SPILG J with Maluleke and Kathree-Setiloane JJ concurring ...
Transcript of SPILG J with Maluleke and Kathree-Setiloane JJ concurring ...
1
SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this
document in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
CASE NO: A5021/12
Court a quo case no: 11971/11
In the matter between:
V, C F Appellant
And
V, M Respondent
SUMMARY
SPILG J with Maluleke and Kathree-Setiloane JJ concurring
INTERPRETATION OF CONTRACTS:
(1) REPORTABLE: YES
(2) OF INTEREST TO OTHER JUDGES: YES
(3) REVISED.
24 November 2016 ………………………...
DATE SIGNATURE
2
- Integrated interpretational process applied to the words used (ie; by
reference to both their internal and external contexts).
- The ordinary meaning of the words used when limited to the clause itself
must yield to the intention of the parties as expressed in the balance of the
contract as a whole, the purpose for which they were introduced and the
factual matrix in which the document came into existence. To interpret
otherwise would result in absurdity and not make commercial sense in the
context of the relationship established by the parties.
EVIDENCE- PAROL EVIDENCE
- What constitutes admissible evidence in order to determine the purpose of
the agreement and its factual matrix
JUDGMENT
SPILG, J:
INTRODUCTION
1. This is an appeal against the decision of Makume J. The case concerns an
agreement of settlement which was made an order of court in divorce
proceedings.
2. The contentious clauses in the agreement relate to the maintenance
obligations undertaken by the respective parties. These are to be found in
section C of the agreement and provide:
‘2. Maintenance in respect of the children
3
2.1 Until the fixed property at […] Paul Newham Avenue is sold
and registered in the name of the purchaser or until 31
December 2010 [whichever date arises last] the defendant will
be solely responsible and liable for the maintenance of the
children.
2.2 As and when the fixed property situated at 19 Paul Newham
Avenue is sold and registered in the name of a purchaser or
until 31 December 2010 [whichever date arises last] the
plaintiff and the defendant will be jointly responsible and liable
for the reasonable and necessary maintenance expenses of
the children, which reasonable and necessary maintenance
expenses will be agreed between the parties alternatively
decided by a court of competent jurisdiction’
THE ISSUES
3. The respondent successfully contended before the court a quo that she
would only be responsible for contributing toward the maintenance of their
children on the later of the two postulated events, the key to the
construction of the clauses being the common phrase “whichever date
arises last” and the commencing words “Until” in the first subparagraph
and “As and when” in the second.
4. The appellant had unsuccessfully counterclaimed for an order that the
parties were jointly liable for all reasonable maintenance costs to be
incurred in respect of their children.
5. The appellant contends that if regard is had to the circumstances
prevailing at the time, then on a proper interpretation of the clauses
transfer was expected to go through prior to 31 December 2010 but that
the respondent would bear the risk if there was a delay beyond that date.
The appellant did not seek rectification of the agreement to amend the
4
phrase to read “whichever date is the sooner”. The appellant also argues
that the mutual responsibility of parents under the common law to maintain
their children overrides the agreement.
The concern we raised during argument was whether the agreement in
fact covered the contingency that arose: If it did, then by when was
transfer to be effected? If not, then was there consensus. We raised these
questions because at the time of the divorce a written sale agreement had
been concluded with a purchaser. However the sale was cancelled
sometime after the divorce was granted because the purchaser failed to
come up with the purchase consideration despite being granted
extensions of time.
6. Aside from the argument that the mutual duty of support overrides the
agreement, the issues concern the proper interpretation of the agreement
between the parties, including whether it was intended to cover the
eventuality that arose.
7. The first question is whether it is permissible to go behind the terms of a
written agreement which was made part of the court order, and which on
the face of it may be clear and unambiguous. This involves a consideration
of the method of interpreting contracts as well as the entitlement to
introduce extrinsic evidence where there has been no application for
rectification.
INTERPRETATION OF CONTRACTS
8. The fundamental consideration in determining the terms of a written
contract or its application to an event that arose during the course of their
relationship is to discern the intention of the parties from the words used in
5
the context of the document as a whole, the factual matrix surrounding the
conclusion of the agreement and its purpose or (where relevant) the
mischief it was intended to address (KPMG Chartered Accountants (SA) v
Securefin Ltd and Another 2009 (4) SA 399 (SCA) at para 39 and Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd 2016(1) SA 518 (SCA) at paras 27,
28, 30 and 35).
9. Since at least Swart en 'n Ander v Cape Fabrix (Pty) Ltd 1979(1) SA 195
(A) at 202C and List v Jungers 1979 (3) SA 106 (A) at 118G-H the
Supreme Court of Appeal (‘the SCA’) and its predecessor have stated that
one considers the contentious words by having regard to their context in
relation to the contract as a whole and by taking into account the nature
and purpose of the contract1. While there have been some hiccups along
the way, in Natal Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593 (SCA) para 18 Wallis JA said:
‘Interpretation is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument, or contract,
having regard to the context provided by reading the particular provision or
provisions in the light of the document as a whole and the circumstances
attendant upon its coming into existence. Whatever the nature of the
document, consideration must be given to the language used in the light of
the ordinary rules of grammar and syntax; the context in which the provision
appears; the apparent purpose to which it is directed and the material known
to those responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the light of all these factors. The
process is objective, not subjective. A sensible meaning is to be preferred to
one that leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document. Judges must be alert to, and guard
against, the temptation to substitute what they regard as reasonable, sensible
or businesslike for the words actually used. To do so in regard to a statute or
1 Swart 202 C:
‘Dit is vir my vanselfsprekend dat 'n mens na die betrokke woorde moet kyk met inagneming van die
aard en opset van die kontrak, en ook na die samehang van die woorde in die kontrak as geheel.’
6
statutory instrument is to cross the divide between interpretation and
legislation; in a contractual context it is to make a contract for the parties
other than the one they in fact made. The '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.’
10. After citing this extract Wallis JA in Bothma-Batho Transport (Edms) Bpk v
S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494 (SCA) at para
12 continued:
‘Whilst the starting point remains the words of the document, which are the
only relevant medium through which the parties have expressed their
contractual intentions, the process of interpretation does not stop at a
perceived literal meaning of those words, but considers them in the light of all
relevant and admissible context, including the circumstances in which the
document came into being. The former distinction between permissible
background and surrounding circumstances, never very clear, has fallen
away. Interpretation is no longer a process that occurs in stages but is
‘essentially one unitary exercise’. Accordingly it is no longer helpful to refer to
the earlier approach.’
11. Accordingly the so called ‘golden rule’ no longer applies. In terms of that
rule a court could not have regard to the surrounding circumstances if the
ordinary grammatical meaning of the words used are clear, unambiguous
and do not lead to an absurdity when considered in the context of the
document as a whole.2
2 Coopers & Lybrand & others v Bryant 1995 (3) SA 761 (A) at 767E-768 E. Our courts always applied
the broader construct of the golden rule and already in the leading early case of Venter v Rex 1907
TS 910 Innes CJ said:
‘that when to give the plain words of the statute their ordinary meaning would lead to absurdity so
glaring that it could never have been contemplated by the legislature or where it would lead to a result
contrary to the intention of the legislature, as shown by the context or by such other considerations as
the Court is justified in taking into account, the Court may depart from the ordinary effect of the words
to the extent necessary to remove the absurdity and to give effect to the true intention of the
legislature. I do not for a moment pretend to say that that rule covers the field of inquiry. He would
7
12. Put another way; a court is now at liberty to depart from the words used,
even when they are clear and unambiguous when considered in the
context of the document as a whole if, having regard to admissible
background and surrounding factors, it is evident that they would lead to a
result contrary to the purpose and intention of the parties or the legislature
as the case might be.
13. The difficulty is to determine the threshold point. As stated in Endumeni, a
court cannot make a contract for the parties or transform a process of
interpretation into one of legislating from the bench.
14. More recently Wallis JA had this to say in Commissioner For The South
African Revenue Service v Bosch and Another 2015 (2) SA 174 (SCA) at
para 9:
‘The words of the section provide the starting point and are considered in the
light of their context, the apparent purpose of the provision and any relevant
background material. There may be rare cases where words used in a statute
or contract are only capable of bearing a single meaning, but outside of that
situation it is pointless to speak of a statutory provision or a clause in a
contract as having a plain meaning. One meaning may strike the reader as
syntactically and grammatically more plausible than another, but, as soon as
more than one possible meaning is available, the determination of the
provision’s proper meaning will depend as much on context, purpose and
background as on dictionary definitions or what Schreiner JA [Jaga v
Dönges NO and Another; Bhana v Dönges NO and Another 1950 (4)
SA 653 (A) at 664G – H] referred to as ‘excessive peering at the language
to be interpreted without sufficient attention to the historical contextual scene’
indeed be a bold man who attempted to exhaust a subject so difficult, and on which so many
conflicting opinions have been held. But it covers sufficient ground to enable one to deal with the case
before the Court, and that is enough for present purposes.’ (emphasis added)
8
15. The position in our law as expressed by Wallis JA in Educated Risk
Investments 165 (Pty) Ltd and Others v Ekurhuleni Metropolitan
Municipality and Others [2016] 3 All SA 18 (SCA) at para 19 is that ‘the
words must be taken as the starting point and construed in the light of their
context and purpose and where applicable the dictates of the Constitution’.
The enquiry must not necessarily always commence by examining the
words used.3
16. While the object is to determine the meaning to be given to the words
used, it remains the primary function of the court to gather the intention of
the parties or the legislature by reference to those words; and this can only
occur if the object and purpose of the contract or the legislation (in which
case it would include the mischief sought to be remedied) are brought into
consideration when examining the words used in the context of both the
document as a whole and the context or factual matrix in which the
document came to be produced.4
17. Another critical feature of modern case law is that the interpretational
process is integrated.5 There is no immutable starting point in the enquiry
3 See also Firstrand Bank Limited v Land and Agricultural Development Bank of South Africa 2015 (1)
SA 38 (SCA) at para 27, Novartis at para 28 and Endumeni at para 19
4 Jaga at 662G-H:
‘Certainly no less important than the oft repeated statement that the words and expressions used in a
statute must be interpreted according to their ordinary meaning is the statement that they must be
interpreted in the light of their context. But it may be useful to stress two points in relation to the
application of this principle. The first is that 'the context', as here used, is not limited to the language of
the rest of the statute regarded as throwing light of a dictionary kind on the part to be interpreted.
Often of more importance is the matter of the statute, its apparent scope and purpose, and, within
limits, its background.’
See also KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) per
Harms DP at para 39; Wallis JA in Bothma-Batho at para 12
5 Endumeni at para 19;
‘All this is consistent with the 'emerging trend in statutory construction'. It clearly adopts as the proper
approach to the interpretation of documents the second of the two possible approaches mentioned by
Schreiner JA in Jaga v Dönges NO and Another; Bhana v Dönges NO and Another, namely that from the
9
to determine the meaning of the words used.6 That is more likely to be
governed by the dictates of the case or individual judicial preference. In
Jaga v Dönges at 664B-H Schreiner JA pointed out that each has its own
disadvantages.7 Of importance is that, unless the issues are narrowed,
neither an examination of the words used, nor a consideration of their
outset one considers the context and the language together, with neither predominating over the
other’
Bothma-Batho at para 12:
‘Interpretation is no longer a process that occurs in stages but is essentially one unitary exercise.'
6 Jaga v Dönges at 662H-663A:
‘The second point is that the approach to the work of interpreting may be along either of two
lines. Either one may split the inquiry into two parts and concentrate, in the first instance, on
finding out whether the language to be interpreted has or appears to have one clear ordinary
meaning, confining a consideration of the context only to cases where the language appears
to admit of more than one meaning; or one may from the beginning consider the context
and the language to be interpreted together.’
Endumeni at para 25
7 Jaga v Dönges at 664B-H:
‘No doubt the result should always be the same, whichever of the two lines of approach is adopted
since, in the end, the object to be attained is unquestionably the ascertainment of the meaning of the
language in its context. But each has its own peculiar dangers. While along the line approved by Lord
GREENE there is the risk that the context may in a particular case receive an exaggerated importance so
as to strain the language used; along the other line there is the risk of verbalism and consequent failure
to discover the intention of the law-giver. The difference in approach is probably mainly a difference of
emphasis, for even the interpreter who concentrates primarily on the language to be interpreted
cannot wholly exclude the context, even temporarily; and even the interpreter who from the outset
tries to look at the setting as well as the language to be interpreted cannot avoid the often decisive first
impression created by what he understands to be the ordinary meaning of that language. Seldom
indeed is language so clear that the possibility of differences of meaning is wholly excluded, but some
language is much clearer than other language; the clearer the language the more it dominates over the
context, and vice versa, the less clear it is the greater the part that is likely to be played by the context.
Ultimately, when the meaning of the language in the context is ascertained, it must be applied
regardless of the consequences and even despite the interpreter's firm belief, not supportable by
factors within the limits of interpretation, that the legislator had some other intention. So too, if, when
interpretation is complete, it is clear that the legislator has failed to deal with a class of case that in all
probability would have been dealt with if it had not been overlooked, there is a casus omissus which
the courts cannot fill. But the legitimate field of interpretation should not be restricted as a result of
excessive peering at the language to be interpreted without sufficient attention to the contextual
scene.’
10
context as a whole or the factual matrix in which the document came into
existence can be looked at in isolation.8
18. Finally, in the recent case of Novartis Lewis JA maintained that the
process of interpretation is to ascertain the intention of the parties or the
legislature.9 In Endumeni Wallis JA had considered the terminology
inappropriate since the enquiry is restricted to ascertaining the meaning of
the language of the provision itself.10 Nonetheless in both cases, the SCA
described the process as requiring the words used to be read in the
context of the document as a whole and in the light of all relevant
circumstances.11 In both cases the SCA confirmed that reliance can no
longer be placed on the outcome of earlier cases which restricted the
enquiry to the words used read with reference only to the internal context
of the document as a whole, and without regard to the external context of
the factual matrix at the time of its conclusion.12
8 See Jaga v Dönges at 662G-663A; Endumeni at paras 24 and 25
9 Novartis at para 27:
‘ 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.’
10 Endumeni at paras 20-24.
In Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 453C-E, Schreiner JA cited with approval
the statement by Greenberg JA in Worman v Hughes and Others 1948 (3) SA 495 (A) at 453D-E that:
'It must be borne in mind that in an action on a contract, the rule of interpretation is to ascertain, not
what the parties' intention was, but what the language used in the contract means, i.e. what their
intention was as expressed in the contract’
The context appears from 454F-455B of the judgment.
11 Endumeni at para 24; Novartis at para 27
12 Novartis at para 29 referring to the passage cited earlier of Wallis JA in Bothma-Batho at
para 12 and Endumeni at para 19:
‘It clearly adopts as the proper approach to the interpretation of documents the second of the two
possible approaches mentioned by Schreiner JA in Jaga v Dönges NO and Another; Bhana v Dönges NO
and Another, namely that from the outset one considers the context and the language together, with
neither predominating over the other. This is the approach that courts in South Africa should now
11
19. Accordingly, the fact that the agreement was made an order of court does
not detract from the need to interpret it with reference to the words actually
used as well as its internal and external context. In KPMG Chartered
Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) at
para 39 Harms DP confirmed that:
‘…the rules about admissibility of evidence in this regard do not depend
on the nature of the document, whether statute, contract or patent.’
The issue before us remains the proper interpretation of the agreement,
and its intended scope or purpose.
ADMISSIBLE EXTRINSIC EVIDENCE (PAROL EVIDENCE RULE)
20. In Coopers & Lybrand at 768D-E the court limited the extrinsic evidence
that could be considered to:
‘… 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.
Delmas Milling case at 455A-C, Van Rensburg's case at 303A-C,
Swart's case at 201B, Total South Africa (Pty) Ltd v Bekker NO1992
(1) SA 617 (A) E {dictum at 624G appl} at 624G, Pritchard Properties
(Pty) Ltd v Koulis1986 (2) SA 1 (A) {dictum at 10C-D appl} at 10C-D.’
21. It has already been observed that Wallis JA in Bothma-Batho at para 12
mentioned that the distinction between permissible background and
surrounding circumstances has fallen away. This was determined in
follow, without the need to cite authorities from an earlier era that are not necessarily consistent and
frequently reflect an approach to interpretation that is no longer appropriate.’
12
KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4)
SA 399 (SCA) where Harms DP said at para 39 :
‘First, the integration (or parol evidence) rule remains part of our law.
However, it is frequently ignored by practitioners and seldom enforced
by trial courts. If a document was intended to provide a complete
memorial of a jural act, extrinsic evidence may not contradict, add to
or modify its meaning (Johnson v Leal1980 (3) SA 927 (A) at 943B).
Second, interpretation 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: Hodge M Malek (ed) Phipson on Evidence (16 ed 2005)
paras 33 - 64). Third, the rules about admissibility of evidence in this
regard do not depend on the nature of the document, whether statute,
contract or patent (Johnson & Johnson (Pty) Ltd v Kimberly-Clark
Corporation and Kimberly-Clark of South Africa (Pty) Ltd 1985 BP 126
(A) ([1985] ZASCA 132 (at www.saflii.org.za)). Fourth, 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 Plessis1955 (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. (See Van der Westhuizen v
Arnold2002 (6) SA 453 (SCA) ([2002] 4 All SA 331) paras 22 and 23,
and Masstores (Pty) Ltd v Murray & Roberts Construction (Pty) Ltd
and Another B 2008 (6) SA 654 (SCA) para 7.)’13
13 See also Absa Technology Finance Solutions (Pty) Ltd v Michael's Bid a House CC 2013 (3) SA 426
13
22. The effect of these decisions is to remove the limitation on bringing into
consideration the factual matrix and do away with the categories of cases
where extrinsic evidence may or may not be resorted to. (Delmas Milling
Co Ltd v Du Plessis1955 (3) SA 447 (A) at 454F-455B.) What is
preserved is the meaning to be given to surrounding circumstances; at
454G Schreiner JA said it meant:
‘… matters that were probably present to the minds of the parties when they
contracted (but not actual negotiations and similar statements).’
and at 455B where surrounding circumstances may not clear up an
ambiguity then;
‘… recourse may be had to what passed between the parties on the subject
of the contract. One must use outside evidence as conservatively as possible
but one must use it if it is necessary to reach what seems to be a sufficient
degree of certainty as to the right meaning.’
23. It would also appear that where the parties are agreed as to the underlying
facts, whatever their nature, then the issue of parol evidence need not
enter the discussion. This would follow from the acceptance that where the
parties agree on the meaning of their contract even if it contradicts the
unequivocal contents of their written memorial the courts will give effect to
the former. See Shill v Milner 1937 AD 101 at 11114.
14 At 111 explaining Breed v Van den Berg and others 1932 AD 283 at 292
‘… the Court cannot go beyond the meaning which both parties have agreed to put on the
contract. I do not interpret this statement of the law to mean that in the former of the two
instances rectification is a necessary preliminary; the learned Judge of Appeal was not
dealing with this question. In my view the agreed meaning put on the contract by both
parties in the trial Court must be held to preclude the appellant from saying that the order
made was not covered by his obligations under the contract.’
See also the clarification by Goldstone J (at the time) in Briscoe v Deans 1989 (1) SA 100 (W) at 105B-C
14
24. In Novartis at para 27 Lewis JA said:
‘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. KPMG, in the passage cited, explains that parol evidence is inadmissible to
modify, vary or add to the written terms of the agreement, and that it is the
role of the court, and not witnesses, to interpret a document. It adds,
importantly, that there is no real distinction between background
circumstances and surrounding circumstances, and that a court should
always consider the factual matrix in which the contract is concluded — the
context — to determine the parties' intention.’
25. The issue of the parties subsequent common conduct did not arise for
consideration in Novartis and the other cases referred to in that decision. It
is however well established that such evidence is admissible since it
amounts to an objective demonstration of how the parties conducted
themselves, without objection, in implementing the terms of the contract. It
also amounts to conduct against interest, conduct evidencing consensus
as to the application of the agreement (much in the same way as
subsequent verbal confirmation as to their mutual understanding of the
terms) and objective evidence of their common understanding as to the
terms of their agreement at the time of its conclusion. See Harms JA (at
the time) in Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266
(SCA) at para 9115and Lewis JA in Rane Investments Trust v
Commissioner, South African Revenue Service 2003 (6) SA 332 (SCA) at
para 27.
15 At para 91:
‘The rule is that evidence of subsequent conduct is admissible, even where the agreement is on its face
unambiguous, if the parties by consent lead such evidence.’
15
Rectification would not be required if the document was ambiguous or if
ambiguity arose when considering the factual matrix. Furthermore where
the interpretation is intended to explain the document or limit its reach and
not to contradict its terms then it appears unnecessary to apply for
rectification before extrinsic evidence is allowed.
26. As I understand the appellant’s case, he seeks to contradict the express
wording of the agreement but has not applied for rectification. He would
therefore have to demonstrate that ambiguity arises from a consideration
of admissible external factors.
THE WORDS USED AND THEIR INTERNAL CONTEXT
27. The opening words to clauses 2.1 and 2.2 of section C of the agreement,
namely “Until” and “As and when” respectively, indicate that the appellant
will be solely responsible for maintenance of the two children until one or
other of the events mentioned in the clauses occurs. It is evident that the
condition which will release the respondent from being solely responsible
for maintenance is not based on the performance of some act by the
parties themselves. The parties will be commence being jointly responsible
for the children’s maintenance either when the Newham property is sold
and registered in the name of the purchaser or on 31 December 2010.
28. Which of the two postulated events will release the appellant from sole
responsibility for maintenance is governed by the phrase “whichever date
arises last”. It is added in parenthesis in both clauses 2.1 and 2.2. The
phrase is clear and unambiguous and in the context of the two clauses
qualifies the words which precede them.
16
29. If the words used are read in the context of the agreement as a whole the
“financial” rationale becomes self-evident. It was not that the appellant
assumed a more onerous obligation that would result in the respondent’s
release from any of the joint financial commitments that arose from their
relationship for so long as transfer of the property was delayed.
The following clauses of the agreement appear relevant to understand the
words used in clauses 2.1 and 2.2 in the context of the agreement as a
whole.
30. Clause 3.1 of Section B to the agreement provides that:
‘Each party shall be responsible for all liabilities incurred in their
respective names and/or attached to any property [movable and
immovable] which they acquire sole and exclusive ownership of in
terms of this agreement, save that the shared bond facility incurred in
respect of […] Paul Newham Avenue. In regard to the aforesaid bond
facility the defendant shall be liable to settle 50% of the outstanding
balance of the facility after the proceeds of the sale of the fixed
property situated at […] Paul Newham Avenue have been paid to
reduce the facility amount less the lump sum payment paid by him to
ABSA during August 2010’
It is evident from the agreement that although the Newham property was
registered in the respondent’s name, the parties marriage out of
community of property with the accrual system meant that both parties had
obtained a joint loan facility, even though the bank had secured the loan
over property belonging to the respondent only.
31. In terms of clause 2.1 of section B to the agreement, each party would
retain, as his or her sole and exclusive property, the immovable property
registered in each of their respective names. Once again, it is clear from
the agreement as a whole that the respondent was the sole registered
owner of the Newham Avenue property.
17
32. Under clause 2.2 of section B to the agreement, the defendant would
vacate the Newham property by no later than 30 September 2010. Until
that date he was to be responsible for rates and taxes, water and
electricity.
33. The children’s primary residence was to be with the appellant (clause 1.2.1
of section C) although at that time the eldest son was at university in
Potchefstroom.
34. Section E to the agreement provides as follows:
‘The parties place on record that by the signing hereof they will have no
further claims against each other, but the parties specifically record that this
clause will have no effect on the parties’ right from time to time, to apply for
maintenance in respect of the minor children , taking into account changing
needs and circumstances’
35. There are some other clauses which deal with specific exclusions relating
to the circumstances where the appellant will continue to be responsible
for certain charges, such as rates and taxes while he remains in
occupation of the property. There are also clauses where the respondent
assumes certain specific maintenance responsibilities such as retaining
the children on her medical aid. However, these are clearly and
unambiguously set out. They constitute specific exclusions to the
arrangement that the appellant will be solely responsible for the children’s
maintenance while the respondent will be solely responsible for paying the
monthly bond instalments until the happening of the relevant event
described in the clauses under consideration.
36. These other provisions of the agreement are entirely consistent with the
ordinary grammatical meaning of the words under consideration, and the
financial rationale for the appellant assuming sole responsibility for
payment of maintenance until the property is transferred into the name of a
purchaser. The agreement as a whole addresses the two financial
obligations arising from their relationship. The one was the joint
responsibility for maintaining their children. The other was the joint
18
responsibility they accepted to pay off the monthly bond installments until
the house was sold, and to assume equal responsibility for any shortfall
between the purchase price for the house and the outstanding bond
amount. Moreover, the parties provided in their agreement that
circumstances that were not contemplated might arise which would result
in a reappraisal of the maintenance obligations. This explains the insertion
of section E.
37. The arrangement was straight forward. For as long as the respondent
would assume sole responsibility for paying the monthly bond instalment,
which they jointly owed, the appellant would assume sole responsibility for
the payment of maintenance. This would obviously endure for as long as
the property was registered in her name, unless of course either party
approached a court to change the maintenance arrangement.
38. The clauses requiring the appellant to vacate by 30 September 2010, and
which indicate that there would be a shortfall between the purchase price
for the property and the outstanding bond amount, might suggest that the
parties envisaged an imminent transfer of the property or at least a sale
where occupation had to be given on or after 1 October 2010.
39. But reading the agreement as a whole there is no suggestion that the
parties did not intend their arrangement, that each would solely assume on
of the joint financial responsibilities, to endure for as long as the Newham
property was not transferred to a purchaser. In its terms, the 31 December
date reflected that even if transfer occurred before this date, the parties
would, nonetheless, continue up to the end of that year with each
assuming sole responsibility to pay the respective joint financial obligations
that arose from their relationship.
40. As was pointed out in Makume J’s judgment, the case of Claassens v
Claassens 1981(1) SA 371 (NPD) at 371A-C is authority for the
proposition that divorce agreements dealing with, amongst other things,
19
property and maintenance are the products of compromises that courts
may not necessarily go along with. It is evident that the underlying
considerations which result in any particular provision, limitation or
extension may be the result of give and take based on past events,
including past failures to meet financial obligations that the other party had
then assumed. The relevant passage from Claassens was recently
approved in Eke v Parsons 2016 (3) SA 37 (CC) at paras 14-22.
41. In the present case there was a safety valve expressly provided for by
section E to the agreement. If circumstances changed then either party
was at liberty to approach a court. This reinforces a reading of the
agreement as a whole to have catered for the eventuality that transfer did
not go through. It would also lead to the absurdity that the appellant’s
obligations would be significantly reduced after having been released from
his liability for half of the monthly loan repayments while the respondent’s
(on the appellant’s version) would at least double.
EXTRINSIC FACTORS
42. It is common cause that the parties were married in January 1990 out of
community of property with the application of the accrual system.
43. There were two dependent children covered by the maintenance
provisions of the agreement. This was determined by the court and is not
the subject of appeal.
44. The agreement was signed on 22 September 2010. The one child was
then a few days short of his 18th birthday and the other was 14 years old.
45. The factual matrix regarding the property mentioned in clause 2 of section
C to the agreement is set out in the following paragraphs.
46. The Newham property is exclusively owned by the respondent.
20
47. In 2004 the parties obtained a shared loan facility from Absa Bank. They
agreed to be responsible for its repayment in equal portions. The
respondent’s Newham property was bonded as security for the loan.
48. Prior to the conclusion of the settlement agreement the parties accepted
an offer to purchase the Newham property from a Mrs Adams. Although
the page reflecting the date of acceptance of the offer is not provided the
offer was forwarded by the estate agent on 12 August 2010.
49. The following clauses are relevant:
a. The purchase price was R2.5 million. There was no deposit.
However, the amount was to be secured by a bank or other
approved guarantee within 30 days of obtaining bond approval, and
bank approved had to be obtained by no later than 30 August 2010;
b. Occupation was to be given to the purchaser on 25 September
2010 from which date she would be responsible for occupational
rent calculated at 1% of the purchase price, payable monthly in
advance.
50. The purchaser did not obtain bond approval by 30 August but it is
common cause that extensions were granted to enable her to obtain
finance. It was a term of the agreement that the period could be extended.
51. On 28 August 2010 the appellant had paid R195 500 into the shared loan
facility account. At that time the amount outstanding on the bond was
R2 745 000. It is clear from the respondent’s own version that the
appellant put the R195 000 in as representing his 50% portion of the
21
anticipated shortfall between the purchase price and the outstanding bond.
The arithmetic adds up. Nonetheless clause 3.1 of section B to the
agreement itself recognises that there may be further amounts that he will
have to pay in. That would only likely arise if the sale to Adams fell
through.
52. On 1 October 2010 the appellant vacated the property after securing
alternative accommodation. Until then he had been occupying the property
rent free although he had an obligation to pay the municipal charges. The
date he vacated the property does not coincide strictly with the date vacant
possession was to be given to the purchaser in terms of the agreement,
but I do not believe that anything turns on it. The dates are sufficiently
close not to be coincidental.
53. The sale was however cancelled on 20 December 2010 and the property
was put back on the market. The respondent states that at the time of the
divorce agreement both parties believed that the sale would be successful,
“to such an extent that I granted the prospective purchaser several
extensions to comply with the suspensive condition”
54. I however accept that further on the respondent, in her replying affidavit,
claims that they both were cautioned by the appellant’s attorneys that the
chances of a cash sale being successful were very remote. And that is
why, although anticipating that transfer would be effected by 31
December, they both understood the risks and she claims that this led to
them agreeing to insert “whichever date arises last” Since the appellant
disputes this, and by reason of the cases referred to earlier, which remain
good law on admissible evidence, such evidence is inadmissible.
55. The appellant contended that the phrase “whichever date arises last” was
introduced because no one anticipated that the sale would fall through but
22
rather that transfer of the consummated sale would occur prior to 30
December 2010. Again this evidence is inadmissible for the same reason.
56. However, the conduct of both parties demonstrates that they were
working around the Adams sale going through. This is evidenced by the
appellant vacating the Newham property on 30 September, by him also
paying his 50% of the shortfall (between the purchase price of the Adams
sale and the outstanding bond in August 2010) and the respondent
granting Adams further extensions of time after 30 September. The
question is whether this was the only contingency they contemplated.
57. By 4 June 2011 the property was again occupied and appears to have
been sold.
58. The obligations each party assumed reveal that the total monthly loan
repayment on the outstanding bond of some R2 750 000 was not
insubstantial, amounting to R19 000 per month, while she had her own
accommodation to provide for elsewhere, and also paid other specified
amounts to the children including just over R1 000 per month for their
portion of the medical aid up to January 2011, as provided for in terms of
the agreement.
59. The appellant produced an additional affidavit setting out his alleged
expenses post January 2011. Even if they are correct (and on a cursory
examination there are items included such as a R15 000 holiday expense
apportioned to the one son) he did not seek to correlate them to what he
had been paying previously.
60. It is significant that the appellant described the purpose of the
arrangement to be “that it was agreed that it would make economic sense
for the one party to make full payment in respect of the shared loan facility
23
and for the other party to attend the joint liability in respect of the
maintenance of our two children”. The respondent confirms this.
61. Accordingly applying Shill, this evidence is admissible. In any event, the
purpose is clear enough from the document, and the other surrounding
circumstances, including the fact that the sons were to stay primarily with
the appellant while the security for the loan facility, which had been utilised
by both parties, was the respondent’s exclusive property. It would make
sense for the allocation of the joint obligations to be assumed in the
manner they were.
62. In short the appellant did not contend that the monthly maintenance for the
children was expected to increase in 2011. No such case is made out.
Even if it could, then the agreement itself provided a remedy; the
appellant could approach the court to vary the maintenance.
63. Accordingly the liabilities each assumed under the agreement appeared to
be treated by them as co-extensive
64. Moreover if occupation had been given to Adams on 1 October then;
a. there would be additional income received by the respondent by
way of occupational rent although she would then have to take up
the payment of rates and taxes while continuing to service the bond
until transfer was effected. But that does not take into account the
financial obligations she would continue to incur at the residence
where she was living.
24
b. The appellant would be obliged to incur an additional liability for
renting accommodation but, would be released of the obligation to
pay rates and taxes on the Newham property.
If occupation had been given to Adams on 1 October 2000 in accordance
with the sale agreement and transfer was not effected by 31 December
2000, then on the interpretation contended for by the appellant, as from 1
January 2011 the maintenance obligation would be shared, while the
respondent would continue to pay an addition al R19000 plus rates and
taxes for the property. To put it bluntly this would make no commercial
sense16 and would result in an absurdity inconsistent with the purpose
and intent of the agreement as confirmed by both parties.
WEIGHING THE WORDS BY REFERENCE TO THEIR INTERNAL AND
EXTERNAL CONTEXT
65. The process of examining the words used in the agreement divided the
enquiry into reading the words in relation to the document as a whole, and
having regard to admissible external evidence. They also could have been
considered comprehensively.
66. Ultimately the parties concluded a settlement agreement which was a
compromise that would ensure that the respondent would assume the sole
responsibility of paying up the joint loan obligations incurred and, in return
for relieving him of responsibility for paying his 50% towards the monthly
loan instalment, the appellant would assume sole responsibility for the
children’s maintenance.
16 Endumeni at para 18. The more recent case of Novartis does not appear to have questioned the
objective approach to determining what is businesslike in the context of the commercial relationship
established by the parties. The criticism of an objective approach was leveled at the appellant’s
contention that one may only have regard to the actual words used (at paras 27 and 28).
25
67. The economic realities are that this arrangement would endure for as long
as the property was not transferred into the name of a purchaser. If it were
otherwise, then the respondent would be obliged to continue paying both
hers and the appellant’s liability for the monthly bond installments (and
rates and taxes if the property was not occupied by Adams) while
simultaneously attracting liability for half the maintenance.
68. The appellant’s counterclaim to have the agreement interpreted in a
manner that, as from 1 January 2011, the parties would resume sharing
the payment of their maintenance obligations towards their children, even
if the property was not sold and transferred by then, would result in the
appellant’s overall liability to the common pool of financial obligations
being significantly reduced, while increasing that of the respondent’s by
over R20 000 per month. It would not make commercial sense for the
respondent to have exposed herself to paying both half the maintenance
and the full amount on the bond, when the appellant was jointly liable for
raising the loan and servicing it.
It is also evident that the parties wished to negotiate an agreement that
would avoid a return to court. If the agreement was dependent on the
single sale then it was of very short duration.
69. This possibility is unlikely as the obligations of the respondent to service
the monthly bond repayments would still remain until the property was
sold. It is also unlikely because, despite the Adams sale having been
concluded before the divorce agreement, the clauses under consideration
are not definitive; they did not allude to an existing sale or only mention an
awaited transfer. They are couched in neutral terms that are broad enough
to include a prospective sale and transfer.
26
70. If the agreement is to be interpreted in a manner that only the sale to
Adams was contemplated, then either the agreement will have failed or
terminated once a reasonable time had elapsed without the sale and
transfer going through.
71. However, the saving clause contained in section E militates against that
interpretation. This clause effectively provides for the survival of the
agreement through all contingencies of whatever nature, and whether
foreseen or not, unless one of the parties approaches a court to vary it.
72. Moreover such an argument assumes that the agreement was silent as to
the time of performance. It also assumes that the divorce settlement
agreement should be construed as an ordinary bilateral contract where
neither party can be expected to wait indefinitely for performance.
73. In the present case there is continued performance by each party. The
agreement does no more than provide that the method of performance will
change on the happening of the last postulated event. In its terms, on the
happening of the last mentioned event, the bond will be settled (save for
the respondent’s obligation to make up her portion of the shortfall). This
event would result in the reduction of the total obligations for which the
parties had jointly remained liable post the divorce, leaving only their joint
responsibility to pay for their children’s maintenance. Once the property is
transferred to a buyer, the performance effected by the respondent in
paying both her and the appellant’s liability to the bank, in respect of the
shared loan ceases, is converted into paying half of the children’s
maintenance. In turn, the appellant’s obligation to pay both his and the
respondent’s share for the children’s maintenance is halved.
74. Accordingly, it would be incorrect to characterise the issue as one where
performance must occur within a reasonable time. Performance between
27
the parties was ongoing. It would only be reduced when the property was
transferred and the joint part of the loan obligation settled. The provisions
of section E also ensure that the agreement does not fail but persists until
varied by a court of competent jurisdiction.
THE AGREEMENT AND THE CHILDREN’S RIGHTS TO MAINTENACE
75. There is nothing in the agreement that can be construed as adversely
affecting the children’s rights to maintenance. Nor is any case made out
that the appellant cannot afford to continue meeting their joint
maintenance obligations for so long as the respondent is required to
service their monthly joint debt repayments under the loan.
CONCLUSION AND ORDER
76. I am satisfied that the contentious words read in the context of the
agreement as a whole, the purpose for which they were introduced and
the factual matrix remain clear and unambiguous; until transfer of the
Newham property is effected the appellant will assume the responsibility
that both parties have to maintain their sons in return for which the
respondent will assume full responsibility for servicing the bond. To
accede to the interpretation contended for by the appellant would make no
commercial sense as it would reduce his share of the joint obligations
considerably, while increasing the respondent’s by over R20 000 per
month without any rational justification. Finally the agreement, in its terms,
was broadly worded so as not to limit the sale of the property to the
Adams’ transaction. Section E to the agreement furthermore militates
against the agreement not intending to cover any changed circumstances
that might have been unforeseen.
77. Accordingly, the appeal is dismissed with costs.
28
___________________________
BS SPILG J
I agree
________________________________
F KATHREE-SETILOANE J
I agree and it is so ordered
___________________________________
GSS MALULEKE J
______________________________________________________________
COUNSEL FOR THE APPELLANT: Adv L de Wet INSTRUCTED BY: CMM Attorneys Inc COUNSEL FOR THE RESPONDENT: Adv LC Matthysen INSTRUCTED BY: Boela van der Merwe Attorneys DATE OF JUDGMENT: 24 November 2016