BACKGROUND AND SUMMARY
On or about 16 July 2001, the first appellant, Visagie & Associates CC duly represented by the second appellant Mr Mullard Visagie (hereinafter together referred to as the “appellants”) entered into a lease agreement with Small Enterprise Finance Agency Ltd (the “respondent”). In terms of the lease agreement, the rentals were payable monthly in advance on the first working day of each month. On or about 30 September 2013 and caused by first appellant’s failure to timeously effect payment of the rental due, the respondent cancelled the lease agreement.
During January 2014, the respondent instituted legal action in the Magistrates Court wherein it claimed, inter alia, the cancellation of the lease agreement and payment of the arrear rental. In their counterclaim against the respondent, the appellants sought payment of R80,000.00 (eighty thousand Rand) for unjustified enrichment arising from alleged improvements to the leased premises. On the date of hearing, in July 2016, the parties settled the matter on terms which were embodied in a settlement agreement and made an order of court. The salient terms of the settlement agreement (“the agreement”) were that each of the parties would withdraw their claims against one another; the appellants would pay the respondent’s legal fees from December 2013 to July 2016 although the scale on which the costs were to be paid was unclear and the appellants would vacate the leased premises by no later than 30 September 2016.
Furthermore, clause 12 of the agreement read: ‘should the appellants fail to make payment herein or fail to make payment timeously and in accordance with the terms set out in the clauses herein, then in such event the full balance of the debt will immediately become due and payable’. Its common cause that after the conclusion of the agreement, the remaining rental payments due to the respondent for July 2016 to September 2016 were paid after the first day of the month. On this basis, the respondent asserting that the appellants were in breach of clause 12 of the agreement applied to the Magistrate’s Court for judgment against the appellants. \
In opposing the application, the appellants contended that they were not in arrears since the agreement did not specify by when the monthly payments had to be made nor did it specify the scale upon which the legal costs were to be paid. The appellants refused to pay the respondent’s costs on the attorney and client scale.
It was found by the Magistrate’s Court and later on appeal the High Court concurred that 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. The respective Courts held that the appellants’ and respondent’s imputed intention when concluding the agreement was that the written lease agreement would regulate the appellants’ obligation to pay rent for the remainder of the rental period. The courts further awarded costs to the respondent on the attorney and client scale.
HELD
The Supreme Court of Appeal (the “SCA”) granted the appellants special leave to appeal against the judgment and order of the Full Bench of the High Court. The critical issue considered by the SCA was 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 and failure to do so would trigger the provisions of clause 12 of the agreement.
The SCA held that in determining whether a tacit term had been imported into an agreement, regard had to be given to the express terms of the agreement and to evidence about the surrounding circumstances at the time of its conclusion and the conduct of the parties post the conclusion of the agreement.
It was common cause that the express terms of the agreement were neutral about the relocation of the original lease agreement. In considering the surrounding circumstances which precipitated the agreement, the SCA held that it was clear that there was a history of repeated non-payment of rentals by the appellants which lead to acrimony between the parties. Furthermore, none of the subsequent rental payments by the appellants had been paid by the first day of the relevant month.
| The Supreme Court of Appeal (the “SCA”) granted the appellants special leave to appeal against the judgment and order of the Full Bench of the High Court. The critical issue considered by the SCA was 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 and failure to do so would trigger the provisions of clause 12 of the agreement. The SCA held that in determining whether a tacit term had been imported into an agreement, regard had to be given to the express terms of the agreement and to evidence about the surrounding circumstances at the time of its conclusion and the conduct of the parties post the conclusion of the agreement. It was common cause that the express terms of the agreement were neutral about the relocation of the original lease agreement. In considering the surrounding circumstances which precipitated the agreement, the SCA held that it was clear that there was a history of repeated non-payment of rentals by the appellants which lead to acrimony between the parties. Furthermore, none of the subsequent rental payments by the appellants had been paid by the first day of the relevant month. Bearing these surrounding circumstances in mind, it was clear that the respondent had concluded the agreement to achieve two important objectives, the first being to collect rental for June to September 2016 and to have the appellants vacate the premises at the end of September; and secondly to quell the appellants claim against the respondent for unjustified enrichment, which was withdrawn. The onus to prove the material from which a tacit term is to be drawn rests on the party seeking to rely on same and in this case, the SCA held that the respondent had failed to prove that this material existed. The SCA held further that without an express provision as to when rental should be paid i.e. monthly in advance or in arrears, the common law applies, which states that rental is payable in arrears after the lessor has fulfilled its obligation. The respondent was therefore not entitled to invoke the provisions of clause 12 of the agreement since there was no breach by the appellants. Lastly, the SCA held that where the scale of costs is not stipulated in a settlement agreement, the ordinary party and party scale applied. For the reasons discussed herein, the appeal was successful. |
VALUE
| A tacit term is invariably a matter of inference as to what both parties must or would have in mind. The inference can be drawn from the express terms and from admissible evidence surrounding the circumstance. The onus of proving the inference rests on the party seeking to rely on the tacit term. Written by Khotso Mmatli Checked by Omphile Boikanyo |
