O K Bazaars (1929) Ltd v Cash-In CC

• Jurisdiction: South Africa

O K Bazaars (1929) Ltd v Cash-In CC
1994 (2) SA 347 (A)

1994 (2) SA p347

Citation	1994 (2) SA 347 (A)
Case No	320/91
Court	Appellate Division
Judge	Hoexter JA, Vivier JA, Kumleben JA, Nienaber JA and Kriegler AJA
Heard	March 1, 1993; November 1, 1993
Judgment	December 2, 1993

Flynote : Sleutelwoorde B

Landlord and tenant — Lease — Renewal of — Clause (clause 3.1) providing that lessee 'shall have the right of renewing this lease . . .' provided 'the lessee shall have faithfully carried out the terms and conditions of this lease and provided the lessee is in no way in default hereunder at C the expiration of this lease' — Interpretation of — In seeking proper meaning to be assigned to clause 3, a South African Court untrammelled in its approach by any long-standing current of authority that an ordinary linguistic interpretation should yield to a time-honoured conventional construction — Upon a natural construction of words of clause 3, such D words not signifying that right of renewal dependent simply on lessee not being in default at time of expiry of lease — Language employed, construed literally, together with use of future perfect tense, suggesting that what was required was compliance with all terms and conditions of lease throughout lease period — What signatories to lease intended was that E first proviso was to relate to past, ie spent breaches, while second proviso was to cover subsisting breaches — Further clause (clause 13.1) providing for lessor's right to terminate lease on lessee's failure to remedy a breach thereof within seven days after being called upon in writing to do so — Non-fulfilment of either condition in clause 3.1 not to F be equated with cancellation of the lease — Clause 13.1 dealing with steps to be taken before lease could be cancelled during its currency on grounds of a breach by lessee; clause 3.1, on the other hand, affording lessee no more than conditional right to renew lease upon its expiry by effluxion of time — In latter case no question of bringing lease to an end — Word G 'faithfully' in clause 3.1 not to be equated with 'reasonably' — Had parties intended 'substantial' or 'reasonable' compliance only, they would have said so — However, 'faithful' performance by the lessee in the instant case could not predicate total absence of even a single breach of H the many and often burdensome terms and conditions of a complex contract — So to interpret clause 3 would be to import an unrealistic standard of near perfection — Words in which first proviso couched naturally and reasonably susceptible of indicating a test less onerous to the lessee, which required the making of a value judgment as to the broad merits and demerits of the lessee, based on an objective assessment of the lessee's I whole conduct and overall performance of its contractual obligations during the currency of the lease — Lessee having failed for four years in succession to deliver to lessor, as required by lease, auditor's certificate of its turnover for calculation of additional rental — Lessee J failing to fulfil condition precedent in clause 3.1 entitling it to

1994 (2) SA p348

A renewal of lease and accordingly having no right to renewal of lease.

Headnote : Kopnota

In terms of an agreement of lease entered into between the respondent (as lessor) and the appellant (as lessee) in respect of certain premises, the appellant was given an option to renew the lease at the expiration thereof B provided that certain conditions had been fulfilled. Clause 3.1 of the lease provided as follows: 'Provided the lessee shall have faithfully carried out the terms and conditions of this lease and provided the lessee is in no way in default hereunder at the expiration of this lease, then the lessee shall have the right of renewing this lease for a further period of nine years and 11 months . . .'. The appellant had exercised the option within the time prescribed by clause 3.2, but the respondent had refused to renew the lease, contending that the appellant was not entitled C thereto as it had breached various terms of the lease. The respondent thereupon instituted an action in a Provincial Division for an order declaring that the appellant was not entitled to exercise the right of renewal, it being common cause that the appellant had failed for four successive years to deliver to the respondent, as required by clause 6.6 of the lease, an auditor's certificate within three months after the end of the lease year setting out its net annual turnover for the purpose of D calculating the additional amount of rental payable in terms of the lease. Applying the decision of the Natal Full Court in Seaborn v Smith 1955 (4) SA 339 (N) at 343D-344A and the decision in Naicker v Pensil 1967 (1) SA 198 (N) and distinguishing for this purpose the decision of the English Court of Appeal in Bass Holdings Ltd v Morton Music Ltd [1987] 2 All ER 1001 (CA), the Court a quo interpreted the provisions of clause 3 as meaning that in order that the lessee might be entitled to a renewal (i) notice must have been given in terms of clause 3(2); (ii) the lessee must E in no way have been in default under the lease at its expiration; and (iii) as at that date the lessee must have faithfully carried out the terms and conditions of the lease. The Court went on to find that in the light of the meaning assigned by it to clause 3.1, and having regard to the persistent nature of the appellant's breach of the provisions of clause 6.6, the appellant had no right to a renewal of the lease.

On appeal the appellant contended: (1) with heavy reliance on the decision F in Bass Holdings Ltd v Morton Music Ltd (supra), that upon a proper construction of clause 3.1, the effect of the first proviso therein was to preclude the lessee from exercising the right to renewal only if any previous breaches had been left unremedied on the expiry of the lease and that on such expiry the appellant was no longer in breach of the terms of the lease; the appellant sought, in this regard, to detect a significant difference between the wording of the relevant clause in Seaborn v Smith (supra) ('The lessee observing all the terms . . .') and the use of the G future perfect tense ('shall have faithfully carried out the terms and conditions . . .') in clause 3.1 of the lease under consideration; (2) that, even if the first proviso in clause 3.1 embraced spent breaches, only such spent breaches as were material sufficed to preclude the lessee's right of renewal; in this connection the appellant invoked clause 13.1 of the lease (which provided for the termination of the lease by the respondent in the event of the appellant failing to remedy a breach of the H lease within seven days of being called upon by written notice from the respondent to do so), and argued that since the respondent had never given the appellant written notice in terms of clause 13.1 to remedy its breach under clause 6.6, the appellant was entitled to renew the lease notwithstanding any breach it may have committed during the currency of the lease; and (3) that upon a proper construction of clause 3.1, the word 'faithfully' should be taken to mean no more than 'reasonably', and that the appellant's delivery of the auditor's certificate, although belated and technically in breach of clause 6.6, represented a reasonable carrying I out by the appellant of its obligations under clause 6.6.

Held, as to (1), that in seeking the proper meaning to be assigned to clause 3, a South African Court was untrammelled in its approach by any long-standing current of authority such as that which in England decreed that an ordinary linguistic interpretation should yield to a time-honoured conventional construction. (At 358G.)

Held, further, that upon a natural construction of the words of clause 3 they did not signify that the right of renewal was dependent simply on the J lessee not being in default at

1994 (2) SA p349

A the time of the expiry of the lease; the intention behind clause 3.1 was manifest: the clause reflected, upon the part of the lessor, an understandable aversion to being saddled, after the ordinary expiry of the lease and for a further period of nine years and 11 months, with a lessee whose performance of its obligations during the ordinary currency of the lease had been unsatisfactory; the language of the clause meant no less than that in considering whether the prerequisite for renewal had been established, the lessee's whole track record up to the date of the expiry B of the lease was relevant. (At 358G/H-I/J.)

Held, further, as to appellant's attempt to detect a significant difference between the wording of the relevant clause in Seaborn v Smith (supra) and the use of the future perfect tense in clause 3.1 in the present matter, that, upon an ordinary grammatical construction of clause 3.1, the use of the future perfect served, if anything, to lay emphasis upon the prediction of future conduct in the light of past performance. C (At 359A-B/C.)

Held, further, that subject to an important qualification to be mentioned hereafter, the Court found itself in agreement with the conclusions reached by the Court a quo to the effect that the language employed, construed literally, together with the use of the future perfect tense, suggested that what was required was compliance with all the terms and conditions of the lease throughout the lease period: it was clear that what the signatories to the lease intended was that the first proviso was to relate to past, ie spent breaches, while the second proviso was to D cover subsisting breaches. (At 359B/C-E.)

Held, further, that appellant's main contention, based on the Bass Holdings case supra, could accordingly not be sustained. (At 359E.)

Held, further, as to (2), that this argument was misconceived, in that it...