the premises. I could find very little authority dealing with the particular word and it is clear that Counsel also experienced difficulty in this regard. In Sleightholme Farms (PVT) Ltd v National Farmers Union Mutual Insurance Society Ltd 1967 (1) SA 13(R) however, the Court did on occasion have the opportunity to decide the meaning of the word occurrence contained in a particular insurance policy, and its finding in my view in that case could prove helpful in deciding the issue at hand. 5

6 Davies J decided that the question, which had to be answered, is the meaning to be given to the words the happening of any occurrence giving rise to injury, disease, loss, damage and/or liability. He states as follows at 16: As stated in Plaintiffs declaration, it is alleged that the building in which the Plaintiff s tobacco was stored was damaged by a storm on 8 th March 1965, but the Plaintiff claims to be unaware of when the actual burning of the tobacco took place and can only say that it took place at some time between the date of the storm and its discovery of the burning in June, 1965. Mr May, who appeared for the Defendant, submitted that, although the damage to the tobacco may not have occurred until some time after 8 th March, 1965, the occurrence giving rise to that damage was the storm itself and this took place on 8 th March. Further at G on the same page he concluded: I am satisfied that Mr May s submission is correct and that, in the circumstances of this case, the occurrence giving rise to the claim was the storm which happened on 8 th March 1965 In my view the occurrence referred to in clause 17.4 is an occurrence which is not only linked to the loss of life, personal injury 6

7 and/or damage to property but furthermore to claims, actions, damages, liability and expense as a result thereof: If one therefore only views the occurrence from the point of view of it causing loss of life, or injury then the argument of Counsel for the defendant is to be favoured. If, however, the occurrence is also linked to damages as is the case in this matter then it is clear that the occurrence refers to a gas leak outside the leased premises and not the explosion or fire which occurred as a result of the gas leak. In Sleightholme Farms (supra) therefore the burning caused the damage to the tobacco, but the occurrence was the storm that damaged the building before the burning took place. INDEMNITY FOR NEGLIGENCE Clause 17.4 deals with an indemnity clause whereby the tenant undertakes to indemnify the landlord for all claims, actions, damages, liability and expense connected to loss of life, personal injury and/or 7

8 damage to property arising from or out of any occurrence in, upon, or at the leased premises. The question to be determined by this Court is whether indemnity extends in terms of Clause 17.4 to claims against the landlord as a result of the landlord s negligence. Mr Burger for the defendants referred in his argument to the golden rule of interpretation as set out in Coopers & Lybrand v Bryant 1995 (3) SA 761 (A) at 767 and also Grey v Pearson (1857) 10 ER 1216. It is his submission that the ordinary meaning of the words in the clause are indicative of the fact that the second third party is required to indemnify the first defendant for any form of liability it occurs and in particular liability to the plaintiffs in this matter based on negligence. In terms of the so-called golden rule of interpretation language in the relevant clause is to be given its grammatical and ordinary meaning, unless this would result in some form of absurdity or repugnancy or inconsistency. 8

9 The Court after establishing the literal meaning of the clause, should then consider: a) the context in which the clause is used in relation to the contract as a whole; b) background circumstances which serve to explain the genesis and purpose of the contract and which are a guideline to matters present in the minds of the contracting parties; c) other evidence of surrounding circumstances if the language is ambiguous. In First National Bank of SA Ltd v Rosenblum and Another 2001 (4) SA 189 SCA, Marais JA at 196 summarises the approach as follows: It is perhaps necessary to emphasise that the task is one of interpretation of the particular clause and that caveats regarding the approach to the task are only points of departure. In the end the answer must be found in the language of the clause read in the context of the agreement as a whole in its commercial setting and against the background of the common law and, now, with due regard to any possible constitutional implication. 9

10 Mr Oosthuizen in his argument, however, adopted a different approach. In his argument it is clear that he equates the position of the relevant indemnity clause to that of clauses excluding liability and exemption clauses, and argues that the principles, which are applicable in those clauses, are equally applicable to an indemnity clause. As a starting point he referred to Rosenblum and Another supra in which the court had to consider a bank s liability to a client for the theft of the contents of a safe deposit box. A clause in the agreement exempted the bank from liability for theft committed by its own employees within the course and scope of their employment and also for specified negligence in this regard. At 195 Marais JA remarks as follows: Before turning to a consideration of the term here in question, the traditional approach to problems of this kind needs to be borne in mind. It amounts to this: In matters of contract the parties are taken to have intended their legal rights and obligations to be governed by the common law unless they have plainly and unambiguously 10

11 indicated the contrary. Where one of the parties wishes to be absolved either wholly or partially from an obligation or liability which would or could arise at common law under a contract of the kind which the parties intend to conclude, it is for that party to ensure that the extent to which he, she or it is to be absolved is plainly spelt out. This strictness in approach is exemplified by the cases in which liability for negligence is under consideration. Thus, even where an exclusionary clause is couched in language sufficiently wide to be capable of excluding liability for a negligent failure to fulfil a contractual obligation or for a negligent act or omission, it will not be regarded as doing so if there is another realistic and not fanciful basis of potential liability to which the clause could apply and so have a field of meaningful application. It was argued by Mr Burger that the decision in this case is distinguishable from the Rosenblum case, that case dealing with restriction of liability and this case dealing with an indemnity clause. Mr Oosthuizen also referred to Johannesburg Country Club v Stott and Another 2004(5) SA 511 SCA in which the court dealt with an exemption clause excluding liability for damages for negligently causing the death of another. At 518 Harms JA remarks: 11

12 A final consideration is the radical nature of the exclusion of liability for damages for negligently causing the death of another. Clear wording which is absent in this case is necessary for reaching this result. In SAR & H v Lyle Shipping Co Ltd 1958 (3) SA 416 AD which dealt with a contract of towage and interpretation of a clause exempting a party from liability for negligence Steyn JA remarked as follows: The question raised on appeal is whether or not the clause quoted above exempts the Applicant from liability for negligence. It does not do so either explicitly or in general terms so all-embracing as clearly to draw such liability into the scope of the exemption. Further on with reference to Essa v Divaris, 1947(1) SA 753 (AD) at 756 Steyn JA remarks: Generally speaking, where in law the liability for the damages which the clause purports to eliminate, can rest upon negligence only, the exemption must be read to exclude liability for negligence, for otherwise it would be deprived of all effect; but where in law such liability could be based on some ground other than negligence, it is excluded only to the extent to which it may be so based, and not where it is founded upon negligence. 12

13 Mr Oosthuizen also referred to the case of Cardboard Packing Utilities (Pty) Ltd v Edblo Transvaal Ltd 1960(3) SA 178 (WLD) in which certain principles were accepted as reflecting our law They are summarised in Canada Steamship Lines Ltd v The King 1952 AC at p 208: (1) If the clause contains language which expressly exempts the person in whose favour it is made (thereafter called proferens) from the consequence of the negligence of his own servants, effect must be given to that provision. (2) If there is no express reference to negligence, the Court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises on this point, it must be resolved against the proferens in accordance with art 1019 of the Civil Code of Lower Canada: In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation. (This article expresses the South African Law on the method of construction of a document). (3) If the words used are wide enough for the above purpose, the Court must then consider whether the head of damage may be based on some ground other than negligence. The other ground must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but 13

14 subject to this qualification the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants. Reference was furthermore made to the unreported decision in Hircock v Drifters Adventure Tours CC & Another (Case 3295/03 CPD) in which Selikowitz J had to decide whether an indemnity clause which did not specifically exclude negligence indemnified the defendants from claims for damages based on negligence. In that particular case the Court applied the principles referred to in the cases dealt with supra as referred to by Mr Oosthuizen. I am of the view that the principles dealt with above are indeed applicable to an interpretation of the indemnity clause in question and agree with Mr Oosthuizen in this respect. The general principles referred to by Mr Burger must also be applied when clauses need to be interpreted, but clauses, which are purported to deviate from common law principles, require in my view a more specific approach. 14

15 If the particular clause is viewed in isolation it is clear that the clause does not expressly refer to claims/actions etc arising from the negligence of the landlord and is wide enough to include such claims. The last sentence in the same clause, however, clearly makes provision for the absence of fault on the part of the landlord and Clause 17.3, which regulates claims against the landlord by the tenant, includes claims of loss or damage caused through negligence of the landlord. In my view Mr Oosthuizen s argument, that this strengthens the view that a blanket indemnity is not contained in Clause 17.4 and was not intended, has substance if the change in use of language is considered. The general principle is that the landlord in terms of common law would be liable for damages or claims caused through his negligence. The premises were let for the purpose of operating a restaurant and it is highly improbable that the parties, if the agreement is considered in its commercial setting would have intended a blanket clause to apply 15

16 in which the tenant who was responsible and had control over the business on the premises only was to indemnify the landlord for the landlords acts of negligence and therefore impose a burden on the tenant contrary to the principles of the common law. If this was the case then this should and would have been clearly indicated as the parties did in clause 17.3. Where the clause in question is, however, wide enough to include negligence, and adopting a different approach the question arises whether the claim or damages to which the clause refers can arise only from negligence on the part of the landlord or whether as Marais JA indicates in Rosenblum supra at 195 there is another realistic and not fanciful basis of potential liability to which the clause could apply and so have a field of meaningful application. Mr Oosthuizen referred to the case where damage is caused to the premises by a third party or other members of the public who visit the V&A Waterfront or injury is suffered by customers or members of the public. He did not elaborate on the basis of such a claim or action. It 16

17 is not in my view inconceivable and neither is it fanciful that a claim against the landlord for damages for patrimonial loss could arise as a result of breach of contract, for example arising from the landlord s duty to maintain or repair the premises or even from a failure to provide, or interruption of amenities or services which the landlord is obliged to provide. Furthermore claims could arise where delicts are committed by persons who have entered into a particular relationship with the landlord, whereby the landlord may be held responsible on the basis of vicarious liability. Clearly the parties to clause 17.4 envisaged situations where the landlord without fault could be made a party to litigation, which is instituted by or against the tenant and extended the indemnity even in matters, not restricted to the premises in the last paragraph of clause 17.4. The landlord being the owner of a property which houses numerous businesses and is visited by vast numbers of tourists and members of 17

18 the public, may face claims in which it is alleged that a breach of a legal duty occurred because of failure to provide safety to persons and property. That the parties were aware of possible claims which could arise whether caused by negligence of the landlord or not is evident in my view from the events stipulated in 17.3 1 to 17.3 12. CONCLUSION I am satisfied that for the purposes of interpreting Clause 17.4 in relation to the facts of this matter, the occurrence which is the subject matter of this case is the gas leak outside the leased premises. I am also persuaded that on correct construction of clause 17.4 the indemnity does not extend to instances in which the landlord was negligent. ORDER 18

19 1. It is therefore declared that the second third party is not liable to indemnify the first defendant in terms of Clause 17.4 in respect of the plaintiffs claims, which relate to damages caused as a result of first defendant s negligence. 2. Costs are to be paid by the defendants. KLOPPER, AJ Adv Burger for the Defendants Adv Oosthuizen SC for the Plaintiffs 19