CCT: 70/2020 SCA Case No:1160/2018
In the matter between:
UNIVERSITY OF JOHANNESBURG Applicant
and
AUCKLAND PARK THEOLOGICAL SEMINARY First Respondent WAMJAY HOLDINGS INVESTMENTS
(PTY) LTD Second Respondent
APPLICANT’S HEADS OF ARGUMENT
TABLE OF CONTENTS
INTRODUCTION 3
The parties 3
The leased premises 3
The Lease Agreement 4
The cession to Wamjay 9
UJ’s termination of the Lease Agreement 10
The litigation 11
The structure of our heads of argument 12
THE RIGHTS UNDER THE LEASE AGREEMENT CANNOT BE CEDED 14
The conflation in the SCA judgment 14
The SCA erred in failing to have regard to the context of the Lease
Agreement 17
The SCA’s reliance on the integration rule was misplaced 20 The SCA’s reliance on the interpretation rule was incorrect 22 What is shown by the evidence regarding context 29
Clause 8 of the Lease Agreement 34
Conclusion 36
ATS REPUDIATED THE LEASE AGREEMENT 37
LEAVE TO APPEAL SHOULD BE GRANTED 40
RELIEF SOUGHT 42
INTRODUCTION
The parties
1 The applicant (“UJ”) is a public higher education institution. It was established in terms of section 23(1) of the Higher Education Act 101 of 1997 (“the Higher Education Act”). It is the legal successor to the Rand Afrikaans University (“RAU”), which was established in terms of the Rand Afrikaans University Act 51 of 1966 (“the RAU Act”). With effect from 1 January 2005, RAU and the Technikon Witwatersrand merged to form UJ.
2 The first respondent (“ATS”) is an entity that provides theological training to students who seek careers as pastors of the Apostolic Faith Mission of South Africa. It was previously known as the Apostolic Faith Mission of South Africa Theological College.
3 The second respondent (“Wamjay”) is a private company. It is not involved in the provision of higher education.
The leased premises
4 UJ is the registered owner of Portion 1 of Erf 809, Auckland Park Township, Registration Division I.R., Province of Gauteng (“the
leased premises”). The leased premises are situated at 51 Richmond Avenue, Auckland Park, Johannesburg.
5 The leased premises form part of Erf 809. Erf 809 was expropriated from the Johannesburg Country Club in order to afford RAU additional land to establish its campus. Due to growing demands for student accommodation, RAU constructed its Sophiatown residence on the remaining portion of Erf 809, directly opposite its Auckland Park/Kingsway campus. The leased premises are located between the Sophiatown residence and ATS’s existing buildings and facilities.
6 The leased premises are currently vacant.
7 There is no other available land in the vicinity of the Kingsway campus that allows for expansion to meet the growing demands for student accommodation. The leased premises are therefore seen as a critical resource. UJ intends to use the leased premises for much-needed student accommodation.
The Lease Agreement
8 In the early 1990’s, RAU and ATS sought to achieve a collaboration that would involve offering higher education degrees to students at
both institutions. The degrees were BA (Theology); BA Honours (Theology); MA (Theology); and D Litt et Phil (Theology).
9 The common interests of RAU and ATS found expression in a co-operation agreement that was concluded on 7 June 1993 (“the Co-operation Agreement”).1 The Co-operation Agreement was authorised by section 10B(1) of the Universities Act 61 of 1955 (“the Universities Act”), which empowered RAU to conclude agreements with other institutions – such as ATS – involved in the provision of higher education. The Co-operation Agreement provided that students registered for theological degrees would be taught some courses by RAU and other courses by ATS.2 The students would pay fees to RAU, which would in turn pay over some of the money to ATS.3
10 In 1995, further negotiations took place between RAU and ATS arising from ATS’s requirement to acquire property on which it could construct a theological college in order to meet growing demands.
The purpose of those negotiations was expressed in a letter dated 5
1 Volume 1 pages 18-30.
2 Volume 1 pages 26 to 29.
3 Volume 1 page 22 clause 2.4 read with definition of “kollegagelde” in clause 1.
June 1995,4 in which ATS stated as follows with reference to what ultimately became the leased premises (our translation from Afrikaans):
“It is confirmed that the primary purpose of the AGS Theological College is to build and develop a synergy with RAU so that the two institutions can serve and support one another in a symbiotic relationship. We are in accord that the agreement which is existence between our two institutions [i.e. the Co- operation Agreement] forms the basis for the negotiations for the purchase of the abovementioned property.”5
11 At the time of the negotiations, the entitlement of RAU to lease immovable property was governed by section 4(2) of the RAU Act.
It provided as follows:
“The university shall not without the approval of the Minister let, sell, exchange or otherwise alienate its immovable property or grant to any person any real right therein or servitude thereon.”
12 On 25 April 1996, RAU applied to the Minister of Education for approval to lease parts of its land for various purposes. Some of the envisaged leases were with parties who were not identified in
4 Volume 6 page 539 lines 8-11.
5 Our underlining. (“Dit word bevestig dat dit groot erns van die AGS Teologiese Kollege is om die sinergie met RAU uit te bou en te bevorder sodat die twee inrigtings in volkome simbiose mekaar kan dien en ondersteun. Ons is dit eens met u dat dié ooreenkoms wat tussen ons twee inrigtings bestaan, die grondslag vir die onderhandelings vir die aankoop van bogenoemde grond is.”) At this stage, it was anticipated that the property would be sold to ATS.
the application. When it came to the envisaged lease with ATS, however, the application was specific:
“3.4 THE THEOLOGICAL COLLEGE OF THE APOSTOLIC FAITH MISSION OF SOUTH AFRICA
The Apostolic Faith Mission of South Africa urgently needs property, in the vicinity of our university to build their Theological College. The students will come from multi-cultural backgrounds and the College will be responsible for the training of all future pastors of the Apostolic Faith Mission of South Africa. They have identified property owned by our university as the most suitable site for erecting their Theological College. We would like to extend a helping hand to them by letting this property to them over a period of 30 years. See Detail Drawing E1 for details of the relevant area for this project.”6
13 The Minister was therefore asked to authorise RAU to let the leased premises to a particular person (ATS) for the purpose of enabling that particular person to establish a theological college on the premises.
14 On 18 June 1996, the Minister of Education granted permission to RAU to let the leased premises in the terms sought in its application.7
6 Volume 1 page 34 para 3.4 (our underlining). The drawing referred to in the final sentence appears at volume 1 page 31. The detail of the development to be undertaken at the site appears at volume 1 page 37.
7 Volume 1 page 39.
15 On 6 December 1996, RAU and ATS concluded a written notarial long-term lease (“the Lease Agreement”).8 The Lease Agreement was registered against the Title Deed on 20 December 1996.9
16 The Lease Agreement was signed on behalf of RAU by Carl David Labuschagne, whose authority was described as follows (our translation from Afrikaans):10
“… and in terms of an authority granted him by the RAU Council held on 22 April 1996 of which a certified copy is currently in my Protocol, as read together with the authorisation provided by the Minister of Education of the Republic of South Africa dated 18 June 1996, of which a certified copy is currently in my Protocol”.
17 The lease was to endure for an initial period of thirty years and would be renewable for thirty-year periods on written notice by ATS given six months prior to the expiry of the previous thirty-year period.11 ATS paid RAU a once-off rental of R700 000.12
8 Volume 1 pages 40-56.
9 Particulars of claim (“POC”) volume 1 page 8 para 9.8
10 Volume 1 pages 40-41, our underlining (“… en in terme van 'n volmag aan hom verleen deur die Raad van RAU gehou op 22 April 1996 waarvan 'n gesertifiseerde afskrif tans in my Protokol berus, soos saamgelees met die goedkeuring soos verleen deur die Minister van Onderwys van die Republiek van Suid-Afrika gedateer 18 Junie 1996, waarvan 'n gesertifiseerde afskrif tans in my Protokol berus”).
11 Volume 1 page 45 clauses 5.1 and 5.2.
12 Volume 1 page 46 clause 6.1.
18 Clause 8.1 of the Lease Agreement is of particular importance for present purposes. It provides as follows (our translation from Afrikaans):13
“The Leased Premises shall be used by the Lessee for educational, religious, and associated purposes, erection of a campus for education, training, research and tuition, offices and student facilities.”
19 To give effect to clause 8.1, the Lease Agreement affords ATS the right to erect buildings and improvements and to perform landscaping for the purpose of the agreed use of the leased premises, subject to written approval by the Registrar of RAU.14
The cession to Wamjay
20 Notwithstanding the wording of clause 8.1, ATS did not establish a theological college on the leased premises. Instead, ATS ceded its rights under the Lease Agreement to Wamjay by means of a written cession dated 28 March 2011.15 Wamjay paid R6.5 million to ATS
13 Volume 1 page 46 (“Die Huurterrein sal gebruik word deur die Huurder vir opvoedkundige, godsdienstige, en aanverwante doeleindes, oprigting van kampus vir onderwys, onderrig, navorsing, opleiding, kantore en studentfasiliteite”).
14 Volume 1 page 47 clause 8.2.
15 Volume 1 pages 57-66.
for the acquisition of the right to take possession of the leased premises.16
21 On 13 October 2011, ATS and Wamjay concluded a notarial deed of cession that notarially confirmed the cession of the rights under the Lease Agreement.17
22 Wamjay intends to establish a religious-based school for primary and high school education on the leased premises. Wamjay does not intend to conduct any form of higher education on the leased premises.
23 Neither ATS nor Wamjay notified UJ of the cession or the subsequent notarial cession agreement. The contents of those agreements came to UJ’s attention on 2 October 2012 and 31 August 2012 respectively. ATS and Wamjay did not seek Ministerial approval for either agreement.
UJ’s termination of the Lease Agreement
24 When it learned of the cession between ATS and Wamjay, UJ adopted the stance:
16 Volume 1 page 60 clause 6.1.
17 Volume 1 pages 67-69.
- that the rights in the Lease Agreement are personal to ATS;18
- that ATS had repudiated the Lease Agreement by purporting to cede rights to Wamjay in circumstances where those rights were incapable of cession;19 and
- that ATS had divested itself of the ability to give effect to the agreed use of the property in terms of clause 8.1 of the Lease Agreement.20
25 UJ accepted ATS’s repudiation on 5 October 2012 and cancelled the Lease Agreement.21
The litigation
26 ATS and Wamjay disputed UJ’s right to cancel the Lease Agreement.
27 The dispute led to the institution by UJ of an action in the High Court in which it sought orders that ATS and Wamjay be evicted from the leased premises.
18 Volume 1 page 13 para 23.2.
19 Volume 1 page 13 para 23.2.
20 Volume 1 page 13 para 23.1.
21 Volume 1 page 13 para 24.
28 Victor J found in UJ’s favour.22
29 ATS and Wamjay appealed to a Full Court. The appeal was heard by van Oosten J, Carelse J and Wright J, who dismissed the appeal.23
30 ATS and Wamjay appealed to the SCA, which upheld the appeal.24
The structure of our heads of argument
31 Our heads of argument are organised as follows:
31.1 We begin by dealing with the question whether the rights under the Lease Agreement are cedable. We submit that the rights are personal to ATS and are incapable of being ceded.
31.2 We deal next with the consequence of the fact that the rights are not cedable. We submit that ATS repudiated the Lease Agreement by purporting to cede rights to Wamjay in circumstances where this incapacitated ATS from giving effect to the agreed use of the leased premises. UJ accepted
22 Volume 9 pages 847-869.
23 The judgment of van Oosten J and Carelse J appears at volume 9 pages 888- 894 and the judgment by Wright J (who dismissed the appeal on different grounds) is at pages 895-899.
24 Volume 9 pages 905 to 911.
the repudiation and cancelled the Lease Agreement. Since the Lease Agreement has been terminated, UJ is entitled to an order evicting ATS and Wamjay from the leased premises.
31.3 We deal then with the application for leave to appeal. We submit that it is in the interests of justice to grant UJ leave to appeal.
31.4 We conclude with the relief sought by UJ. We submit that leave to appeal should be granted and that the appeal should succeed.
THE RIGHTS UNDER THE LEASE AGREEMENT CANNOT BE CEDED
The conflation in the SCA judgment
32 In principle, there are two ways in which a creditor may be prohibited from ceding a contractual right:
32.1 First: the contract may contain a term that prevents a creditor from ceding a right without the debtor’s consent. Such a term is sometimes referred to in Latin as a pactum de non cedendo (literally translated as “an undertaking not to cede”).
32.2 Second: the right may be so personal in nature to the creditor that it is incapable of being ceded without the debtor’s consent. This is sometimes referred to in Latin as delectus personae (literally translated as “choice of person”).
33 These are two discrete mechanisms.25 As we explain below, the application of each mechanism depends on different considerations.
25 Propell Specialised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC 2019 (2) SA 221 (SCA) para 17. LAWSA volume 3 “Cession” (3 ed) para 165 explains that “[d]electus personae should not be confused with a pactum de non cedendo although there may be many instances where, in circumstances of delectus personae, a tacit pactum de non cedendo can readily be implied”.
34 In order to decide whether a pactum de non cedendo exists, it is necessary to ask whether the contract creating the right contains an express or tacit term that prohibits cession of the right.
35 In order to decide whether the principle of delectus personae applies, it is necessary to ask something different, namely whether
“the nature of contractual rights flowing from the [contract] is such that it excludes the transfer of the personal rights created”.26 In other words, the enquiry turns on the nature of the right that is sought to be ceded by the creditor:
35.1 From the perspective of the debtor, the enquiry may be formulated as follows:27
“The question whether a claim (that is, a right flowing from a contract) is not cedable because the contract involves a delectus personae falls to be answered with reference, not to the nature of the cedent’s obligation vis-à-vis the debtor, which remains unaffected by the cession, but to the nature of the debtor’s obligation vis-à-vis the cedent, which is the counterpart of the cedent’s right, the subject-matter of the transfer comprising the cession. The point can be demonstrated by means of the lecture-room example of a contract between master and servant which involves the rendering of personal services by the
26 Propell Specialised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC 2019 (2) SA 221 (SCA) para 17.
27 Densam (Pty) Ltd v Cywilnat (Pty) Ltd 1991 (1) SA 100 (A) at 112A-D (our underlining).
servant to his master: the master may not cede his right (or claim) to receive the services from the servant to a third party without the servant’s consent because of the nature of the latter’s obligation to render the services; but at common law the servant may freely cede to a third party his right (or claim) to be remunerated for his services, because of the nature of the master’s corresponding obligation to pay for them, and despite the nature of the servant’s obligation to render them.”
35.2 In other words, the question is whether it makes “any difference to the debtor whether it is the cedent or the cessionary who is entitled to enforce the contract”.28 If the answer is “yes”, then the contract involves a delectus personae.
35.3 Another way of approaching the enquiry is to ask whether the cession of the right by the creditor would prejudice the debtor.
It has been held that the restriction on cession “imposed by the delectus personae concept is simply a manifestation of the general principle that the cession should not disadvantage the debtor”.29
28 Densam (Pty) Ltd v Cywilnat (Pty) Ltd 1991 (1) SA 100 (A) at 112G. See also Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 31G-H.
29 Goodwin Stable Trust v Duohex (Pty) Ltd 1998 (4) SA 606 (C) at 617I-J.
36 We respectfully submit that the SCA conflated the two enquiries referred to above.30 The SCA appeared to reason that, since there was no express clause in the Lease Agreement prohibiting the cession of ATS’s rights, it followed that “on a proper interpretation, the rights on [sic] the lease were not at all delectus personae and personal to ATS and thus incapable of cession”.31 But that is a non sequitur because the conclusion does not follow from the premises.
The fact that the Lease Agreement does not contain an express term prohibiting cession does not justify the conclusion that the rights are not by their nature personal to ATS.
37 This conflation meant that the SCA itself asked the wrong question when it came to determining whether the rights under the Lease Agreement are capable of being ceded.
The SCA erred in failing to have regard to the context of the Lease Agreement
38 We have submitted that the question the SCA was required to address was whether the rights in the Lease Agreement are
30 The respondents engage in the same conflation: see answering affidavit in the application for leave to appeal volume 10 page 997 para 25.7 and page 1002 paras 29.4 to 29.6.
31 Volume 9 page 910 para 11.
incapable of cession because they are by their nature personal to ATS. This required the Lease Agreement to be interpreted in accordance with the general principles relating to interpretation of contracts.32
39 Evidence was led on behalf of UJ that covered the background to, and the context of, the Lease Agreement. The purpose of the evidence was to shed light on the nature of the rights in order to show that they are personal to ATS. In other words, the purpose of the evidence was to show that it does indeed make a difference to UJ whether the rights under the Lease Agreement are vested in ATS or in someone else.
40 The SCA declined to have regard to any of the evidence regarding background and context. It found that the evidence was “plainly inadmissible and should have been disallowed by Victor J”.33 The SCA offered two reasons for this finding (although it did not clearly distinguish between them):
32 Propell Specialised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC 2019 (2) SA 221 (SCA) para 20.
33 Volume 9 page 910 para 10.
40.1 The first reason was that the evidence was inadmissible on account of “the integration or parol evidence rule”.34
40.2 The second reason was that “in deciding the meaning of a contract, the court must have regard to the words used” and
“the words must be construed objectively”.35
41 These two reasons reflect Corbett JA’s classic description of the two components of the parol evidence rule:36
“… the parol evidence rule is not a single rule. It in fact branches into two independent rules, or sets of rules: (1) the integration rule, … which defines the limits of the contract, and (2) the rule, or set of rules, which determines when and to what extent extrinsic evidence may be adduced to explain or affect the meaning of the words contained in a written contract: see, for example, the exposition by SCHREINER JA in Delmas Milling Co. Ltd. v Du Plessis, 1955 (3) SA 447 (AD), at pp 453-5. (For convenience I shall call this latter rule ‘the interpretation rule’.)”
42 We shall employ the terminology of Corbett JA below. For the reasons that follow, we respectfully submit that neither the integration rule nor the interpretation rule justified the SCA’s decision to decline to have regard to evidence regarding the context of the Lease Agreement.
34 Volume 9 page 910 para 10.
35 Volume 9 page 910 para 11.
36 Johnston v Leal 1980 (3) SA 927 (A) at 943A-B.
The SCA’s reliance on the integration rule was misplaced
43 In its judgment, the SCA summarised the integration rule as meaning that “when a contract has been reduced to writing, the writing is regarded as the exclusive embodiment or memorial of the transaction and no extrinsic evidence may be given of other utterances or jural acts by the parties which would have the effect of contradicting, altering adding to or varying the written contract”.37 The SCA found that the evidence led by UJ contravened the integration rule because “such evidence was introduced to add to, vary or contradict the general words of the lease”.38
44 We respectfully submit that this finding was incorrect because the evidence regarding context did not seek to “add to, vary or contradict” the Lease Agreement:
44.1 The evidence led by UJ sought to shed light on the nature of the rights created by the Lease Agreement in order to show that those rights are personal to ATS. Evidence of this nature does not fall foul of the integration rule since it does not seek
37 Volume 9 page 908 para 7.
38 Volume 9 page 910 para 10.
to add to, vary or contradict the general words of the Lease Agreement.
44.2 In any event, the Lease Agreement is silent as regards whether cession is permitted. The situation is therefore the same as in National Board,39 where the Appellate Division held that
“the power of attorney in question is silent in regard to the duration thereof and the parol evidence rule cannot accordingly operate to exclude evidence as to the prior oral agreement between Swanepoel and Brigish, which provides for such a limitation, for such evidence does not add to, vary or contradict the general words of the power of attorney”.40
45 If the integration rule were to apply in this situation, it would mean that the doctrine of delectus personae would almost never find application. Delectus personae normally applies in circumstances where a contract is silent regarding the cedability of contractual rights. Where the contract is silent on the topic, it will inevitably be necessary to have regard to contextual evidence in order to assess whether the rights are personal in nature. If evidence of this nature were inadmissible, there would be little room for the principle of
39 National Board (Pretoria) (Pty) Ltd v Estate Swanepoel 1975 (3) SA 16 (A).
40 At 26D-E.
delectus personae at all. This appears to be the logical consequence of the SCA’s finding that the principle of delectus personae did not apply because “there was nothing in the lease itself that shows that ATS’ rights under the lease were not intended to be ceded”.41
46 For all of these reasons, we submit that the integration rule found no application in the present case.
The SCA’s reliance on the interpretation rule was incorrect
47 The SCA also held that the evidence regarding the context of the Lease Agreement was inadmissible because “the words must be construed objectively”.42 In support of this, the SCA cited43 a line of three judgments: KPMG,44 Endumeni45 and Novartis.46
48 This line of authorities does not support the conclusion of the SCA:
48.1 In KPMG, Harms DP held that
41 Volume 9 page 909 para 10.
42 Volume 9 page 910 para 11.
43 In footnote 10 on page 910.
44 KPMG Chartered Accountants (SA) v Securefin Ltd 2009 (4) SA 399 (SCA).
45 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA).
46 Novartis SA (Pty) Ltd v Maphil Trading (Pty) Ltd 2016 (1) SA 518 (SCA).
“… to the extent that evidence may be admissible to contextualise the document (since ‘context is everything’) to establish its factual matrix or purpose or for purposes of identification, ‘one must use it as conservatively as possible’ (Delmas Milling Co Ltd v du Plessis 1955 (3) SA 447 (A) at 455B–C. The time has arrived for us to accept that there is no merit in trying to distinguish between ‘background circumstances’ and ‘surrounding circumstances’. The distinction is artificial and, in addition, both terms are vague and confusing. Consequently, everything tends to be admitted. The terms ‘context’ or ‘factual matrix’
ought to suffice.”47
48.2 In Endumeni, Wallis JA concluded his well-known summary of the principles of interpretation by stating that
“[t]he ‘inevitable point of departure is the language of the provision itself’, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.”48
48.3 In Novartis, it was argued that KPMG and Endumeni meant that “in deciding what a contract means, a court must have regard to the words used and construe them objectively”.49 Lewis JA rejected this argument in emphatic terms:
“[27] I do not understand these judgments [i.e. KPMG and Endumeni ] to mean that interpretation is a process that takes into account only the objective
47 Para 39.
48 Para 18 (our underlining).
49 Para 24.
meaning of the words (if that is ascertainable), and does not have regard to the contract as a whole or the circumstances in which it was entered into. This Court has consistently held, for many decades, that the interpretative process is one of ascertaining the intention of the parties – what they meant to achieve.
And in doing that, the court must consider all the circumstances surrounding the contract to determine what their intention was in concluding it. …
[28] … A court must examine all the facts – the context – in order to determine what the parties intended. And it must do that whether or not the words of the contract are ambiguous or lack clarity.
Words without context mean nothing.
…
[35] The argument that the words of the document, signed by van Jaarsveld and van der Spuy on 14 October 2004, must be examined only linguistically, and that the genesis of the document, subsequent conduct and other facts relevant to the conclusion of the contract be ignored, is directly contrary to the decisions of this court cited above, and many others. But, as I have said, the issue here is not what the parties intended their contract to mean, but whether they intended to bind themselves contractually. That inevitably requires an examination of the factual matrix – all the facts proven that show what their intention was in respect of entering into a contract: the contemporaneous documents, their conduct in negotiating and communicating with each other, and importantly, the steps taken to implement the contract.”50
49 As this lengthy quotation makes clear, Novartis provides no support for the SCA’s conclusion that the Lease Agreement must be
50 Our underlining.
interpreted without having regard to evidence of context. Novartis establishes the exact opposite.
50 The approach of the SCA in the present case is strikingly inconsistent with its approach in other matters. We merely give three examples:
50.1 In a judgment handed down – ironically – on the very same day as the judgment in the present case, the SCA interpreted a provision in a lease by having regard to evidence that had been led regarding the background to the conclusion of the lease.51
50.2 In G4S Cash Solutions, the SCA held that it was insufficient for a litigant merely to annex a written contract to its affidavits since “relevant evidence regarding the factual matrix in which the contract was concluded and the subsequent conduct of the parties, should be called in aid of the interpretative process”.52
51 Hugo, Kirsten & Kirsten (Pty) Ltd v Collotype Labels (Pty) Ltd [2020] ZASCA 21 para 1.
52 G4S Cash Solutions (SA) (Pty) Ltd v Zandspruit Cash & Carry (Pty) Ltd 2017 (2) SA 24 (SCA) para 13.
50.3 In Tshwane City,53 the SCA stated that “the pendulum has swung too far”54 and held that evidence of contractual negotiations is inadmissible.55 It nevertheless held that a term in a contract must be interpreted “with regard to the factual matrix underlying its conclusion”.56
51 We respectfully submit that the inconsistency in the jurisprudence of the SCA is of considerable concern. This Court has recently had occasion to emphasise57 that the application of the common-law rules of contract should result in reasonably predictable outcomes, enabling individuals to enter into contractual relationships with the belief that they will be able to approach a court to enforce their bargain. The rule of law means that the enforcement of contractual terms should not be dependent on the “idiosyncratic inferences of a few judicial minds”.58 The same should apply to the principles guiding the interpretation of contracts.
53 Tshwane City v Blair Atholl Homeowners Association 2019 (3) SA 398 (SCA)
54 Para 63.
55 Para 77.
56 Para 71.
57 Beadica v Trustees, Oregon Trust 2020 (5) SA 247 (CC) para 81.
58 Quoted in Beadica v Trustees, Oregon Trust 2020 (5) SA 247 (CC) para 81.
52 In the face of the SCA’s inconsistent jurisprudence, what approach should be adopted by this Court regarding the relevance of contextual evidence when it comes to interpreting a contract?
53 The short answer is that this Court has already held that the approach of the SCA in the present case was wrong. It has done so by quoting Endumeni with approval in the context of interpretation of statutes59 and interpretation of contracts.60 It has therefore approved the reasoning in Endumeni that contracts must be “read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.”61 Significantly, the respondents accept this.62
54 Of course, the evidence of context must be relevant. We endorse the approach in the current edition of Christie that relevance should be used to determine the admissibility of evidence in circumstances where “the purpose of admitting evidence of context is to assist in
59 See for example Road Traffic Management Corporation v Wayments Infotech (Pty) Ltd 2019 (5) SA 29 (CC) para 29; Moyo v Minister of Police 2020 (1) BCLR 91 (CC) paras 52 to 53; Municipal Employees Pension Fund v Natal Joint Municipal Pension Fund 2018 (2) SA 157 (CC).
60 See for example Airports Company South Africa v Big 5 Duty Free (Pty) Ltd 2019 (5) SA 1 (CC) para 29; Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (2) SA 94 (CC) para 52.
61 Endumeni para 18.
62 Answering affidavit in application for leave to appeal: volume 10 pages 966-967 para 6.5 and page 1001 para 29.3.
interpretation of the words used by the parties and not to vary those words”.63 This offers a principled basis to determine the admissibility of background and contextual facts when it comes to interpreting contracts. It is a principle that our courts engage with on daily basis, having recognised that “relevancy is based upon a blend of logic and experience lying outside the law”.64
55 If the test of relevance is applied in the present case, then we submit that the test was clearly satisfied. The evidence regarding context did not seek to explain the meaning of the Lease Agreement65 or to vary the terms of the Lease Agreement. It sought rather to shed light on whether the rights under the Lease Agreement are personal to ATS – in other words, it sought to show why it would make a difference to UJ whether the creditor is ATS or someone else. That evidence covered the context within which the Lease Agreement had been concluded, the relevant statutory provisions at the time and the historical relationship between UJ and
63 Christie’s Law of Contract in South Africa seventh edition (2016) by G B Bradford at page 252.
64 Per Schreiner JA in R v Matthews 1960 (1) SA 752 (A) at 758.
65 “[I]nterpretation is a matter of law and not of fact and, accordingly, interpretation is a matter for the court and not for witnesses (or, as said in common-law jurisprudence, it is not a jury question…” (KPMG Chartered Accountants (SA) v Securefin Ltd 2009 (4) SA 399 (SCA) para 39).
ATS. All of this is of manifest relevance to the question of delectus personae.
56 In its judgment, the SCA held that “the restriction on cession imposed by the delectus personae concept is simply a manifestation of the general principle that the cession should not disadvantage the debtor”.66 Once this is so, it must follow that evidence is relevant in order to show that the cession of rights by ATS had the effect of prejudicing UJ.
57 For all of these reasons, we respectfully submit that the SCA erred in failing to have regard to the evidence regarding the context of the Lease Agreement.
What is shown by the evidence regarding context
58 If the SCA had chosen to have regard to the evidence of context, we submit that it should have reached the same conclusion as Victor J67 and Van Oosten J,68 namely that the rights under the Lease Agreement are personal to ATS.
66 Volume 9 page 909 para 8.
67 Volume 9 page 857 paras 25 to 54.
68 Volume 9 pages 891-893 paras 12 to 15.
59 We summarise below two aspects of the context that are of particular relevance to the enquiry regarding delectus personae.
60 The first aspect has to do with the fact that the Co-operation Agreement between RAU and ATS was expressly directed at the provision of higher education:
60.1 At the time, section 10B(1) of the Universities Act provided as follows:
“Notwithstanding anything to the contrary in any law contained in relation to the seat of a university, a council may, with the consent of the Minister and subject to the provisions of subsection (2), enter into agreements in connection with the training of students with provincial, educational and other authorities or with the council or governing body of an institution whose purpose it is to provide a division of higher education….”
60.2 The Co-operation Agreement recognised this in express terms. It recorded that the Universities Act provided that a university may conclude an agreement with an institution which has as its aim the offering of “a division of higher education … in relation to the education of students” (our translation from Afrikaans).69 It also recorded that the Minister of Education had approved guidelines for co-
69 Volume 1 page 19 lines 5 to 7.
operation between “a university and an institution for the purpose of education for a degree, diploma or certificate from a university” (our translation from Afrikaans).70
60.3 RAU and ATS were both involved in the provision of higher education since students at ATS would eventually obtain a university degree in theology. In contrast, Wamjay does not provide higher education. In terms of section 10B(1) of the Universities Act, RAU could not have concluded the Co- operation Agreement with Wamjay at all.
60.4 We have indicated in paragraph 10 above that the Lease Agreement was concluded pursuant to the Co-operation Agreement. The Lease Agreement was aimed at the provision of higher education in the same way as the Co- operation Agreement was aimed at the provision of higher education. It therefore made a difference to RAU whether the tenant did or did not provide higher education.
60.5 The effect of the cession is that Wamjay has become the beneficiary of rights under the Lease Agreement even though
70 Volume 1 page 19 lines 18 to 21 ("… tussen 'n universiteit en 'n inrigting met die oog op opleiding vir 'n graad, diploma of sertifikaat van 'n universiteit …”).
it is not involved in the provision of higher education.
Moreover, Wamjay has become the beneficiary of rights under the Lease Agreement even though Wamjay would have been barred by statute from concluding the Co- operation Agreement with RAU.
61 The second aspect has to do with the granting of Ministerial consent for the Lease Agreement:
61.1 Section 4(2) of the RAU Act precluded RAU from affording any party real rights in its immovable property without the Minister’s consent.
61.2 The approval given by the Minister in terms of section 4(2) of the RAU Act was consent for RAU to let the leased premises to ATS – not to any other party. The terms of the Minister’s consent are to be read in conjunction with the request presented to him by RAU.
61.3 The introductory portion to the Lease Agreement records that Mr Labuschagne’s authority to represent RAU in the conclusion of that agreement is to be read in conjunction with the approval granted by the Minister of Education.
61.4 RAU did not have the authority to conclude a lease in terms of which the recipient of the Minister’s approval (i.e. ATS) could transfer that right to an unidentified third party whose purpose in acquiring the leased premises was not the provision of higher education.
62 For all of these reasons, it makes a difference to UJ whether the person in whom rights are vested under the Lease Agreement is ATS (i.e. an entity that is involved in the provision of higher education) or Wamjay (i.e. an entity that is not involved in the provision of higher education).
63 The cession of rights by ATS to Wamjay defeats the purpose of the Lease Agreement and is contrary to the Ministerial permission. It means that the leased premises may now be used for a purpose that does not involve the provision of higher education. That is an outcome that could never have been intended by RAU and ATS when the Lease Agreement was concluded – their stated intention was that RAU would “extend a helping hand to [ATS] by letting this property to them over a period of 30 years”.71 Moreover, it means that ATS is able to profiteer by ceding the right to use the leased
71 Volume 1 page 34 line 35 to 36.
premises to Wamjay for an amount of R6.5 million in circumstances where RAU had granted ATS the right to use the leased property at less than market value.72
Clause 8 of the Lease Agreement
64 The SCA found that “there is nothing in clause 8 of the lease agreement to justify an assertion by UJ that the rights in the lease were personal to ATS and therefore incapable of cession”.73 For the reasons that follow, we respectfully submit that this finding was incorrect.
65 Clause 8 of the Lease Agreement provides that the leased premises
“shall be used”74 inter alia for a “campus for tuition”75 and for
“student facilities”.76 Those words are synonymous with higher education and cannot, applying the ordinary meaning of the Afrikaans words, refer to scholars or scholastic education.
66 Clause 8.1 therefore means that ATS is required to use the leased premises for higher education. It requires ATS to ensure there
72 Volume 3 page 280 line 2 to 12.
73 Volume 9 page 910 para 11.
74 Volume 1 page 46 para 8.1 “sal gebruik word”.
75 Volume 1 page 46 para 8.1 “kampus vir onderwys”.
76 Volume 1 page 46 para 8.1 “studentfasiliteite”.
would be constructed on the leased premises tertiary facilities that could be utilised by students, including residential facilities.
67 The cession records that ATS has ceded to Wamjay its rights in terms of the Lease Agreement but has not assigned its obligations.77 This means that the positive obligations created by clause 8.1 of the Lease Agreement remain vested in ATS despite the fact that Wamjay will be occupying the leased premises. In other words, the effect of the cession is that:
- Wamjay is entitled to occupy the leased premises but cannot give effect to the positive obligation imposed by clause 8.1 of the Lease Agreement because it is not involved in higher education;
and
- ATS remains obliged to comply with clause 8.1 of the Lease Agreement but is unable to do so because it has no right to occupy the leased premises.
68 Clause 8.2 affords the right to erect improvements in accordance with the use contemplated in clause 8.1.78 The contextual evidence establishes that those improvements are the development plan of
77 Page 59 clause 4.1 at lines 6-17.
78 Volume 1 page 47 para 8.2.
the ATS Theological College that was presented to the Minister as detailed drawing E1, and that formed the basis for the Minister's consent.79
69 Such a schizophrenic outcome is prejudicial to UJ. Since the restriction on cession “imposed by the delectus personae concept is simply a manifestation of the general principle that the cession should not disadvantage the debtor”,80 this provides another reason why the rights are not cedable.
Conclusion
70 For all the reasons set out above, we submit that the rights in the Lease Agreement are personal to ATS and are incapable of being ceded.
79 Volume 3 page 270 line 16 to 25 and page 271 line 1 to 7; Volume 4 page 386 line 4 to 11.
80 Goodwin Stable Trust v Duohex (Pty) Ltd 1998 (4) SA 606 (C) at 617I-J.
ATS REPUDIATED THE LEASE AGREEMENT
71 What consequences follow from the fact that the rights in the Lease Agreement are not cedable? The short answer is that ATS has repudiated the Lease Agreement.
72 The principles regulating cancellation on grounds of repudiation are well established. They were summarised as follows in the leading judgment:
“[A] repudiatory breach may be typified as an intimation by or on behalf of the repudiating party, by word or conduct and without lawful excuse, that all or some of the obligations arising from the agreement will not be performed according to their true tenor. Whether the innocent party will be entitled to resile from the agreement will ultimately depend on the nature and the degree of the impending non- or malperformance.”81
73 The test for repudiation is an objective one: would a notional reasonable person conclude that proper performance (in accordance with the true interpretation of the agreement) will not be forthcoming?82 If that test is satisfied, then it does not matter if the repudiating party believes bona fide that its conduct is justified by
81 Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) at 294 para 17.
82 Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) at 294 para 16.
the terms of the agreement.83 The conduct from which repudiation is to be inferred must be clear cut and unequivocal,84 and the interpretation of the conduct must be from the perspective of the innocent party, taking into account all the background material and circumstances that should have weighed with the innocent party.85
74 Provided that the nature and degree of the impending non- or malperformance is sufficiently serious, the repudiation will entitle the innocent party to accept the repudiation and to cancel the agreement. When that happens, the contract comes to an end and all future rights and obligations in terms of the contract are terminated.
75 The cession objectively communicated to UJ that ATS no longer held itself bound to the terms of the Lease Agreement. As we have explained above, ATS purported to divest itself of the ability to give effect to the agreed use of the leased premises.
83 Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) at 294 para 17.
84 Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) at 294 para 18.
85 Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) at 294 para 19-20.
76 We respectfully submit that Victor J correctly concluded that ATS had repudiated the Lease Agreement in a manner that entitled UJ to cancel the Agreement. That conclusion was adopted by the Full Court.
77 It follows from the cancellation of the Lease Agreement that ATS and Wamjay have no right to occupy the leased premises. That is, in effect, the relief sought by UJ in the action.
LEAVE TO APPEAL SHOULD BE GRANTED
78 We submit that it is in the interests of justice for UJ to be granted leave to appeal against the judgment of the SCA.
79 This Court has recently held that the rule of law requires courts to
“develop clear and ascertainable rules and doctrines that ensure that our law is substantively fair, whilst at the same time providing predictable outcomes for contracting parties”.86 The application for leave to appeal therefore raises a “constitutional matter” within the meaning of section 167(3)(b)(i) of the Constitution.87
80 But in any event, the application for leave to appeal raises arguable points of law of general public importance that ought to be considered by this Court in terms of section 167(3)(b)(ii) of the Constitution. As we have explained above, the relevant points of law include:
- whether and to what extent a party is entitled to adduce evidence of facts pertaining to the context within which an agreement has been concluded;
86 Beadica (supra) para 81.
87 Founding affidavit volume 10 page 948 paragraphs 82 to 89.
- to what extent a court is entitled to take cognisance of and rely on evidence of context in the process of interpretation.
81 The points of law are substantial and implicate the interests of all litigants in contractual matters in which the interpretation of contracts is in issue. The public has an interest in having a definitive judgment from this Court on the relevance of evidence dealing with context.
82 Finally, we respectfully submit that UJ has good prospects of success based on the arguments advanced above.
RELIEF SOUGHT
83 UJ asks for an order in the following terms:
(a) The applicant is granted leave to appeal.
(b) The appeal is upheld and the order of the Supreme Court of Appeal is replaced with an order as follows:
‘The appeal is dismissed with costs, including the costs consequent upon the employment of two counsel.’
(c) The respondents are directed to pay the costs of the application for leave to appeal and the costs of the appeal, including the costs of two counsel.
ALFRED COCKRELL S.C.
A.R.G MUNDELL S.C.
H.C.BOTHMA NOXOLO KHUMALO
Counsel for the applicant
Chambers
Cape Town and Johannesburg 16 September 2020
