THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

CASE NO: 320/06
Not Reportable
In the matter between
ETHEKWINI METROPOLITAN UNICITY
MUNICIPALITY (NORTH OPERATIONAL
ENTITY)
Appellant
and
PILCO INVESTMENTS CC
Respondent

Coram:
Harms ADP, Van Heerden, Jafta, Combrinck et Cachalia JJA
Heard:
3 May 2007
Delivered:
29 May 2007
Summary:
Lease – interpretation of – lessee given only partial occupation of
leased property – lessee obliged to pay rent, although entitled to a
remission of rent proportional to its reduced use and enjoyment –
failure by lessee to pay any rent, despite due demand – lessor entitled
to cancel lease
Neutral citation: This judgment may be referred to as Ethekwini Metropolitan Unicity
Municipality v Pilco Investments CC [2007] SCA 62 (RSA)

VAN HEERDEN JA:

[1] The issue to be determined in this appeal is whether the appellant (the
defendant in the court below) is liable to the respondent (the plaintiff in the court
below) for damages on the basis of either breach of contract or delict.  For the
sake of convenience, I will refer to the parties by their appellation in the trial
court.
[2] The plaintiff was the sole tenderer for the development of a recreational
facility on certain property in Verulam in respect of which tenders had been
invited by the Town Council of the Borough of Verulam, the predecessor in title
to the defendant.  The property in question, portion of Lot 7862 Parkgate,
Verulam (‘the property’), was zoned as a public open space, approximately
30 000m2 in extent, and was going to be transferred into the name of the
defendant.  The defendant eventually became the registered owner of the
property on 21 October 1994.
[3] On 30 August 1993 the defendant accepted a proposal by the plaintiff
‘for the development of parks, recreational and sporting facilities’ in respect of
the property.  The parties signed an agreement of lease of the property in
October 1994.  Building plans were submitted by the plaintiff and approved by
the defendant on 12 December 1994, subject to the condition, inter alia, ‘that
liquor must not be sold or consumed outside the recreation club.  The usage of
this club must be restricted to members only.’ The defendant also resolved ‘that
a new agreement be drawn and entered into’.
[4] During February 1995, the parties duly concluded a new written lease
agreement in respect of the property, thereby replacing the earlier lease.  This

new lease (‘the lease’) – that lies at the centre of the dispute between the
parties – was to commence on 1 November 1994 and to continue thereafter for
30 years with an option to renew.
[5] The plaintiff’s main claim was one for damages for breach of contract,
arising from the defendant’s alleged repudiation of the lease. Its two alternative
claims were in delict.  Counsel for the plaintiff did not really persist with these
delictual claims before us.  In any event, the negligence relied upon by the
plaintiff in each of the (alternative) delictual claims consisted in an alleged
breach by the defendant of duties allegedly flowing from specific terms of the
lease.  This being so, the decision of this court in Lillicrap, Wassenaar &
Partners v Pilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 474 (A) precludes
such delictual claims being brought by the plaintiff against the defendant.1
[6] By agreement between the parties, the trial court (Van der Reyden J in
the Durban High Court) was asked to make a ruling on liability only, with the
issue of quantum standing over for later determination, if necessary.
[7] At the conclusion of the trial, the trial judge held in favour of the plaintiff
in respect of its main claim based on repudiation of the lease. He accordingly
issued a declaratory order ‘that the plaintiff was entitled to resile from the lease
agreement and that the defendant is liable to compensate the plaintiff for such
damages as it may have suffered in consequence of the breach’. He also
ordered the defendant to pay the plaintiff’s costs, including the costs of two

1 See Holtzhausen v Absa Bank Ltd [2005] 2 All SA 560 (SCA) paras 6-7 and Media 24 Ltd & Another v
Grobler 2005 (6) SA 328 (SCA) para 69-70.

counsel. In the circumstances, he did not find it necessary to consider the
arguments presented on the alternative delictual claims. With the leave of the
trial court, the defendant now appeals against this judgment.
[8] In terms of the lease, the agreed rent in respect of the property was
R2 050 per month, payable in advance. In the event of failure by the lessee to
make payment of rent upon due date, or ‘to implement each and every one of
his obligations’ in terms of the lease, written notice to remedy such breach
within ninety (90) days had to be given by registered post to the lessee (clause
13).
[9] Clause 1 of the lease provided:
‘Subject to the provisions of Clause 18 hereof,2 the tenancy will commence from the 01 day of
November 1994, notwithstanding the date of occupation and will continue thereafter [for] thirty
(30) years with an option to renew.’
In terms of clause 16 –
‘It is a special condition hereof that in the event of the persons presently occupying the premises
not vacating them by the date of commencement hereof, the Lessee undertakes to accept
occupation from such later date as the premises are available.  In this event the Lessee shall
have no claim for damages or right of action against the Lessor and the Lease shall be deemed
to commence as from the later date on which the premises become fully available for
occupation, with the following conditions:
(1) The boundary pegs being flagged and pointed out to the Lessee.’

2 It is common cause that the reference to clause 18 is incorrect and that the relevant clause is
actually clause 16.

[10] The usage of the property was governed by clause 6 of the lease, which
provided that:
‘The property shall be used for recreational, kiosk and take-away purposes by the Lessee, and
buildings shall be constructed on the said property for the above purposes and the following
conditions will apply:
a)
Liquor must not be sold or consumed outside the recreation club;
b)
. . .
c)
. . .
d)
The usage of the club must be restricted to members only.’
[11] On 10 June 1997 the plaintiff applied for a licence in respect of the
property to conduct business described by it as ‘Entertainment – Disco. Action
Bar. Sports Café. Indoor Entertainment. Playground Facilities.’  This was
followed by the plaintiff’s issuing an invitation, presumably to residents of the
Parkgate community and other potential patrons, to attend the opening of ‘Club
Chalice’ on the property on Sunday, 15 June 1997.
[12] Shortly after the opening of Club Chalice, a complaint was lodged with
the defendant by a resident of the Parkgate community, followed on 24 June by
a petition signed by 47 residents complaining about high noise levels emanating
from the ‘disco’ at the club; loud and abusive language; off-consumption of
liquor; club patrons parking their vehicles in residents’ driveways and on curbs
and driving while under the influence of liquor; and other forms of anti-social
behaviour by club patrons.  The petition resulted in an inspection by the
defendant’s building inspector of the building erected by the plaintiff on the
property.  The inspector found that the approved building plans had been

deviated from in various ways and the plaintiff was required to submit amended
plans to the defendant for approval.  This the plaintiff did on 31 July 1997.
[13] On 23 September 1997, a letter was addressed by the defendant to the
plaintiff (Annexure H to the plaintiff’s particulars of claim), informing the latter
that approval of its amended building plans had been refused for reasons
which, for present purposes, need not be canvassed.  This was followed, two
days later, by a further letter (Annexure J to the particulars of claim), informing
the plaintiff that it had contravened the Verulam Town Planning Scheme by
operating a discotheque with food and alcohol for sale in a public open space.
The plaintiff was required to terminate this usage of the property within seven
days, failing which it would be guilty of an offence under the Town Planning
Scheme and liable to incur certain fines.
[14] In the meantime, on 11 September 1997, the defendant’s attorneys sent
a registered letter to the plaintiff, pointing out that the plaintiff had failed to pay
any rent in terms of the lease and that it was at that stage in arrears to the tune
of R74 784.  With reference to clause 13 of the lease, the plaintiff was called
upon to remedy its breach within 90 days by paying the arrear rent, failing which
the defendant would cancel the lease and institute action in the magistrate’s
court for recovery of all arrear rent and other amounts due by the plaintiff.  The
plaintiff failed to pay any amount and, on 15 December 1997, the defendant
instituted action against it in the Verulam Magistrate’s Court, claiming
confirmation of its cancellation of the lease, payment of the total arrear rent then
due (R89 995) and ejectment of the plaintiff from the property.  The litigation in

the magistrate’s court was eventually transferred to the High Court and resulted
in the proceedings which gave rise to the present appeal.
[15] According to the plaintiff, the abovementioned letters annexed to its
particulars of claim as Annexures H and J constituted a repudiation by the
defendant of the lease, which was accepted by the plaintiff.  The plaintiff
allegedly conveyed such acceptance to the defendant ‘by relinquishing
possession of the property and building to the defendant’ sometime in mid-
1998.
[16] The defendant denied that Annexures H and J constituted a repudiation
by it of the lease, contending that these letters were simply intended to notify
the plaintiff that it was breaching the lease by using the property for an unlawful
purpose not intended thereby, and to require the plaintiff to comply with its
lawful obligations in terms of the lease.  The defendant alleged, in turn, that it
was the plaintiff who had ‘breached and repudiated’ the lease, inter alia by
failing to pay any rent and, when sued by the defendant for arrear rent, by
pleading that the agreement of lease had never commenced and was ‘of no
force and effect’.  The defendant claimed to have cancelled the lease by
instituting the abovementioned action in the Verulam Magistrate’s Court in
December 1997.
[17] It is common cause that, despite having taken occupation of the
property in late 1994, building the structure on the property, and conducting the
club business thereon (albeit only for a limited period of time), the plaintiff never
paid any rent whatsoever in respect of the property.  Its excuse for not doing so

was that, until June 1997, approximately 3000 to 4000m2 of the property had
been occupied by another person who was using this portion for making pre-
cast concrete fencing and, further, that the boundary pegs had never been
pointed out to it by the defendant as required by clause 16 of the lease.
[18] Counsel for the plaintiff conceded before us that the boundary pegs
stipulation in clause 16 of the lease was not a ‘suspensive condition’ in the
sense that non-compliance therewith suspended the commencement of the
lease itself.  However, counsel contended that, although the plaintiff had indeed
taken occupation of the property in late 1994, its obligation to pay rent was
suspended until such time as the person making pre-cast fencing on a portion
of the property vacated this portion and the boundary pegs were pointed out to
the plaintiff.  According to counsel, this contention was borne out by a proper
interpretation of clause 16, read together with clause 1, of the lease
agreement.3  In other words, counsel submitted, the word ‘tenancy’ in clause 1
of the lease and the word ‘Lease’ in clause 16 had to be interpreted to mean the
lessee’s obligation to pay rent and not the lease itself.
[19] The technique of interpretation of written contractual documents
consistently adopted by the South African courts was summarised by Joubert
JA in Coopers & Lybrand & Others v Bryant 1995 (3) SA 761 (A) as follows (at
767E-768E):
‘According to the “golden rule” of interpretation the language in the document is to be given its
grammatical and ordinary meaning, unless this would result in some absurdity, or some

3 For the wording of the relevant parts of clauses 1 and 16, see para [9] above.

repugnancy or inconsistency with the rest of the instrument …  The mode of construction should
never be to interpret a particular word or phrase in isolation (in vacuo) by itself …  The correct
approach to the application of the “golden rule” of interpretation after having ascertained the
literal meaning of the word or phrase in question is, broadly speaking, to have regard:
1)
to the context in which the word or phrase is used with its interrelation to the contract as a
whole, including the nature and purpose of the contract …;
2)
to the background circumstances which explain the genesis and purpose of the contract,
ie to matters probably present to the minds of the parties when they contracted …;
3)
to apply extrinsic evidence regarding the surrounding circumstances when the language
of the document is on the face of it ambiguous, by considering previous negotiations and
correspondence between the parties, subsequent conduct of the parties showing the sense in
which they acted on the document, save direct evidence of their own intentions.’
[20] Applying this approach to clause 1 of the lease, the ‘grammatical and
ordinary meaning’ of the word ‘tenancy’ in the phrase ‘the tenancy will
commence’ is the lease itself, not the obligation to pay rent.  This is borne out
by the rest of clause 1, in particular the phrase ‘the tenancy . . . will continue
thereafter [for] thirty (30) years with an option to renew’.  Moreover, clause 2 of
the lease provides that ‘[t]he Lessee [shall] commence the project within six (6)
months.’  To make sense, this clause must be read as referring to a period of
six months calculated from the date of the commencement of the lease,
certainly not from a date of commencement of the obligation to pay rent.
[21] Properly interpreted, clause 1 thus provides that the lease will
commence from 1 November 1994, notwithstanding the date of occupation of
the leased ‘premises’.  This is, however, made ‘subject to the provisions of
clause 16’.  In terms of the latter clause, in the event of the persons occupying
the premises (ie the person making pre-cast fencing on a small portion of the

property) at the time of conclusion of the lease not vacating the premises by ‘the
date of commencement hereof’ (ie 1 November 1994, as stipulated in clause 1),
the lessee undertakes to accept occupation of the premises from such later
date as ‘the premises are available’.  In this event (delayed occupation), the
lessee has no claim for damages or ‘right of action’ against the lessor and the
lease shall be deemed to commence (and, of course, the obligation to pay rent
will only run) from the later date on which the premises become ‘fully available
for occupation’, with the further ‘condition’ that the boundary pegs be flagged
and pointed out to the lessee.  The corollary of this is that, notwithstanding the
provisions of clause 1, the lessee is not obliged to take partial occupation of the
premises and can delay taking occupation and being obliged to pay rent until
such time as the premises are totally vacated and the boundary pegs have
been flagged and pointed out to it.  The delayed occupation provision in clause
16 is thus for the benefit of the lessee.  It does not follows that if the lessee
chooses not to delay taking occupation, but instead takes partial occupation of
the premises long before the occurrence of these two events and commences
‘the project’ referred to in clause 2, the commencement of the lease and of the
obligation to pay rent is still delayed. In such event, the lessee must be taken to
have waived the benefit of clause 16.  This was what happened in the present
case when the plaintiff took occupation of the property in late 1994 and built its
structure on the property.  That despite the continued presence on the property
of the person making pre-cast fencing and the continuing failure by the
defendant to flag and point out the boundary pegs.

[22] It follows that, upon taking occupation of the property in late 1994, the
plaintiff became obliged to pay rent to the defendant, as stipulated in clause 1 of
the lease.  Of course, because the plaintiff was, until early June 1997, deprived
of the use of that portion of the property which was being used by the person
making pre-cast fencing, the plaintiff would be entitled to a remission of rent
over the period in question, proportional to its reduced use and enjoyment of the
property.4  If the amount to be remitted was capable of prompt ascertainment,
the plaintiff could have set this amount off against the defendant’s claim for rent;
if not, the plaintiff was obliged to pay the full rent agreed upon in the lease and
could thereafter reclaim from the defendant the amount remitted.5  As was
pointed out, albeit obiter,6 by Nienaber JA in Thompson v Scholtz 1999 (1) SA
232 (SCA) at 247A-D:
‘Where a lessee is deprived of or disturbed in the use or enjoyment of leased property to which
he is entitled in terms of the lease, either in whole or in part, he can in appropriate
circumstances be relieved of the obligation to pay rental, either in whole or in part; the Court
may abate the rental due by him pro rata to his own reduced enjoyment of the merx.  This is
true not only where the interference with the lessee’s enjoyment of the leased property is the
result of vis major or casus fortuitus but also where it is due to the lessor’s breach of contract,
eg because the leased property is not fit for the purpose for which it was leased or, as in this
case, because the performance rendered by the lessor is incomplete or partial …  The lessee
would be entirely absolved from the obligation to pay rental if he were deprived of or did not
receive any usage whatsoever.  That would simply be a manifestation of the exceptio [non

4 See in this regard, W E Cooper Landlord and Tenant 2ed (1993) 200; A J Kerr The Law of Sale and
Lease 3ed (2004) 350.
5 Kerr loc cit. See also J N Piek & D G Klein ‘’n Huurder se aanspraak op vermindering van huurgeld
terwyl hy in besit van die huursaak is’ 1983 (46) THRHR 367, especially at 381-2.
6 The case did not involve a lease, being concerned with the payment of occupational interest in terms of
a sale of property where the seller had failed to give the purchaser complete occupation of the property
purchased pending transfer thereof to the latter, but nevertheless attempted to claim the full occupational
interest agreed upon between the parties.

adimpleti contactus], more particularly of the first proposition in B K Tooling [B K Tooling (Edms)
Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A)] (cf Fourie NO en ’n Ander
v Potgietersrus Stadsraad 1987 (2) SA 921 (A)).’
[23] As the plaintiff’s non-payment of rent was thus a breach of the lease,
and as it failed to remedy this breach upon receipt of 90 days notice to do so, as
required by clause 13, the defendant was entitled to cancel the lease.  It did so
by instituting action against the plaintiff in the Verulam Magistrate’s Court in
December 1997, as set out above.  This was long before any purported
acceptance by the plaintiff of any purported repudiation of the lease by the
defendant.
[24] Although the plaintiff did eventually purport to give notice to the
defendant, apparently in terms of clause 13 of the lease, that the latter was in
breach in that it had failed, inter alia, to flag and point out the boundary pegs
and to give the plaintiff ‘total occupation’ of the property, this was done only on
10 June 1998, once again long after the lease had been cancelled by the
defendant on the grounds of the plaintiff’s non-payment of rent.
[25] The plaintiff’s contractual claim against the defendant should therefore
have failed in the court a quo.  As regards the alternative delictual claims, I have
already indicated that the decision of this court in the Lillicrap case precludes
such claims.7
[26] It follows that the appeal should succeed.

7 See para [5] above.

Order
[27] In the circumstances, the appeal is upheld with costs. The order of the
court a quo is set aside and substituted with an order of absolution from the
instance with costs.

B J VAN HEERDEN
JUDGE OF APPEAL
CONCUR:
HARMS ADP
JAFTA JA
COMBRINCK JA
CACHALIA AJA