THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Non-Reportable
Case no: 262/2018
In the matter between:

M VISAGIE & ASSOCIATES CC
FIRST APPELLANT

MULLARD HAMLET VISAGIE
SECOND APPELLANT

and

SMALL ENTERPRISE FINANCE AGENCY LTD
RESPONDENT

Neutral citation: Visagie & Associates CC & another v Small Enterprise Finance Agency Ltd
(262/2018) [2019] ZASCA 32 (28 March 2019)

Bench:
Majiedt, Swain, Zondi and Mocumie JJA and Rogers AJA

Heard:
04 March 2019

Delivered:
28 March 2019

Summary:
Law of Contract – whether terms of lease tacitly relocated into settlement
agreement.

_____________________________________________________________________

ORDER
______________________________________________________________________

On appeal from: Western Cape Division, Cape Town (Ndita and Boqwana JJ sitting as
court of appeal):
The appeal is upheld with costs.
The order of the high court is set aside and substituted with the following:
‘The appeal is upheld with costs. The order of the Magistrate’s Court, Kuilsrivier, is set
aside and substituted with the following:
“The application is dismissed with costs”’.
______________________________________________________________________

JUDGMENT
______________________________________________________________________

Mocumie JA (Majiedt, Swain and Zondi JJA and Rogers AJA concurring):

[1] This appeal concerns the alleged breach of the terms of a settlement agreement.
Related thereto, is the question whether the terms of an earlier lease agreement had been
tacitly relocated into the settlement agreement. The appeal, which is before us with the
special leave of this court, is directed against the judgment and order of the Full Bench of
the Western Cape High Court, Cape Town (Ndita and Boqwana JJ) (the high court). The
high court dismissed an appeal against an order of the Magistrate’s Court, Kuilsrivier,
upholding a claim by the respondent, Small Enterprise Finance Agency Ltd. The
respondent sought judgment in terms of Magistrate’s Court Rule 27(9) in respect of the
alleged non-fulfilment of the terms of a settlement agreement against the appellants, M
Visagie & Associates CC and Mr Mullard Hamlet Visagie.

[2] The first appellant, the first defendant in the magistrate’s court, had leased
premises from Business Partners Ltd, which sold the premises to Khula Enterprise

Finance Ltd, which later changed its name to Small Enterprise Finance Agency Ltd, the
present respondent. The second appellant – the sole member of the first appellant – had
bound himself as surety and co-principal debtor for the due and proper fulfilment of the
obligations of the first appellant. The lease agreement was concluded on 16 July 2001
and endured from 1 July 2001 until 30 June 2004 when it expired by the effluxion of time.
In terms thereof, monthly rental of R503.36 for the first year, R553.70 for the second year
and R609.07 for the third year was payable. The rentals were payable monthly in advance
by the first working day of each calendar month.

[3] It is common cause that after the expiry of the initial lease period, the first appellant
remained in occupation and the lease agreement continued on a month to month basis.
The first appellant fell into arrears with the payment of the rental which led the respondent
to cancel the agreement in an email dated 30 September 2013 which reads:
‘[Y]our client did in fact have a lease agreement with the landlord, which had expired and he was
unwilling to renew…
We therefore reject his offer and have no alternative but to give your client 30 days’ notice to
vacate on 31 October 2013.’

[4] On 28 January 2014 the respondent instituted legal action against the appellants
in which it claimed, amongst others, confirmation of the cancellation of the lease
agreement and payment of the amount of arrear rental. In their plea, the appellants
admitted that they were bound by the terms of the lease agreement. However, they denied
that they had breached any of its terms. The appellants filed a counterclaim in which they
sought payment of the sum of R80 000 for unjust enrichment arising from improvements
which they alleged they had effected to the leased premises.

[5] On the date of trial, 18 July 2016, the parties settled the matter on certain terms
which they embodied in a settlement agreement. The settlement agreement was made
an order of court. Its salient terms were as follows. The respondent withdrew its claim and
in turn the appellants withdrew their counterclaim based on unjust enrichment. The
appellants agreed to pay the respondent’s legal costs as from December 2013 up to 18

July 2016 and to vacate the premises by 30 September 2016. The scale on which the
costs were to be paid, was not specified.

[6] Clause 10 of the settlement agreement provides:
‘As the rental claim until May 2016 is hereby settled (the claim currently before the court), the
[appellants] will pay all rental due and payable as from June 2016, until they vacate the leased
premises’
Clause 12 states:
‘Should the [appellants] fail to make payment herein or fail to make payment timeously and in
accordance with the terms set out in clauses 1 to [11] … then and in such event:
12.1
The full balance of the debt will immediately become due and payable;
12.2
The [appellants] agree that the [respondent] shall immediately become entitled to obtain
judgment against the [appellants] for the full balance of the debt, which will be calculated as
follows’ (Emphasis added.)
Clause 17 provides as follows:
‘Notwithstanding anything contained herein, the [appellants] hereby agree and acknowledge that
this Settlement Agreement shall not constitute a novation of the [respondent’s] claim against the
[appellants] and is merely the confirmation of an existing debt.’

[7] The respondent, asserting that the appellants were in breach of the settlement
agreement, invoked the provisions of clause 12 and applied for judgment to be entered
against the appellants in terms of rule 27(9).1 It was common cause that, subsequent to
the conclusion of the settlement agreement, rentals were paid as follows:
(a) the July rental was paid on 4 July 2016;
(b) the August rental was paid on 11 August 2016; and
(c) the September rental was paid on 2 September 2016.
These payments were accepted by respondent without demur.

1 Rule 27(9) of the Magistrates Court Act stipulates:
‘(a) When the terms of a settlement agreement which was recorded in terms of sub-rule (6) provide for the
future fulfilment by any party of stated conditions and such conditions have not been complied with by the
party concerned, the other party may at any time on notice to all interested parties apply for the entry of
judgment in terms of the settlement.
(b) An application referred to in this sub-rule shall be on notice to the party alleged to be in default, setting
forth particulars of the breach by the respondent of the terms of settlement.’

[8] The appellants opposed the application. They contended that all rental payments
were made, the last one on 2 September, prior to the date on which they were to vacate
the leased premises. The appellants further contended that payments were tendered
every month. They were not in arrears. They contended also that since the settlement
agreement did not specify by when monthly payments had to be made, nor the scale of
the costs, the payments they made were timeous. The appellants refused to pay costs on
the attorney and client scale. Costs thus had to be paid on the party and party scale and
not the attorney and client scale as the respondent demanded.

[9] The magistrate’s court found that the failure of the appellants to pay the rental
amounts monthly in advance on or before the first working day of each calendar month
constituted a breach of the settlement agreement. This conclusion was based on its
finding that the terms of the lease agreement, more particularly in respect of the date
when rentals had to be paid, had been tacitly relocated into the settlement agreement.

[10] It held further that, as a consequence of the breach, the provisions of clause 12
applied and granted judgment against the respondents with costs on an attorney and
client scale. The appellants appealed against the judgment of the magistrates’ court to
the high court. The high court dismissed the appeal. In dismissing the appeal, the high
court found that:
‘The only inference that can be drawn from the settlement agreement and the surrounding facts
is that at the time the settlement agreement was concluded, the parties were of the same mind
that the appellants occupied the leased premises on the terms contained in the written lease
agreement. It is not unreasonable to conclude that the settlement agreement was agreed upon
on that basis. The appellants and the respondent’s imputed intention was that the terms of the
written lease agreement would apply to regulate the former’s obligation to pay rent for the period
they would continue to lease the leased premises from the respondent under the terms of the
settlement agreement.’
In conclusion it held ‘the parties intended to relocate the terms of the lease agreement. It
follows that the appellants were in arrears as payment was not tendered timeously and in
accordance with the terms of the lease agreement.’ It awarded costs on an attorney and
client scale on the basis of the provisions of clause 12.2.3 and 13 of the settlement
agreement.

[11] In this court, it was common cause that the settlement agreement was a product
of a negotiated settlement between the parties. It is clear from the language and text of
the agreement that it was meant to be final and inclusive of all the issues that related to
the lis. It was further common cause that:
(a) the settlement agreement contains no express terms as to when payments had to be
made;
(b) all the rentals were paid but the payments were made after the first day of the month;
and
(c) that at the time of the settlement of the matter, the appellants had paid up all the
arrears that were not compromised by the agreement.

The issue and legal principles
[12] The central issue is whether the terms of the lease agreement had been tacitly
relocated into the settlement agreement. If so, the rentals had to be paid monthly in
advance by the first working day of each month. Failure to do so would trigger the
provisions of clause 12, outlined above. It is well established that a tacit term is ‘an
unexpressed provision of the contract which derives from the intention of the parties, as
inferred by the court from the express terms of the contract and the surrounding
circumstances.2 A court will be slow to import a tacit term into a written contract.3

[13] In Wilkins this court said:
‘A tacit term, one so self-evident as to go without saying, can be actual or imputed. It is actual if
both parties thought about a matter which is pertinent but did not bother to declare their assent.
It is imputed if they would have assented about such a matter if only they had thought about it -
which they did not do because they overlooked a present fact or failed to anticipate a future one.
Being unspoken a tacit term is invariably a matter of inference. It is an inference as to what both
parties must or would have had in mind. The inference must be a necessary one: after all, if
several conceivable terms are all equally plausible, none of them can be said to be axiomatic.
The inference can be drawn from the express terms and from admissible evidence of surrounding
circumstances. The onus to prove the material from which the inference is to be drawn rests on
the party seeking to rely on the tacit term. The practical test for determining what the parties would

2 Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 531H.
3 Wilkins v Voges 1994 (3) SA 130 (A) at 136–137.

necessarily have agreed on the issue in dispute is the celebrated bystander test. Since one may
assume that the parties to a commercial contract are intent on concluding a contract which
functions efficiently, a term will readily be imported into a contract if it is necessary to ensure its
business efficacy; conversely, it is unlikely that the parties would have been unanimous on both
the need for and the content of a term, not expressed, when such a term is not necessary to
render the contract fully functional. The above propositions, all in point, are established by or
follow from numerous decisions of our courts.4 (Emphasis added; authorities omitted.)

[14] As the appeal revolves around the interpretation of a court order - the settlement
agreement and its relevant clauses – we must apply the approach to interpretation of
contracts and legislation, outlined in Natal Joint Municipal Pension Fund v Endumeni
Municipality 5, and Novartis v Maphil.6

[15] As stated, in respect of the central issue, regard must be had to the express terms
of the settlement agreement, the surrounding circumstances at the time of the conclusion
of the settlement agreement and the conduct of the parties post the conclusion of the
settlement agreement. The starting point is the express terms of the settlement
agreement: one must determine whether, in view of its express terms, there is any room
for importing the alleged tacit term.7 The express terms of the settlement agreement are
neutral with regard to the relocation of the original lease agreement. And it also contains
no express term from which any inference can be drawn.

[16] The relevant surrounding circumstances are the following. At the time of the
conclusion of the settlement agreement there was a history of repeated non-payment of
rental by the appellants. The respondent refused to renew the lease agreement after the
appellants had continued to occupy the leased premises without paying rental as
proposed by the respondent after it acquired ownership from the previous owner. In fact,
despite this failure by the appellants to pay rental timeously, the respondent accepted late

4 Wilkins v Voges 1994 (3) SA 130 (A) at 136 H– 37D. The judgment has been cited with approval by this
court in subsequent cases. See Jacobs NO v Braaff [2006] ZASCA 115; [2007] 4 All SA 966 (SCA) para 20.
5 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262; 2012
(4) SA 593 (SCA).
6.Novartis v Maphil [2015] ZASCA 111; 2016 (1) SA 518; [2015] 4 All SA 417 (SCA).
7 Pan American World Airways Inc v S A Fire and Accident Insurance Co Ltd 1965 (3) SA 150 (A) at 175C.

payments without raising the issue that it was entitled to cancel the lease agreement as
provided for in the original lease agreement. Negotiations between the parties failed as
the email dated 30 September 2013, referred to in para 3 above, shows. There was
resultant acrimony between the parties. By the time the settlement agreement was
concluded and made an order of court on 18 July 2016, the June and July rentals had
been paid, but in neither case by the first day of the month in question (the June rent was
paid on 8 June, the July rent on 4 July). Considering the acrimony between the parties
whether or not rental was paid on the first day of each month was not important to the
respondent. All the respondent wanted was to see the first appellant vacate the leased
premises. A factor of some importance is that the respondent received payments after
the first working day of the month, particularly in respect of August 2016, without protest
(the August rent was paid on 11 August). The respondent took no action for about a month
in respect of the ‘late’ August payment. A delay in asserting rights which allegedly
emanate from a tacit term has a direct bearing on the probabilities. (see Wilkins v Voges
above, at 143B-D). The parties’ email exchanges show that the dispute arose not
because of alleged late payments, but due to their different views on the scale on which
the costs would be payable by the appellants.

[17] Viewed in its proper contextual setting and bearing in mind the surrounding
circumstances, the settlement agreement plainly intended to achieve two important
objects as far as the respondent was concerned:
(a) First, it enabled the forbearing respondent to get its rentals for the period June-
September 2016 and to have the first appellant vacate the premises by the end of
September 2016, clearly an important consideration for the respondent; and
(b) Secondly, the unjust enrichment claim by the appellants, which lingered in the
background, would be withdrawn.
Since insistence that rental payments be made by the first day of each month (something
which had not historically occurred) may have jeopardized the achievement of these
objects, one cannot find on a balance of probability that the respondent would have held
out for this strict term. That is why it was evidently content to receive payments later in
the month without objection. As stated, its subsequent discontent originated from the
dispute about the scale of the costs to be paid.

[18] Having regard to the surrounding circumstances and the conduct of the parties at
the time of the conclusion of the settlement agreement and subsequently, I am not
satisfied that the respondent discharged the burden of proving a tacit term that ‘timeous’
payment referred to in clause 12 means the first working day of the month. This is so
taking into consideration that even when the parties concluded the settlement agreement,
the respondent did so when the appellants had already been ‘late’ in paying the rentals
for June and July and in a sense waived those arrears. It also accepted late payment
despite the clear language of the forfeiture clause under clause 12. Put differently, if the
officious bystander had asked the parties, when they concluded their settlement, by what
date the rent would have to be paid, it is not more probable than not that they would both
have promptly answered, ‘By the first day of each month’. There may have been some
discussion, with the respondent being willing to receive the rent at any time before the
appellants vacated on 30 September 2016.

[19] Since the respondent failed to prove a tacit term, one must consider what term the
law would imply in the absence of consensus. In Kerr’s Law of Sale and Lease,8 Professor
Glove adopts the view, correctly so, that absent an express provision as to when rental
should be paid i.e. in advance or in arrears, the common law applies, namely that rental
is payable in arrears after the lessor has fulfilled its obligation, i.e. after the lease had
come to an end or after the end of each period in the case of a periodical lease.9 In this
case the lease was a monthly one and the rental was therefore payable on the last day
of the month, alternatively at the end of the lease period, namely the date on which the
appellants had undertaken to vacate the leased premises, 30 September 2016. From the
respondent’s conduct it has to be inferred that the fact that rental was paid late for the
outstanding months is of no significance in the scheme of things – as long as all arrears
would have been paid up by the time the appellants vacated the leased premises on the
date agreed upon.

[20] As stated, the respondent made an about turn after the conclusion of the
settlement agreement. When the settlement agreement was concluded the appellants

8 G Glove Kerr’s Law of Sale and Lease (4 ed) (2014) at 427-428 and cases cited therein.
9 Ibid.

were not required to pay the full outstanding balance of the rental. They agreed to pay
the rental for June-September 2016 and to vacate the premises by 30 September 2016.
They paid such rental. They undertook to pay the respondent’s costs of the action which
had been settled. The scale of the costs was not stipulated in the settlement agreement,
which meant that the ordinary party and party scale applied. The costs which the
respondent demanded from the appellants subsequently amounted to R134 217.82 which
were owed in respect of a trial which never ran and which was clearly calculated on the
attorney and client scale. This demand precipitated the present dispute. As stated, the
respondent’s delayed invocation of the clause 12 forfeiture provisions, in respect of the
‘late’ payments, is telling as far as the probabilities are concerned.

[21] In sum, the respondent failed in my view to discharge the onus of proving that the
terms of the original lease agreement as to when rental payments had to be made, were
tacitly relocated into the settlement agreement. The surrounding circumstances and the
parties’ subsequent conduct are at best for the respondent equivocal. The respondent
was not entitled to invoke the forfeiture provisions in clause 12, since there had been no
breach by the appellant. For these reasons the appeal must succeed.

[22] In the result the following order is granted:
The appeal is upheld with costs.
The order of the high court is set aside and substituted with the following:
‘The appeal is upheld with costs. The order of the Magistrate’s Court, Kuilsrivier, is set
aside and substituted with the following:
“The application is dismissed with costs”’.

_________________
B C Mocumie
Judge of Appeal

APPEARANCES

For Appellant :

P J Tredoux

Instructed by:

Raymond McCreath Inc., Somerset West

Webbers Attorneys, Bloemfontein

For Respondent:

J B Engelbrecht

Instructed by:

Gideon Pretorius Inc., Bellville

Symington & de Kok, Bloemfontein