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LL Case No. 381/1983

IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION

In the matter between:

EVANGELOS ANTONIOU SOTERIOU Appellant

and
RETCO POYNTONS (PROPRIETARY) LIMITED Respondent

(formerly known as POYNTONS PROPERTIES (PROPRIETARY) LIMITED

CORAM: KOTZé, BOTHA, NICHOLAS JJA, GALGUT

et VIVIER AJJA
HEARD: 7 MARCH 1985
DELIVERED: 29 MARCH 1985

JUDGMENT

/BOTHA JA ...

2.

BOTHA JA:-

In my judgment this appeal ought to be dis= missed.

There is no doubt in my mind that clause 2 (b) of the lease is not susceptible of bearing the mean= ing assigned to it in the judgment of my Brother NICHOLAS.

By using the expression

"upon such terms and conditions and at such rental as may be mutually agreed upon"

the parties in the plainest possible language expressed
their intention to be that the terms, conditions and
rental to be applied to the extended period of the lease
would be settled by negotiation and agreement between the
parties. It cannot be doubted, I consider, that the
words embody an agreement to agree.

The words "first refusal" connote a right of
election either to accept or to decline something. That
something can be, and frequently is, an offer by the other

/party ...

3.

party. But it need not be so. It can also be an opportunity to negotiate and to enter into an agree= ment. That, to my mind, is clearly what is conveyed by the words "first refusal" in the context of clause 2 (b).

At the heart of the interpretation of the clause which is contained in the judgment of my Brother NICHOLAS lies the view that the lessor is obliged to
submit an offer to the lessee, which the latter can then accept or refuse. In my opinion, with respect, such a notion cannot be found in the wording of the clause, and is, on the contrary, quite foreign to it. It will not do to transplant the reasoning in the Manchester Ship Canal Company case (1900) 2 Ch 352 at 364 and (1901) 2 Ch 37 at 48), on which my Colleague relies, onto a clause such as the present, which contains explicit provisions of a kind not present in the clause considered in that case. Here, the clause in

/question ...

4.

question contemplates mutual agreement being reached on the terms, conditions and rental of the extended lease. If the parties had intended to impose an obligation on the lessor to submit a unilaterally settled offer to the lessee, I can hardly conceive of a more inept way of saying so than that contained in the clause. If, instead of affording the lessee an opportunity of nego= tiating an agreement regarding the extension of the lease, the intention had been to oblige the lessor to submit an offer, the parties would assuredly have given expression to such an intention in words quite different from those appearing in the clause.

In Smith v Morgan (1971) 2 All ER 1500, on which my Brother NICHOLAS relies, the clause under con= sideration differed substantially from the clause in question here, particularly in so far as the former contained an express reference to an offer to be made, which is lacking in the latter. Apart from that, I

/differ ...

5.

differ, with respect, from NICHOLAS JA in my assessment of the reasoning in that case: I do not find it con= vincing. Applied to the circumstances of the present case, it amounts to this: the expression "as may be mutually agreed upon" is to be understood as referring to the agreement which will arise in the event of the lessee accepting an offer which the lessor is obliged to submit to him. With great respect, I consider such an interpretation of the words mentioned to be wholly strained and artificial, and, in fact, in conflict with the plain and natural meaning of the words. As far as comparable cases go, I much prefer the reasoning of TROLLIP J in Hattingh v Van Rensburg 1964 (1) SA 578 (T) at 582 D - H, and I think it applies to the facts of the present case.

No doubt the parties intended the clause to have business efficacy. But then, they no doubt did not realise that an agreement to agree was devoid of

/legal ...

6.

legal effect. The Court is powerless to correct their error for them. While the Court will strive not to be a destroyer of bargains, it can never be the creator of them. In Roode v Morkel 1976 (4) SA 989 (A), MILLER JA said, at 993 E:

"Die uitgangspunt van die betoog namens die appellant is dat dit hoogs waarskynlik is dat die partye deur klousule 9 by die kon= trak in te lyf, bedoel het om 'n afdwingbare hernuwingsreg te skep. Daar moet egter gewaak word teen enige neiging om die be= doeling van die partye te veronderstel en dan op grond van sodanige veronderstelling die woorde wat in die kontrak gebesig is te interpreteer. Die bedoeling van die partye moet in die eerste instansie in die bewoord= ing van hulle kontrak gesoek word."

And in Aronson v Sternberg Brothers (Pty) Ltd 1985 (1) SA 613 (A) at 622 E ELOFF AJA said:

"The defendant's counsel submitted that if the grant of a right of first refusal was not coupled with a duty on the part of Alburn to find another tenant, the clause lacked business efficacy. That might be so, but that per se is not sufficient justi= fication for placing an interpretation on

/the ...

7-

the lease to supplement a deficiency for which the parties did not provide. As WESSELS JA said in Haviland Estates (Pty) Ltd and Another v McMaster 1969 (2) SA 312 (A) at 336 E - G:

'It not infrequently occurs that, where subsequent developments show that a party has contracted 'inadequately', equitable considerations may at times give rise to a natural desire to come to the aid of the party concerned, par= ticularly so where the 'inadequacy' of his right vitally affects him. This feeling of sympathy should, however, not be permitted to blunt the Court's under= standing of the meaning of the words.'"

In my view, therefore, clause 2 (b) of the lease did not confer a legally effective right of renewal of the lease on the appellant and I would dismiss the appeal on that ground.

There is, however, another difficulty in the way of the appellant, which I consider to be insuperable. On the supposition that my interpretation of clause 2 (b) is wrong and that of my Brother NICHOLAS correct, it seems to me that the appellant has failed to avail himself of

/his ...

8.

his proper remedy. In terms of the decision in the Associated South African Bakeries case (1982 (3) SA 893 (A)), which is mentioned in the judgment of NICHOLAS JA, the appellant's remedy, in principle, was to step into the shoes of CNA by means of a unilateral declaration of intent. Clearly, to be legally effective such a declaration had to be an unequivocal and unqualified one. To the extent that some of the unknown terms of the respondent's contract with CNA may have been inappro= priate to the appellant's use of the premises, I am of the view that the appellant should at least, if he had wished to pursue his remedy, have declared unequivocally and unqualifiedly that he intended to step into the shoes of CNA at the rental fixed between the respondent and CNA for a period of 4 years and 11 months and on the terms and conditions of that lease in so far as they were not inconsistent with his continued use of the premises as before. The appellant never expressed a firm intention

/in ...

9.

in that regard, as appears from a perusal of his answer= ing affidavit.

Although the appellant alleged in his affi= davit that the respondent was not entitled to let the premises to CNA until it had given him an opportunity of competing with the rental proposed to be paid by CNA, and although there are passages in the affidavit in which he professes a willingness to pay the rental agreed upon between the respondent and CNA, it is clear from other passages that such professed willingness did not in fact constitute an unqualified declaration of intent. This came about because the appellant's main line of defence against the application for ejectment was based on an alleged agreement which the appellant said he had concluded with a representative of the res= pondent, one Walker. The appellant alleged that he and Walker had agreed on a renewal of the lease at a rental not exceeding by more than R200 per month the rental

/payable ...

10.

payable by the appellant at the termination of his period of lease. This, the appellant averred, meant that a renewal had been agreed upon at a rental of R811 plus R200 per month, which he was prepared to pay. The appellant anticipated that a dispute would arise on the papers regarding the alleged agreement with Walker. Against this background, I quote the following two pas= sages from the appellant's affidavit:

"Without prejudice and without being lawfully obliged to do so by reason of the prior agree= ment with the said WALKER, I am prepared to pay the same rentals and be subjected to the same conditions and terms as the CNA in their purported contract."

"I am, pending the dispute, in fact quite pre= pared to pay the same rental as the CNA would be required to pay the applicant, although I contend that there is a valid agreement between the applicant and myself as aforesaid."

(My emphasis.)

These passages make it abundantly clear that the appellant by no manner of means expressed an unequivocal and

/unqualified ...

11.

unqualified intent to be bound by the rental agreed upon between the respondent and CNA. On the contrary, it seems to me that the appellant plainly disavowed any in= tent to avail himself of his proper remedy. Moreover, it is apparent from the appellant's affidavit that his lack of knowledge of the full terms and conditions of the lease with CNA played no role at all in the stance that he took in his affidavit. The appellant at no time suggested that the application for his ejectment should be dismissed, or even stayed, pending the submis= sion of an offer to him by the respondent, and its re= fusal or acceptance by him. On the contrary, the first two paragraphs of the prayer with which his affidavit concluded are significant:

"WHEREFORE I pray that applicant's claim for:

(a)	A declaration and ejectment be dismissed with costs.
(b)	That the applicant be interdicted and restrained from giving the CNA posses= sion of the leased premises pending the hearing and determination of the dispute."

(My emphasis.)

/"The ...

12.

"The dispute" obviously refers to the appellant's alleged agreement with Walker. Although McCREATH J found that the appellant's allegations in regard to the agreement were so improbable that they could be summarily dismissed on the papers, they were persisted in in the heads of argument filed on behalf of the appellant, albeit side by side with the argument that the respondent was obliged to submit an offer to the appellant. It was only at the commencement of the hearing of the appeal that counsel for the appellant abandoned reliance on the alleged agreement with Walker and confined himself to the last-mentioned argument.

In all these circumstances the conclusion is inescapable, in my opinion, that the appellant has perempted the right either to step into the shoes of CNA or to re= ceive an offer from the respondent in regard to the exten= sion of the lease. At the very least, his attitude has been ambivalent up to the last moment, and it is impossible

/for...

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for the Court to come to his assistance now without causing serious prejudice to the respondent, which it would not have suffered had the appellant not miscon= ceived his remedy in the Court a quo. In this connec= tion it is to be observed that in the judgment of my Brother NICHOLAS there is to be substituted for the order granted by McCREATH J an order dismissing the ap= plication for ejectment. Such an order would seem to be the only possible one if the appeal were to be allowed, in view of the way in which the appellant's case was con= ducted in the Court a quo. But such an order would leave a number of issues of vital importance to the parties unresolved. It cannot mean that the appellant has been occupying the premises at the rental stipulated in the respondent's contract with CNA, nor that he will henceforth occupy them at that rental. Presumably the order is intended to compel the respondent to submit an offer to the appellant. But, having regard to the

/latter's ...

14.

letter's past conduct in this litigation, he will not be obliged to accept it even if it corresponded exactly to the terms of the lease with CNA, and it may well be that it would serve his purposes now to refuse it. Is the offer to be made with retrospective effect? If it is refused, by virtue of what title has the appel= lant been occupying the premises, and what are the rights of the parties with regard to the rental in the inter= vening period? Considerations such as these fortify my view that the appellant ought not at this late stage to be afforded an opportunity of pursuing his proper remedy, which he neglected to do timeously.

I would accordingly dismiss the appeal, with
costs.

A.S. BOTHA JA

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