O K Bazaars (1929) Ltd v Grosvenor Buildings (Pty) Ltd and Another

• Jurisdiction: South Africa
• Citation: 1993 (3) SA 471 (A)

O K Bazaars (1929) Ltd v Grosvenor Buildings (Pty) Ltd and Another
1993 (3) SA 471 (A)

1993 (3) SA p471

Citation	1993 (3) SA 471 (A)
Court	Appellate Division
Judge	E M Grosskopf JA, Milne JA, F H Grosskopf JA, Howie AJA and Van Coller AJA
Heard	March 16, 1993
Judgment	April 1, 1993

Flynote : Sleutelwoorde B

Landlord and tenant — Lease — Interpretation of — Twenty-year lease providing that in eighth year rental payable 'shall be the market rental' to be determined by agreement; failing agreement, by valuers appointed by C each party; failing agreement between valuers, by appointment of third valuer as umpire; and, failing all else, by arbitration — Further provision (in clause 3.3.2) that 'if a party . . . fails to nominate its valuer' rental to be 125% of that payable in last month of seventh year — Rental fixed in eighth year influencing rental for remainder of lease — Landlord demanding non-negotiable escalation of 25% in eighth year — D Tenant not agreeing and appointing valuer — Landlord refusing to appoint valuer and, relying on such refusal, demanding rental based on 25% escalation — Tenant cancelling lease — Court holding that terms of lease clear that rental in eighth year to be market rental ascertained in terms E of contract — If parties intended automatic 25% escalation, they would have said so without making elaborate provision for fixing market rental — Court concluding that 'party' in clause 3.3.2 intended to apply to tenant only — Landlord thus not entitled to obtain 25% escalation by refusing to appoint valuer — Landlord's conduct amounting to repudiation, F entitling tenant to cancel.

Headnote : Kopnota

The appellant, as tenant, hired a building for 20 years from the first respondent, as landlord. In terms of their agreement of lease the rental for the first year was fixed and was to escalate by specified rates during the second to seventh years. Clause 3.2 of the lease provided that '(i)n the eighth year . . . the rental payable shall be the market rental G ascertained as provided hereunder or 125% of that payable in the last month of the seventh year, whichever is the lesser, provided that in no circumstances shall the rental be less than that payable in the last month of the seventh year of the lease'. Clause 3.3 made provision for the manner in which the market rental was to be determined: in terms of clause 3.3.1 the parties were first to try to reach agreement; failing agreement, each was to nominate a commercial valuer to determine the revised rental; if the valuers disagreed, they were to appoint a third valuer to act as H umpire; and, failing all else, the matter was to be referred to arbitration. Clause 3.3.2 provided that '(i)f a party . . . fails to nominate its valuer . . . the monthly rental . . . shall be 125% of that payable in the last month of the seventh year of the lease'. The rental in the eighth year was to provide the base from which the rental was to escalate from the ninth to fourteenth years; in the fifteenth year the rental was to be determined in accordance with the procedure laid down in clauses 3.2 and 3.3, whereafter the rental for the sixteenth to twentieth I years would escalate from the base rental determined in the fifteenth year.

The eighth year of the lease was due to commence on 1 July 1990. Discussions about the revised rental commenced some months prior thereto. The landlord adopted the attitude that it was entitled to a 25% increase; that such increase was non-negotiable; and that it would be a waste of time and money to employ valuers. The tenant's attitude was that there should be no increase; it expressed its willingness to continue negotiations but, in the face of the landlord's intransigence, appointed J its

1993 (3) SA p472

A valuer on 8 February 1990. The landlord declined to appoint a valuer and, relying on clause 3.3.2 of the lease, advised the tenant that the monthly rental from 1 July 1990 would be 125% of that payable in the last month of the seventh year of the lease. The tenant responded by terminating the lease on the ground that the landlord had prevented the rental from being determined in breach of its (the landlord's) obligations in terms of clause 3.3.

The landlord issued a notice of motion claiming payment of rental for July B to October 1990. It denied that the contract had been validly cancelled, contending that the word 'party' in clause 3.3.2 could mean either the landlord or the tenant and, since the landlord had failed to appoint a valuer, it was automatically entitled to claim the maximum increase. The tenant opposed the matter, contending that the landlord's incorrect interpretation of clause 3.3.2 had amounted to a repudiation of the contract which the tenant had accepted. A Local Division upheld the C landlord's argument. In an appeal,

Held, that if 'party' in clause 3.3.2 were to mean either the landlord or the tenant then, in order to obtain the maximum rental, the landlord could simply refuse to appoint a valuer, as had been done in this instance.

Held, further, that the provisions of clauses 3.2 and 3.3 made it abundantly clear that, unlike in the previous years when there had been a D fixed escalation, the rental payable in the eighth year would be a market rental, ascertained in terms of the contract, subject to a maximum and a minimum: if the parties had intended an automatic escalation of 25% they would have said so, without having to make elaborate provision for fixing a market rental.

Held, further, that it seemed bizarre to suggest that the parties would have used clause 3.3.2, which did not define the rental for the eighth year and only came into effect if the procedures prescribed by clause E 3.3.1 failed, as a setting for a provision laying down the rental to the exclusion of everything preceding it.

Held, accordingly, that the word 'party' in clause 3.3.2, in the context, had to have been intended to apply only to the tenant.

Held, further, as to whether the landlord's refusal to appoint a valuer and its demand for rental based on an escalation of 25% had amounted to a repudiation entitling the tenant to cancel the contract, that the F interpretation of clauses 3.2 and 3.3 in the eighth year of the contract had been of vital importance in fixing the rental for the remaining period of the lease.

Held, further, that the landlord's refusal to comply with those provisions had, in the circumstances, amounted to a repudiation of the contract, which repudiation the tenant had been entitled to accept. The appeal was accordingly allowed.

The decision of the Witwatersrand Local Division in Grosvenor Buildings (Pty) Ltd and Another v O K Bazaars (1929) Ltd reversed. G

Case Information

Appeal from a decision in the Witwatersrand Local Division (MacArthur J). The facts appear from the judgment of E M Grosskopf JA.

H Z Slomowitz SC (with him M C Goldblatt) for the appellant referred to the following authorities: Kirsh v Willets 1930 EDL 9; Gillig v Sonnenberg H 1953 (4) SA 675 (T); Dublin v Diner 1964 (1) SA 799 (D); Grey v Pearson (1857) 10 ER 1216 at 1234; Swart en 'n Ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C; Christie The Law of Contract in South Africa 2nd ed at 172, 174-5, 245-6, 251, 587-8, 607, 610-2; Jaga v Dönges 1950 (4) SA 653 (A) at 662H; Sassoon Confirming & Acceptance Co (Pty) Ltd v Barclays National Bank Ltd 1974 (1) SA 641 (A) at 646B-C; Cameron v Getz 1945 WLD I 92 at 100-1; Halsbury's Laws of England vol 12 para 1502; Wolmarans and Another v Tuckers Land & Development Corporation (Pty) Ltd 1979 (1) SA 663 (T) at 668G-H; and on appeal, see 1980 (3) SA 961 (T) at 968A-B; Gravenor v Dunswart Iron Works 1929 AD 299 at 303; Scottish Union & National Insurance Co Ltd v Native Recruiting Corporation Ltd 1934 AD 458 at 465-6; Chitty on Contracts, General Principles 24th ed para 766; Wessels The Law J of Contract in South Africa

1993 (3) SA p473

A 2nd ed vol 1 para 1908; Cheall v Association of Professional Clerical Executive & Computer Staff [1983] 1 All ER 1130; Alghussein Establishment v Eton College [1991] 1 All ER 267 (HL); Scott v Poupard 1971 (2) SA 373 (A) at 378G; Design and Planning Service v Kruger 1974 (1) SA 689 (T) at 700G; Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A) B at 242B-C; Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634E-635C; Janowsky and Others v Payne 1989 (2) SA 562 (C) at 564H-565A; Vromolimnos (Pty) Ltd and Another v Weichbold and Another 1991 (2) SA 157 (C) at 161I-162I, 163D; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 436 ([1957] 2 All ER 70); Ponisammy and Another v Versailles Estates (Pty) Ltd 1973 (1) SA 372 (A) C at 387A-C; Tuckers Land & Development Corporation (Pty) Ltd v Hovis 1980 (1) SA 645 (A) at 653A-E; Van Rooyen v Minister van Openbare Werke en Gemeenskapsbou 1978 (2) SA 835 (A) at 845, 846A; Schlinkmann v Van der Walt and Others 1947 (2) SA 900 (E) at 919; Federal Commerce & Navigation Ltd v Molena Alpha Inc and Others (the Nanfri) [1978] 3 All ER 1066 (CA) D at 1081h-1082d; [1979] 1 All ER 307 (HL) at 313j-314g; Culverwell and Another v Brown 1990 (1) SA 7 (A) at 13, 14; Moodley and Another v Moodley and Another 1990 (1) SA 427 (D) at 431; Edengeorge (Pty) Ltd v Chamomu Property Investments (Pty) Ltd 1981 (3) SA 460 (T); Collen v Rietfontein Engineering Works 1948 (1) SA 413 (A); Vorster Bros v Louw 1910 TPD 1099; E Strydom v Die Land- en Landboubank van Suid-Afrika 1972 (1) SA 801 (A) at 812G-H; Mphosi v Central Board for Co-operative Insurance Ltd 1974 (4) SA 633 (A) at 645; S v Naidoo 1985 (1) SA 36 (N) at 43A-D; Textile Workers' Industrial Union (SA) and Another v Fabricius NO and Others 1986 (4) SA 998 (T) at 1002-3; Ongevallekommissaris v Die Meester en Andere 1989 (4) SA 69 (T) at 75-6; Greer v McHarry 1938 WLD...