Republic of South Africa

REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

							CASE No:  6163/2004

In the matter of

PLETTENBERG BAY COUNTRY CLUB					Applicant

and	

BITOU  MUNICIPALITY								Respondent  

JUDGMENT  DELIVERED  :  24  OCTOBER  2005

MOOSA, J:

INTRODUCTION
1.	Applicant, which is the Plettenberg Bay Country Club, entered into a Notarial Deed of Lease (dated 4 May 1994) with respondent, which is the Bitou Municipality, in terms of which applicant leased a certain piece of land in the Piesang River Valley from respondent (“the lease”).  The land included an 18-hole golf course, tennis courts, bowling greens, club house as well as various outbuildings and shelters ancillary to the said amenities.  The lease commenced on 1 January 1994 and is due to expire on 30 June 2050.  The rental is a nominal amount of R1, 00 per annum for the duration of the lease.
2.	In terms of clause 22 of the lease, respondent gave applicant written notice (dated 2 March 2004) cancelling the lease which is to be effective two years from the date of receipt of such notice.  The premature cancellation of the lease was based on the grounds that the leased property is required to be sold and the proceeds thereof to be used for various municipal purposes.  The lease provides, in terms of clause 23, for applicant to be compensated for any improvements made by it on the leased property, in the event of the property no longer being able to be used for the purpose for which it is leased as a result of the property being required by the state or the lessor.

THE  ISSUES
3.	Applicant brought an application for a declarator in terms of which it seeks an order:
(i)	declaring that the purported termination of the lease is contrary to the provisions of the lease; 
(ii)	declaring that the lease agreement remains in full force and effect and 
(iii)	declaring that the respondent’s resolution to dispose of the leased property does not comply with the provisions of Section 14 of the Local Government Municipal Finance Management Act, 56 of 2003 (“the Act”).
             Respondent, in opposing the relief sought, firstly, questioned the authority of the deponent of  applicant’s founding affidavit to depose to such affidavit; secondly, stated that it was entitled to cancel the lease for the reason given and thirdly, contended that the Act in question was not yet in operation at the time the particular resolution was passed.  The principal issue to be determined by this court relates to the purported cancellation of the lease.  The court will deal with the other two preliminary issues before dealing with the principal issue.

THE  AUTHORITY  OF  APPLICANT’S DEPONENT
4.	Respondent challenged the authority of Peter Joachim Victor (“Victor”) as president of applicant to depose to the founding affidavit, in terms of the resolution (“PJV1”).  The said resolution was passed by a committee of applicant.  The challenge was based on the alleged shortcomings of resolution “PJV1” which were described as follows:
(a)	the nature of the meeting is not stated;
(b)	the status of the committee is not indicated; 
(c)	no time when the resolution was passed is reflected and 
(d)	the resolution is not signed. 
            Victor, in his replying affidavit, explained that applicant’s constitution provides for the election of a committee to manage its affairs.  It is this committee that adopted the resolution that authorised Victor, in his capacity as president of applicant, to initiate the proceedings and depose to the affidavit. 

5.	Where the authority of a person to act on behalf of a legal entity is challenged and no facts are put up in support of such challenge, the minimum of evidence is required to establish such authority.  (Griffiths & Inglis (Pty) Ltd v Southern Cape Blasters (Pty) Ltd 1972 (4) SA 249 (C ) at 252F-G.)  It is sufficient if there is evidence aliunde to infer such authority.  (Tattersall and Another v Nedcor Bank Ltd 1995 (3) SA 222 (A) at 228H-229D.)  Respondent admits that Victor is the president of applicant.  Ex facie the resolution (“JCV1”), Victor is authorised to initiate and prosecute the proceedings and to sign all necessary documents.  Victor, in his replying affidavit, states that applicant’s constitution empowers a committee to manage its affairs and this committee gave Victor the necessary authority in terms of the resolution (“JCV1”).  Victor also confirmed that the original resolution that was filed on record was duly signed.  This was not countenanced  by respondent.

6.	In motion proceedings any person, who can positively attest to the facts, is entitled to depose to an affidavit, whether it is the founding affidavit or any ancillary affidavit, and no specific authority is required.  It is the institution of the proceedings that must be authorised.  (Ganes and Another v Telcom Namibia Ltd 2004 (3) SA 615 (SCA) at 624G-I.)  I do not understand respondent’s challenge to be directed at the authority of applicant to institute the proceedings.  If that was the case, respondent should have availed itself of the procedure provided for in Rule 7 of the Uniform Rules of Court.  (Eskom v Soweto City Council 1992 (2) SA 703 (W) at 705G-H.)

7.	Adv Maponya, for respondent, relied on clause 21 of the lease to challenge the authority of Victor as president to represent applicant in these proceedings.  The aforesaid clause authorises the chairman and secretary to represent  applicant.  Adv Gauntlett SC (with him Adv Melunsky), for applicant, pointed out and correctly so, that clause 21 provides for the eventuality where legal proceedings are instituted against applicant, in which case the two officials may be cited as representatives of the applicant.  

8.	Applicant dealt in its Replying Affidavit with the alleged shortcomings in resolution JCV1, save for the time when the resolution was passed.  This was perfectly permissible as the authority of Victor was challenged by respondent in its opposing affidavit.  Applicant was quite entitled to deal with this issue in its replying papers.  (Smith v Kwanoqubela Town Council 1999 (4) SA 947 (SCA) at 954F-H.)  The fact that the time of the meeting is not reflected in resolution JVC1) is not, in my view, fatal and does not vitiate the resolution.  I am satisfied that Victor not only had the necessary authority to initiate and prosecute the proceedings but also had the necessary authority to depose to the founding affidavit although such authority, strictly speaking, was not required. 

COMPLIANCE  WITH  LOCAL  GOVERNMENT  MUNICIPAL  FINANCE  MANAGEMENT ACT,  56  OF  2003
9.	Applicant initially challenged the validity of the resolution of the executive committee of respondent to dispose of the leased property to a consortium of strategic and Black Economic Empowerment (BEE) investors by way of an open tender.  The challenge was based on the non-compliance with Section 14 of the Local Government Municipal Finance Management Act, 2003 ( “the Act”).   It is common cause that at the time the particular resolution was passed, the Act had not yet come into operation.  The Act came into force on 1 July 2004, while Section 14(5) was only due to come into effect on 1 December 2004.  I agree with respondent’s contention that  applicant’s reliance on Section 14 of the Act was therefore premature and the declarator sought in the Notice of Motion in respect thereof is a non-sequitur. 

10.	In argument before me applicant contended that it is entitled to a declarator to the effect that any alienation of the leased property, without due compliance with Sections 14(2) and 14(5) of the Act would be unlawful and of no force and effect.  In my view, this is tantamount to a restatement of the law.  I do not understand  respondent to say that it would not comply with those sections of the Act, should it be required to do so.  In view of the conclusion which I have arrived at, I do not think that it is necessary for me to make a formal finding in respect of that issue. 

THE  PURPORTED  CANCELLATION  OF  THE  LEASE
11.	I now turn to the principal issue, namely the resumption of the leased property in terms of clause 22 of the Lease.  The relevant part of the clause reads as follows: 
“Notwithstanding anything in this Agreement contained, the Lessor may resume possession of the whole or any portion of the Property at any time on giving two years notice in writing to that effect should it be required for any Municipal or Government purposes and may cancel or amend the Lease accordingly.” 
              The key words to be interpreted in the above clause for determining the principal issue, are:  “…should  it be required for any Municipal or Government purposes…” (impugned phrase).

12.	Applicant contends that on a proper construction of this phrase, respondent is not entitled to exercise its right to cancel the lease unless it requires the property itself and, intends to use it specifically for Municipal or Government purposes, as contemplated by the parties in the lease.  Respondent, on the other hand, contends that the sale of the property and the use of the proceeds to fund Municipal projects amounts to municipal purposes as contemplated by the parties in the lease and as such it is entitled to cancel the lease.  The resolution of the dispute is accordingly premised on the interpretation of the relevant phrase.

THE  GOLDEN  RULE  OF  CONSTRUCTION
13.	Joubert, JA in Coopers and Lybrandt v Bryant 1995(3) SA 761 (A) crystallised the technique of interpretation as it had found expression in case law for more than a century.  The learned judge formulated the technique at 767E-768E as follows: 
“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 repugnancy or inconsistency with the rest of the instrument…  The mode of construction should never be to interpret the 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…;
(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.”
 
THE  NATURE  OF  THE ENQUIRY
14.	Adv Gauntlett SC  submitted that the enquiry has two legs.  The first leg is what exactly the respondent required for Municipal purposes.  The second leg is whether the leased property earmarked for sale, in order to generate funds for Municipal purposes, falls within the notion of the property “required for any Municipal purposes”.

15.	With regard to the first leg of the enquiry, it is clear and unambiguous according to the ordinary and grammatical meaning of the words that what is required is possession of the property.  I do not understand respondent to say otherwise.  Adv Maponya submitted that it would be more correct to say that there would be resumption of possession.  The critical question, however, which arises is:  can the property be sold and the proceeds thereof used for Municipal purposes?  In other words can such a term be read or imported into the words “should it be required for any Municipal purposes”.  The pronoun “it” is a reflexive abbreviation of the words “possession of the whole or portion of the property”.  In the present instance, it applies to the whole of the property. 

16.	I agree with Adv Gauntlett SC that there is no room to stretch the meaning of the word “it” to either read into such word or import the term “should the proceeds of the property be required for Municipal purposes” or “should the property be required to be sold for Municipal purposes”.  In my view such construction would do violence to the ordinary meaning of the words used by the parties.  However, that is not the end of the matter.  In order to determine the common intention of the parties, as contemplated in the lease, one must have regard to the relevant wording as a whole.  That brings me to the second leg of the enquiry, which is the more difficult one.  It also forms the essential bone of contention between the parties.

THE  SCOPE  OF  THE  INTERPRETATION
17.	On the facts of this case, the enquiry essentially is whether the impugned phrase  permits respondent to sell the property and use the proceeds thereof for the purpose of funding municipal projects as indicated in the written notice cancelling the lease in terms of clause 22 of the lease.  That enquiry is predicated upon the common intention of the parties as gathered from the terms of the lease. 

18.	Adv Gauntlett contended that the right to cancel the lease must be interpreted strictly in order that the established rights of applicant are disturbed as little as possible.  Adv Maponya, on the other hand, submitted that the key words should be interpreted widely.  In support of his submission he contended that the words “any Municipal purposes”  should be interpreted widely and in accordance with the provisions of the Interim Constitution of the Republic of South Africa, Act 24 of 1993, which deals with the powers and functions of local government.  He contended further that the sale of Municipal assets, in order for the proceeds to be utilised for purposes of Municipal projects beneficial to the community at large, falls within the definition of “any Municipal purposes”. 

19.	Provided the term “any Municipal purposes” passes constitutional muster, the question of whether words in a contract are to be interpreted widely or strictly will depend on the context in which they are used in the lease.  The Supreme Court of Appeal in Aktiebolaget Hassle and Another v Triomed (Pty) Ltd 2003 (1) SA 155 (SCA) at 157G approved the words of Lord Steyn, namely that  “in law context is everything”.  According to my understanding, applicant’s challenge is not based on the ground that the Municipal purposes for which the proceeds of the sale of the property will be used is inconsistent with the provisions of the interim or permanent Constitution, relating to the powers and functions of local government.  The challenge is founded on the contract itself.

20.	In terms of the cardinal rule of construction, I will firstly examine the ordinary, literal and grammatical meaning of the words constituting the impugned phrase and thereafter examine them as a whole within the context in which they are used in the contract.  

21.	The word “required” is capable of a number of meanings ranging from “desired” to “necessary” to “indispensable”.  It depends largely on the context in which it is used.  (R v Mofokeng 1953 (3) SA 629 (O) at 632F.)  The word is defined in the Little Oxford English Dictionary as “need or want something for a purpose;  instruct or expect someone to do something;  regard a particular thing as necessary or compulsory”.  (See also Khala v Minister of Safety and Security 1994 (4) SA 218 (W) at 224.)  The word “required” as used in Section 23 of the Interim Constitution:  “where information is required for the protection of his or her rights”, has been interpreted as conveying an element of need in Shabalala v Attorney General, Transvaal and Another;  Gumede and Others v Attorney General, Transvaal 1995 (1) SA 608 (T) at 624C-D.  (See also Davis v Clutchco (Pty) Ltd 2004 (1) SA 75 (C) at 84.)  The context in which the word “required” is used in the lease can, therefore be interpreted to mean that “possession of the property” is necessary for “any Municipal purposes”.

22.	The word “any” in its natural and ordinary sense, unless restricted by the context, is an indefinite term, which includes all of the things to which it relates.  (Dictionary of Legal Words and Phrases – RD Claasen.)  “Any” is a word which excludes limitation or qualification but its generality may be limited by the subject matter or context.  (Stroud’s Judicial Dictionary of Legal Words and Phrases, 6th Ed at 271.)  The word “any” is on the face of it, a word of wide and unqualified generality.  It may be restricted to the subject matter or the context but prima facie it is unlimited.  (R v Hugo 1926 AD 268 at 271.)  The word “any” in the present context is limited to “Municipal or Government purposes”  but within those restricted subject matter i e “Municipal or Government purposes”,  it has wide application. 

23.	The words “Municipal purposes” have been described as akin to “public purposes”.  Both these concepts have received judicial consideration, primarily in matters concerning expropriation and town-planning.  In most of the cases considered in relation to these phrases, the land in question was designated for actual use for public or municipal purposes.  (Fourie v Minister van Lande en ŉ  Ander 1970 (4) SA 165 (O);  L F Boshoff Investments (Pty) Ltd v Cape Town Municipality 1969 (2) SA 256 (C);  African Farms & Townships Ltd v Cape Town Municipality 1961 (3) SA 392 (C);  White Rocks Farm (Pty) Ltd and Others v Minister of Community Development 1984 (3) SA 785 (N);  Sorrell v Milnerton Municipality 1983 (1) SA 31 (A).)
24.	The scope of “public purposes” received judicial consideration in Rondebosch Municipal Council v Trustees Western Province Agricultural Society 1911 2711 AD at 283, where Innes, J stated that:
“public purposes may either be all purposes which pertain to and benefit the public in contra-distinction to private individuals, or they may be more restricted purposes which relate to the state, and the Government of the country – that is governmental purposes”.

25.	Having examined the meaning of the separate words and concepts, I now turn to deal with the meaning of the impugned phrase, as a whole.   Is the meaning of that phrase sufficiently wide to include the sale of the property to enable the proceeds to be utilised for Municipal projects?  To answer that question one needs to determine the intention of the parties from the language of the phrase.  If the language is not clear one must look at the wider context of the lease, including the nature and purpose of the contract and the surrounding, including background, circumstances pertaining thereto.

THE  FACTS  AND  CIRCUMSTANCES
26.	Applicant, prior to entering into the present lease, had a written lease with  respondent for 25 years.  In 1994 this lease was, by agreement, cancelled and substituted by the existing lease.  The leased property was earmarked as a public amenity for the playing of golf, tennis and bowls and for other recreational purposes.  The terms and conditions were substantially the same, except in regard to the following:  the existing lease was for a period of 56 and a half years;  it was notarially registered against the title deeds of the leased property;  it prohibited applicant from discriminating on the grounds of race or colour;  it provided for a longer notice period for the resumption of the property;  it provided for a different formula for the calculation of compensation and the payment thereof;  and it provided that when the leased property was resumed, applicant shall not disband but re-establish itself elsewhere. 

27.	Applicant, by virtue of the duration of the lease and the fact that it was notarially executed and registered, enjoyed security of tenure not only as far as respondent is concerned but also against any future purchaser of the property.  It also provided respondent with the assurance that the public would enjoy sporting and recreational facilities, which respondent would otherwise have to provide.  The fact that a nominal rental of R1,00 was levied is a clear indication that the common intention of the parties was that the lease was essentially meant to provide sporting and recreational facilities, rather than to generate income for respondent.  It is not disputed that applicant’s membership is open to all members of the community at affordable rates and the facilities are readily available to the community and charitable institutions to raise funds.  It is also not disputed that the continued provision of sporting and recreational facilities for all the residents of respondent is one of the requirements for the promotion of social and economic development and a safe and healthy environment as contemplated by Section 152(1) read with Section 24 of the Constitution of the Republic of South Africa Act, 108 0f 1996.  
28.	I have not been referred to any authority by counsel nor could I find, in my research, any authority permitting a Municipality to resume possession of property, owned by it and leased to a third party as a public amenity, for the purpose of selling such property to generate funds for Municipal projects.  The facts which approximate most closely with the facts of this case, are to be found in Uitenhage Municipality v Uys 1974 (3) SA 800 (E).  In that particular case, the Municipality had leased a piece of land to Uys.  The Municipality then required a piece of land for building an access road.  The lease provided that should the Municipality require the leased property or any portion thereof for its own purposes, it was entitled to resume possession thereof on six months’ written notice.  The Municipality was therefore entitled to resume a portion of the property for its own use.

FINDINGS
29.	In my view, the wording of the impugned phrase, seen in the light of the wider context and circumstances of the lease, is sufficiently wide to include any Municipal and Government purposes.  However, by accepting the wording in its widest possible sense, one would arrive at conclusions which would lead to absurdity when considered with the rest of the contract.  Such an interpretation would effectively destroy, firstly, the security of tenancy and, secondly, the object for which the leased property was earmarked.  The property could then be resumed on any pretext, provided it constituted a Municipal or Government purpose, however insignificant such a purpose could be.  A few examples can clearly illustrate this point:  the resumption and sale of the property to fund salary increases of councillors or to fund the performance bonus of the Municipal manager or to fund an expensive motor vehicle for the mayor or even an aeroplane for the premier.  The possibilities are endless.  They might sound absurd but they could be covered if an extended meaning is given to the wording of the impugned phrase as suggested by the respondent.  I cannot imagine that the parties could have contemplated such an intention when concluding the lease.  
30.	What in my view the parties intended, was for respondent to exercise its right of resumption in terms of clause 22 of the lease, only if respondent genuinely required the property for the broadest possible Municipal or Government use.  This use could include the erection of a school, library, hospital, clinic, houses for the poor, or for the settlement of squatters or for any other such Municipal or Government use.  In my view, it could never have been the common intention of the parties that the leased property be sold and the proceeds thereof be used for Municipal or Government purposes.  Neither could it be the common intention of the parties that the property on which a public amenity is located, be sold to a private developer for the establishment of a golfing estate for the rich and the elite, at the expense of the ordinary residents of  respondent, with the proviso that the public amenity be established elsewhere as contemplated in clause 23 of the lease.  It is on this basis that respondent’s purported termination of the Notarial Deed of Lease, is found to be invalid.  

ORDER
31.	In the premises:
(i)	the termination of the Notarial Deed of Lease dated 4 May 1994, is declared to be invalid;  and
(ii)	respondent is ordered to pay applicant’s costs, which costs shall include the costs of two counsel.
……………………….        E  MOOSA