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97/85

IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter between:

PERCIVAL WHYTE Appellant

AND

FERNANDA SPARES DA COSTA COUTO Respondent

CORAM: JANSEN, TRENGOVE, JOUBERT, JJA, HOWARD et GROSSKOPF, AJJA

HEARD: 10 May 1984

DELIVERED: 13 Sept 1985

JUDGMENT GROSSKOPF, JA
I have had the benefit of reading the judgment of JANSEN JA but find myself in respectful disagreement

with

2

with his interpretation of clause 4 (b) of the contract
of sale. This clause, it will be recalled, reads as

follows:

"4. The agreement shall be subject to the following conditions:

(b) The lessor agreeing to give me a new lease of the premises for a period of 3 (three) years and - months and an option to renew the lease for a further period to be negotiated commencing at a rental agreed to by the buyer."

The crisp question on which I disagree with

the views of JANSEN JA relates to the meaning of the

words
3 words "the Lessor agreeing to give me a new lease". In my view these words in their ordinary sense require only that the lessor should, when approached, consent or agree to enter into a lease with the purchaser for a period of three years with an option to renew the lease as described by the clause. I do not think that the clause in its ordinary signification requires the actual conclusion of a contract of lease between the lessor and the purchaser.
I accept that the condition was inserted in the contract primarily for the benefit of the purchaser. This does not, however, in my view justify an interpretation which goes beyond the meaning of the words.

The
4 The willingness of the lessor to accept the purchaser as the lessee of the premises in itself provides some protection for the purchaser's interests, and there is no compelling reason suggested by the wording or context of the clause, the surrounding circumstances, or other relevant considerations, to suppose that the parties intended to provide any greater protection. The premises are described in the draft deed of lease, which the purchaser (respondent) ultimately did not sign, as "the first shop and interleading factory in the building known as World Centre, on the East side of the building in Fox Street, City and suburban, Johannesburg, presently occupied as a Dry Cleaning Depot and Dry

Cleaning
5 Cleaning Factory". The terms upon which business premises of this sort would be let could reasonably have been expected by the parties to conform to the ordinary standards of the market place. The parties may well have considered that, if the purchaser was acceptable as a lessee, there would be no difficulty with the terms of the lease. As I shall try to demonstrate later, no difficulty was in fact experienced in this regard.

Although

6 Although, as I have stated, I accept that clause 4(b) was inserted primarily in the interests of the purchaser, one should in considering the broader context of the contract (in so far as this may be relevant to its interpretation), not ignore the seller's interests. The seller sold his business and gave almost immediate occupation thereof to the purchaser. He had a clear interest in avoiding the possibility that the sale might be frustrated by the purchaser's unreasonable failure to conclude a contract of lease offered to her by the lessor. I do not think the court should be astute to ascribe a meaning to the clause which would permit the purchaser to achieve such a result.

To

7 To sum up, I consider that clause 4(b) required only that the lessor should express its agreement to grant a lease in accordance with the clause.
It may be accepted that this interpretation could in theory lead to difficult problems. What would happen, for instance, if the lessor were to indicate its willingness to enter into a lease but were to change its mind? And what is the legal effect (if any) of an "option" to renew a lease "for a further period to be negotiated commencing at a rental agreed to by the buyer?"

Such questions are, however, hypothetical. If they were to arise the parties or the court may have

to
8 to decide them, relying perhaps, in some cases, on implied terms. So, for instance, it may be implied that the lessor's willingness to accept the purchaser as a lessee should not be withdrawn, i.e, should persist up to the moment that the lessee is able to conclude the contract of lease. But be that as it may, the fact that the clause suffers from defects or may in particular situations be difficult to apply, does not in my view justify the court in making a new contract for the parties which is highly prejudicial to the seller.
The next question then is whether the condition has been fulfilled. Evidence on this issue was given by the appellant himself and by Mr. Levy, a

director
9 director of Trasu Properties (Pty) Ltd (Trasu) who was authorized to act on Trasu's behalf. The appellant testified that he made an appointment for the respondent and her husband to see Mr. Levy to discuss the lease. (According to Mr. Levy this was on 7 February 1980). The respondent herself did not attend the meeting, but it is not disputed that her husband was authorized to represent her. The appellant testified that "Mr. Levy went to great extents (sic ) to explain very carefully and very slowly, all the various clauses in the lease .... they discussed
the rental " In answer to the question: "Was
Mr. Levy prepared to give an option to renew? Did he communicate that?" the appellant said: "He was quite

prepared
10 prepared to give an option to renew for three years, it was on terms to be negotiated between Mr. and Mrs. da Couto and Mr. Levy who represented the company." The appellant testified further that the respondent's husband appeared to understand the explanation and seemed to be quite satisfied with the proposed terms of the lease. Although the appellant was questioned during cross-examination on the events at this meeting, it was not suggested to him that the evidence set out above was incorrect.

Mr. Levy's evidence was to the effect that
he had no clear independent recollection of the negotiations,
but that he had contemporary notes from which he re
freshed .

11

freshed his memory. In general he confirmed the evidence of the appellant that the terms of the proposed lease were discussed in detail with the respondent's husband and that "he accepted- it". Mr. Levy did not however recall that the period of the option was discussed. In regard to the option to renew he said: "Yes, I think it came up, and we said that we would be prepared to give an option for renewal, but the details and conditions of

it should have been discussed in due course".

On 24 February 1970 Mr. Levy and the plaintiff visited the respondent's husband. During this visit the respondent's husband agreed to sign a contract of suretyship in connection with the lease.

Subsequently
12 Subsequently, on Mr. Levy's instructions, a draft deed of lease was prepared by his attorneys. The option of renewal in this draft was only for a term of two years. In the light of the plaintiff's evidence this would appear to be a mistake, but in any event Mr. Levy testified that Trasu was prepared to give an option for three years if requested to do so. Mr. Levy's evidence on all these aspects was not challenged in cross-examination.
To sum up: according to the evidence of the appellant and Mr. Levy, Trasu offered to enter into a contract of lease with the respondent for the period and on the terms mentioned in clause 4(b) of the contract

of

13 of sale. In fact, on this evidence all the suggested
terms of the lease were quite acceptable to the respondent's husband. Not only, as I have mentioned, was this evidence not challenged in cross-examination but neither the respondent nor her husband disputed it - in fact, neither of them testified at all. On the evidence as a whole I conclude that compliance with the condition in clause 4(b) was established.
In support of this conclusion it is instructive to note when and how the respondent first contended that the condition had not been fulfilled. The contract of sale was concluded on 5 February 1980. On 7 February 1980 the respondent's husband negotiated with Mr. Levy concerning the

lease.

In
14 In the middle of February the respondent took occupation of the business. On 24 February the further meeting with Mr. Levy took place. Afterwards a dispute arose between the appellant and the respondent about the equipment and turnover of the business. On 5 April 1980 the appellant sent a registered letter to the respondent threatening action because, so it was alleged, she had failed to comply with several of her obligations under the contract of sale, including, inter alia, her obligation to sign the deed of lease which had been prepared by Trasu's attorneys. The respondent apparently did not reply to this letter. On 16 April 1980 the appellant's attorneys wrote a letter

to
15 to similar effect. To this letter the respondent's attorneys replied, raising three defences, viz., a) that the respondent was married in community of property, and that her husband had not signed the contract of sale; b) that the contract of sale, if valid at all, had been cancelled by mutual consent, and that a new contract was being negotiated; and c) that the new contract could not be finalized because the parties could not agree which of them was to be responsible for the repair of certain equipment. These defences were disputed by the appellant's attorneys in a letter dated 30 April 1980.

On 1 May 1980 the appellant's attorneys again wrote, reiterating that the respondent had committed

breaches

16

breaches of contract by, inter alia, failing to sign the lease, and threatening to cancel the contract of sale. The respondent's attorneys replied to this letter on 7 May 1980, persisting in the allegations set out in their letter of 21 April 1980. In the letter of 7 May the respondent's attorneys added the alternative defence "that in any event the provisions of clause 4(b) of the Agreement of Sale have not been fulfilled in that, inter alia, certain terms contained in the proposed lease are not applicable to our client". It should be noted that even at that stage she did not contend that it was her failure to sign the deed of lease which, per se, amounted to a non-fulfulment of the condition. Her

contention

17 contention then was that the condition failed because of her dissatisfaction with some of the terms of the draft.
I find it difficult to accept this contention at face value. The respondent had been in occupation of the premises for almost three months. There is no suggestion in the evidence that she had, at any stage, expressed any concern or dissatisfaction to the appellant or to Mr. Levy about the proposed terms of the lease. The defences first raised by her made no reference to the terms of the lease. When her attorney did eventually raise this issue, they did so apparently as an afterthought, without providing any particulars as to the terms which the respondent allegedly found

objectionable ..

18

objectionable. Neither in cross-examination of the appellant's witnesses, nor in evidence on behalf of the respondent, was the alleged inadequacy of the deed of lease raised. In all these circumstances I cannot accept that any weight is to be attached for any purpose to the bare allegation in the letter of 7 May that "certain terms .... are not acceptable". The inference seems to me to be inescapable that the respondent was attempting to secure her release from the contract of sale and for this purpose clutched at the straw which was provided by the non-completion of the lease. The whole history of the matter convinces me that the condition contained in clause 4 (b) had not only been

fulfilled

19

fulfilled as a matter of objective fact but also that the respondent fully realized this.
I would accordingly allow the appeal, and reinstate the magistrate's judgment. The respondent has argued that, if the appeal were to succeed, this Court should interfere with the magistrate's order for the payment of attorney and client costs by the respondent (defendant). The magistrate made this order because of the nature and quality of the defences raised by the respondent. It is accordingly necessary to consider the various bases upon which the respondent attempted to answer the appellant's claim. I have already referred to the letter of 21 April 1980 in which

the
20 the respondent's attorneys relied on the fact that she was married in community of property, and contended that the contract of sale had in any event been cancelled by mutual consent. As far as the respondent's marital status was concerned, the appellant's attorneys pointed out in reply that the respondent was a public trader and did not require her husband's assistance in concluding the contract. This became common cause at the trial, during which it also appeared that the respondent in fact enjoyed the assistance of her husband throughout all stages of the negotiations between the parties. The allegation that the contract had been cancelled by mutual consent was denied by the appellant's attorneys in their

letter

21 letter dated 13 April 1980, and was not pursued in the pleadings.
In their letter of 7 May 1980 the defendant's attorneys, as noted above, added the alternative defence that clause 4(b) had not been complied with in that certain terms in the proposed lease were not acceptable to the respondent. As I have indicated this suggested defence was in my view not only unsound but disengenuous.
In her plea, dated 15 September 1980, the defendant raised a number of defences. They may be summarised as follows:
(a) The condition in clause 4(b) was so vague as to be unenforceable and in the premises the contract

of

22

of sale was null and void;

(b) The said condition had not been fulfilled;

(c) The appellant had induced the contract
by fraudulent misrepresentations about the turnover of
the business; and
(d) The appellant had induced the contract
by fraudulent non-disclosure of defects in the equipment
which was used in the business which formed the subject
matter of the sale.
A further issue arose following on an amendment to the appellant's particulars of claim on 5 December 1980. Respondent denied in her amended plea that the condition in clause 4(c) of the contract of sale

(which

23

(which is quoted in the judgment of JANSEN JA) had been fulfilled, i.e., she denied that a trading licence had been granted to her.
In the result all the defences failed or were abandoned during the proceedings before the magistrate. The defendant admitted prior to the hearing that a licence had in fact been granted to her, and no serious attempt was made to substantiate the defences based on fraudulent misrepresentation and non-disclosure. All that remained were the two defences based on clause 4(b) of the contract. These defences failed, rightly in my view, before the magistrate. This brings me to the magistrate's reasoning in arriving at the conclusion

that

24 that an award of a attorney and client costs was justified. In this regard he stated:

"As already indicated the court considers the first two defences (i.e., those based on clause 4(b) of the contract) as unjustified. They are also frivolous and vexatious and the defendant has added insult and injury by recklessly and unjustifiably alleging falsity and fraud. No basis whatsoever has been laid for making such claims, no mention thereof was made in cross-examination, and the allegations have not been withdrawn. They are found to be malicious and vexatious."

I would not myself stigmatize the defences based

on clause 4(b) of the contract as frivolous and vexatious,
and in this respect I disagree with the magistrate.
The respondent's counsel contended that also the defence

based
25 based on fraudulent non-disclosure, although unproven, was not so unsubstantiated as properly to be described as malicious, frivolous or vexatious. I do not propose analysing the evidence on this aspect in detail. It appears that the appellant sold the business to one Pretorius in September 1977, from which time Pretorius operated it until the appellant repossessed it immediately prior to the sale thereof to the respondent. The appellant had no detailed knowledge of the machinery but was aware of some obvious defects which he mentioned to the respondent. Before giving occupation of the business to the respondent, the appellant, according to his undisputed evidence, arranged with the respondent

"that

26

"that Mr. Pretorius would work with them (the respondent and her husband) for a week or two weeks, and help them to operate the machinery and show them where everything is, as I know absolutely nothing about the machinery, in fact I don't even know where you turn the light on". In view of this background there would accordingly have been no reason for the respondent to assume that the appellant was aware of any defects which there may have been in the equipment other than those expressly mentioned to her. Pretorius was the man who had worked with it,
and he was made available to her to provide such infor-

mation about the equipment as she needed. Nonetheless

the respondent persisted until the end with the allegation

that
27 that the appellant had been guilty of fraudulent nondisclosure. I agree with the magistrate that this was malicious and vexatious. The magistrate's finding that the defence of fraudulent mis representation was also malicious and vexatious could not be seriously challenged. Although, as stated above, I consider that the magistrate was unduly severe in his strictures on the defences based on clause 4(b) of the contract, it seems that, in awarding attorney and client costs, he was influenced mainly by the reckless and unjustifiable allegations of falsity and fraud against the appellant. This was obviously a relevant feature. Moreover, the magistrate was also entitled, in my view,

to

28

to have had regard to the other spurious defences raised in the correspondence and the pleadings to which I referred above. The whole history of this matter shows, in my view, that the respondent raised every imaginable defence irrespective of its lack of foundation in the facts known to her or the seriousness of the misconduct imputed to the appellant. In these circumstances I consider that a award of attorney and client costs was fully justified.
In the result the appeal succeeds with costs, including the costs of two counsel. The order of the Transvaal Provincial Division is altered to read: Appeal dismissed with costs. The order of the magistrate

is

29

is re-instated, i.e. judgment is entered for the plaintiff for R800,00 with interest thereon at 11% per annum from 2 July 1980 to date of payment, and costs as between attorney and client.

E M GROSSKOPF, JA JOUBERT, JA ) Concur

HOWARD, AJA ) concur

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