Trustees for the Daleen Kruger Trust v Middleground Trading 251 CC and Another (A449/2017) [2018] ZAGPPHC 596 (2 August 2018)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

Case no: A449/2017

REPORTABLE

OF INTEREST TO OTHER JUDGES

REVISED

Date 2 August 2018

In the matter between:

WILMA PETRA KOOIJ

MAGDALENA MARIA KRUGER

JACOBUS CHRISTOFFEL KRUGER

in their capacities as TRUSTEES FOR THE

DALEEN KRUGER TRUST (IT1972/96)

Appellant

and

MIDDLEGROUND TRADING 251 CC

First Respondent

DIRK JACOBUS FOURIE

Second Respondent

JUDGMENT

MOULTRIE AJ:

1. This appeal is against a judgment of the Magistrates' Court for the District of Tlokwe held at Potchefstroom and relates to a written contract concluded between Mr JC Kruger (" Kruger'') on behalf of the appellant trustees of the Daleen Kruger Trust ("the Trust'') and the second respondent, Mr DJ Fourie ("Fourie" ) on behalf of the first respondent ("Middleground" ) on 30 September 2005 ("the contract" ). In terms of the contract, the Trust granted Middleground the right to extract peat on certain portions of a farm owned by the Trust ("the property").

2. The matter raises two issues for determination.

3. In the first place, it is necessary to determine the nature of the obligation imposed on Middleground in terms of the contract to make payment to the Trust.[1] The payment in question is referred to in the contract as " die minimumhuur bedrag van R15 000-00 (Vyftien duisend rand), plus BTW per maand' , and was subject to an annual escalation. It is non-tendentioulsy referred to in this judgment simply as " the minimum monthly payment". The parties argued the appeal on the basis that we are required to decide, as a matter of contractual interpretation, whether this

payment is correctly to be understood solely as a rental for the lease of the property (as the Trust contends) or whether (notwithstanding its description as "huur" ) it constituted a pre-payment for the extracted peat (as Middleground contends). For the reasons set out below, however, I do not consider that this is a 'binary' question.

4. The second question for determination is whether, and if so in what way, Middleground's obligation to make the minimum monthly payment was affected by a compliance notice issued during November 2011 by officials of the Department of Environmental Affairs (" the compliance notice" ) and the subsequent events that occurred prior to the institution of these proceedings by the Trust seeking payment.

The relevant facts

5. For some time prior to the conclusion of the contract, peat was extracted from the property by an entity known as Stander Veen BK. The contract was then negotiated by the parties' respective attorneys during August and September 2005 and was signed on 30 September 2005.

6. The contract is headed "OOREENKOMSVIR HUUR EN VERHUUR" and records that the Trust is " die eienaar van die ... eiendom en die veen in, op en oor die eiendom" and that Middleground "begerigis om die eiendom te huur om op die eiendom vir veen te prospekleer, le myn en of te oes" .

7. The remaining provisions of the contract insofar as they are relevant to the appeal are the following:

"1. DIE PARTYE EN DIE EIENDOM

1.3 Die eiendom waaroor die regle verleen word is die uilgewysde vleiland en gedeelles waarop veen voorkom op die plaas ... soos per kaart hierby aangeheg ... Die veen gedeelle word aangedui in rooi op die kaart plus die uilgewysde gedeelle van ongeveer 5 heklaar waarop die gepaardgaande besigheidsakliwileile op uitgeoefen kan word, en die uitgewysde paaie.

2. ALGEMEEN

2.2 Onderworpe aan die voorwaardes van hierdie ooreenkoms en virdie duur van die kontraktermyn verhuur die [Trust] hiermee aan [Middleground] die eiendom om die alleen reg te verkry om alleenlik vir veen te prospekteer, om veen te ontgin, om vir veen le myn en om veen op die eiendom te oes.

3. KONTRAKTERMYN

• Die kontrak sat in aanvang neem op datum van ondertekeningvan die ooreenkoms.

3.2 Die ooreenkoms sat voortduur vir 'n termyn van 3 (ORIE) jaar.

• Die [Trust] verleen 'n verdere twee opsies van 3 (ORIE) jaar elk aan [Middleground] om die ooreenkoms le verleng. [Middleground] moel skriftelik kennis aan die [Trust] gee van sy voorneme om die opsie uil te oefen, minstens 1 maand voor die verstryking van die kontrak termyn. ...

3.3 [Middleground] mag die ooreenkoms slegs kanselleer as:

3.4.1 [Middleground] deur nuwe wetgewing verbied word om vir Veen te oes;

3.6 Enige vorm van vis major sat 'n geldige rede vir [Middleground] daar stet om nie sy werksaamhede in terme van hierdie ooreenkoms uit te oefen nie, indien dit permanente onmoontlikheid tot gevolg het.

4. VERGOEDING

• Vir die huur van die eiendom sal [Middleground] die [Trust] die minimum huur bedrag van R15 000-00 (Vyftien duisend rand), plus BTW per maand betaal en 'n verdere bedrag van R25-00 per kubieke meter per maand vir die Veen wat verwyder is van meer as 600m3 Veen per maand. ...

4.2. Die betaling van die bedrag van R15 000-00 per maand, vir die huur van die elendom en vlr die verlening van die regte in terme van die ooreenkoms is 'n vooruitbetaling van die bedrag van die beta/Ing van R25-00 I m3 (R25 per kubieke meter) (plus BTW indien van toepassing), vir die Veen wat per maand deur [Middleground] verwyder is.

4.3 Die bedrag van R15 000-00 per maand sat verreken word teen die bedrag wat aan die [Trust] verskuldig is, vir die veen wat ingevolge die bepalings van die ooreenkoms verwyder is en waarvoor [Middleground] die [Trust] vergoed. Die verrekening sat maandeliks gedoen word en sal daar maandeliks 'n rekonsiliasie van gedoen word. Betaling sal geskied 30 dae na maand-einde.

7. REGTE EN PL/GTE VAN DIE PARTYE

• As eienaar van die eiendom verleen die [Trust] die reg aan [Middleground] om op die eiendom vir Veen te prospekteer, te myn en I of daarvoor te oes op enige wyse en of metode wat nou bestaan of later ontdek mag word en om in die algemeen die reg he om a/le stappe te neem en werksaamhede te verrig vir die behoorllke uitvoering van sy prospekteer, myn of oes werksaamhede, vir veen op die EIENDOM.

8. ALGEMEEN

• Die [Trust] verleen hiermee aan [Middleground] die reg om in sy eie naam vir enige magtigings, welke ookal nodig sat wees om vir Veen te oes, en of te myn aansoek te doen.

• [Middleground] is geregtig is om onder die magtiging van Stander Veen BK vir veen te oes."

8. Following the conclusion of the contract, reconciliation accounts (with the heading " rekonsi liasie van veen reeds betaaf') were regularly submitted by Middleground to the Trust. Although the implication of these accounts for the interpretation of the contract was disputed at the trial, the correctness of the data underlying them (i.e. the amount paid by Middleground and the volume

of peat that it extracted each month) was not. It is apparent from the reconciliation accounts that no peat was extracted for the first 10 months of the contract between 1 October 2005 and 31 July 2006. Despite this, Middleground continued to pay the minimum monthly payment of R15,000 per month (recorded as "bedrag huur reeds betaaf') to the Trust throughout this period. The accounts reflected the cumulative total of the minimum monthly payments that had been made, and a balance of R150,000 was recorded in the column"Vereken @ HuurI Vooruif' of the accounts as at July 2006. It was only with effect from August 2006 that Middleground succeeded in extracting any peat from the property. After this, the reconciliation accounts reflect that the value of any peat over and above 600 m extracted (at R25 per m) was deducted from the balance. By April 2007, the balance of the account had reduced to R52,778.28.

9. The contract was renewed for the first of the two additional periods between 1 October 2008 and 30 September 2011 and it would appear that Middleground exercised its option in respect of the second additional period (i.e. until 30 September 2014) some time prior to 30 August 2011.[2]

10. On 24 August 2011 officials of the Department of Environmental Affairs issued a notice (" the pre-notice" ) indicating their intention to issue a compliance notice and/or directive in terms of sections 28(4) and/or 31L of the National Environmental

Management Act, 107 of 1999 (" NEMA") and/or a directive in terms of section 31A of the Environment Conservation Act, 73 of 1989 ("EC A" ), on the basis of what they contended was " the environmental degradation and serious harm caused by the unlawful activities conducted on" the property. The pre-notice stated inter alia that the Department officials had:

"... reasonable grounds for believing that the activities which have taken place on the site have taken place in the absence of all the

necessary environmental authorisationls have caused environmental degradation, and will continue to do so if decisive action is not taken. Moreover, the activities on site have the potential to cause significant harm, not only to the environment, but to water users downstream of the site in the Mooi River Catchmen,t including but not limited to, residents of Potchefstroom".

11. Paragraph 5 of the pre-notice listed the activities that were taking place and stated inter alia that:

"i. Owing to the degradation referred to above, the vital hydrological and ecosystem functioning provided by the wetland (including but not limited to habitat for wetland species, assimilation of heavy metals and flood and drought attenuation for the Mooi River catchment as a whole) has for all practical purposes been completely lost;

j. The Gerhardminnebron wetland is the single largest source of water for Potchefstroom, largely owing to the sub aquatic artesian

springs;"

12. In paragraph 13, the pre-notice concluded that:

... the Department has reasonable grounds to believe that the manner in which activities are conducted on the site has caused, is causing

and will further cause significant environmental degradation to the Gerhardminnebron wetland and presents an immediate danger to the environment of the greater Wonderfontein spruit, including the residents of Potchefstroom and surrounds."

13. The compliance notice was then issued on 28 November 2011. It is a detailed document setting out the basis for the directives that were issued in paragraph 22 thereof, which were as follows:

"In light of the reasons given above, the parties are required to do the following:

22.1. Cease the extraction of peat from Portion 2 or any other portion within the farm Gerhardminnebron 139-IQ within four (4) working days of receipt of this Compliance Notice/Directive;

22.2. Within five (5) working days from receipt of the Compliance Notice I Directive, remove all machinery and any implement that was used for the extraction of peat from the site;

22.3. Within five (5) working days from date of receipt of the Compliance Notice I Directive, ensure that any access points to the affected areas of the Gerhardminnebron which forms subject of the Compliance Notice I Directive are cordoned off, either by locking gates or barricading access points to prevent access to the affected areas;

22.4. Employ the services of a specialist conversant in the field of aquatic science within ten (10) working days of receipt of the Compliance Notice I Directive, to compile a report for approval by the DEA giving effect to:

i. A site characterisation and assessment in the form of a delineation study indicating the surface area impacted by the unlawful activities on the site;

ii. An estimate of the volumes of the peat that have been unlawfully removed;

iii. An estimate of the ecological value of the peat that has been removed and if possible, equate the ecological value to a market related cost; and

iv. A detailed recommendation on remediation measures that may be implemented after the site characterisation has been conducted in the

short, medium and Jong term by making use of recognised scientific methods; and

22.5 Commence implementation of the measures approved by the DEA within three (3) days after the report has been approved. Please note that the DEA reserves the right to augment any finding contained in the report."

14. The trustees of the Trust as well as Middleground, Stander Veen and their members were all identified in paragraph 3.6 of the compliance notice as " the parties" required to implement these measures.

15. The following further extracts from the compliance notice are relevant for current purposes:

"12.1. That peat extraction causes environmental degradation and that peat takes centuries to form is trite:

12.2. You claim that an official from the DAFF "created a legitimate expectation ... that ... the floatation method was sanctioned by the State and would hold no adverse consequences for our clients ...". The DEA will hasten to remind you that the problem with the extraction is not with the floatation method as such, but peat extraction as a whole (particularly where this Is unlawful), whether by floatation or any other method. ...

13. The DEA also does not believe that the establishment of floating islands or similar contrived means constitutes reasonable measures to rectify or rehabilitate the peat/and ...

13.6 The DEA still has reasonable grounds to believe that the peat extraction has and will continue to result in irreversible degradation of the environment." [emphasis supplied]

16. In December 2011, Middleground's attorneys launched an application in the High Court comprising an urgent Part A seeking a temporary

suspension of the compliance notice and a Part B seeking to have it reviewed and set aside. This application was, however, settled

shortly before it was argued and the parties agreed that although Middleground would be permitted to remove from the property such peat that it had already extracted, it would cease all new extraction activities until the finalisation of an internal appeal to the Minister of Environmental Affairs which would be lodged by 31 January 2012. In addition, the Minister undertook to give a decision on the appeal by no later than the end of February 2012 or such other date as may be agreed upon between the parties.

17. The last month in which any peat was recorded in the reconciliation accounts as having been extracted from the property was January 2012. Although it appears that the minimum monthly amount was paid in respect of February 2012, no further payments were made after that and the accounts thereafter reflected a balance owing by the Trust to Middleground in the sum of R228,915.38. It is common cause that Middleground has taken no steps to recover this amount from the Trust.

18. It is to be noted that the cessation of payments by Middleground to the Trust after February 2012 coincides with the expiry of the date on which the Minister had undertaken to furnish the decision on the internal appeal, which had been duly lodged on behalf of both parties and Stander Veen on 31 January 2012.

19. The Minister's decision was, despite the undertaking, not forthcoming by the end of January 2012. It appears that the Trust then enquired about continued payment of the minimum monthly amount. In response, Whitehorn sent Kruger an email on 29 May 2012 noting that Middleground had borne the professional and legal fees associated with the attempts to reinstate the required permissions to extract peat on the property and proposing two potential options to deal with the situation. The first was that Middleground would pay three instalments of the minimum monthly amount and then cancel the contract, in which case the legal process would be abandoned. The second proposed option was that Middleground would continue to fund the legal processes but would not be required to pay the minimum monthly amount at all until such time as the required permissions had been reinstated. When the Trust responded to these proposals on 27 November 2012, it did not accept either of them, and instead made a counter-proposal of its own which was not accepted by Middleground.

20. The Minister made a decision refusing the internal appeal on 26 June 2013, which was received by the parties on 3 July 2013.

21. In March 2014 Middleground instituted a review application (citing the Trust as a respondent.)In this application, Middleground sought to set aside only items 22.4 and 22.5 of the compliance notice, which required the Trust, Middleground and Stander Veen to take steps to remediate the environmental damage that had allegedly been caused by the peat extraction activities on the property. The application contained no prayer for an order setting aside items 22.1 - 22.3 of the compliance notice requiring the cessation of peat extraction activities. In other words, no attempt was made in this application to reinstate the ability to continue with the peat extraction activities on the property.

22. The contract terminated by effluxion of time on 30 September 2014. Shortly after this, the Trust instituted the current claim against Middleground for payment of R1,051,796.99 in respect of the unpaid minimum monthly amount for the period from March 2012 until September 2014.

The nature of the minimum monthly payment

23. The first issue to be determined in this matter is one of contractual interpretation.

24. Interpretation of written legal instruments is an exercise in ascertaining the "objective" "meaning of the language of the provision itself' .[3] The subjective views of the parties have "no bearing on the analysis"[4] and are "irrelevanf'.[5] "Interpretation is a matter of law and not of fact and ... is a matter for the court and not for witnesses". Although interpretation is " one unitary exercise" ,[6] and the meaning of a provision is determined both with reference to its language and in the light of its factual context, the "inevitable point of departure"[7] is the language of the provision. It is inappropriate to "do violence to the language. . by placing upon it a meaning of which it is not reasonably capable[8]" and the language should not be "unduly strained'.[9] "Elementarymeaning demands that we stop short of the extreme expedient of interpreting a provision against its own language" .[10] A sensible meaning should be preferred to one " that leads to insensible or unbusinesslike results" , or one that undermines the apparent purpose.[11] Where, however, a court "is faced with two or more possible meanings that are to a greater or lesser degree available on the language used ... the apparent purpose of the provision and the context in which it occurs will be important guides to the correct interpretation" .[12] Thus, while context may no longer be completely ignored, "one must use it as conservatively as possible" .[13]

25. The factual context includes what has previously been referred to as "background circumstance"sand"surrounding circumstances" .[14] It is ascertained by reading the provision in the light of the document as a whole and the circumstances attendant upon its coming into existence. It has also been held by the Supreme Court of Appeal that "... it can be accepted that the way in which the parties to a contract carried out their agreement may be considered as part of the

contextual setting to ascertain the meaning of a disputed term ... because [this] may be probative of their common intention at the time they made the contract'.[15] However, in view of Wallis JA's powerful critique of the concept of the 'intention of the parties' in Endumeni,[16] it is not surprising that the Court has been quick to circumscribe the limits within which evidence of the subsequent conduct of the parties may be utilised as an interpretational aid. In Urban Hip Hotels, the SCA held that:

"The use of such evidence is, however, subject to three provisos. First, the evidence must be indicative of a common understanding of the terms and meaning of the contract. Second, as pointed out by Bradfield, (supra) at 254, the evidence may be used as an aid to interpretation and not to alter the words used by the parties. See also Comwezi Security Services (Pty) Ltd & another v Cape Empowerment Trust Ltd (75912011) [2012) ZASCA 126 (21 September 2012). Third, as Harms JA cautioned in KPMG Chartered

Accountants (SA) v Securefin Ltd & another [2009) ZASCA 7; 2009 (4) SA 399 (SCA) para 39, the evidence must be used 'as conservatively as possible"'.[17]

26. In the current matter, the Trust bases its argument on the fact that the contract is expressly identified as one of"huu ren verhuur' and the minimum monthly payment in question is expressly referred to as "huur'. It furthermore points out that Middleground "had to occupy the property" in order to extract the peat and that "without use and enjoyment of the property, [it] would not have been able to" do so. As such, "the agreement in fact could not exist without the lease element'.

27. Although I accept that all of these contentions are correct, I do not consider that they provide a complete answer to the question for resolution in this appeal.

28. The fact that the agreement can be characterised as a 'lease' in respect of which the minimum monthly payment is identified as 'rent' does not necessarily mean that the payment did not also constitute payment in respect of the peat extracted. Nor does it necessarily mean that the Trust would be entitled to receive and retain the payment irrespective of whether any peat was extracted or not.

29. To my mind, this is precisely the kind of 'lease' that was considered by the Appellate Division in Graham. In that case, the facts were as follows:

"... the appellant and the company entered into a 'tribute' agreement whereby the right of working the claims 'on tribute' for a period of five years was granted to a partnership, consisting of two persons named Bean, associated for the purpose of carrying out the tribute agreement under the style or firm of The Roof Mine Tribute. (This agreement will be referred to as Agreement B.) Agreement B was drawn in the form of a lease, the company being called the lessors of the claims and the Roof Mine Tribute the lessees. ... The lease was for a period of five years with an option to the lessees to renew it for a further period of two years ... The consideration

payable by the lessees was a monthly royalty calculated on a percentage of the gross yield of bullion extracted from the ore ... There was also a provision against subletting and several clauses dealing with the manner in which the work of mining should be carried on."[18]

30. The respondent argued that Agreement B was not a lease. However, even though he specifically recognised that one of the essentialia of a lease is an agremeent by one of the parties " to pay rent' in exchange of the use of something, Watermeyer JA concluded on behalf of a uninimous court that "it is difficult to see any distinction between this contract and a contract of letting and hiring" [19] He proceeded to decide the matter on the basis that this was indeed a lease, albeit one in respect of which the rent took the form of the royalty, and even though "the consideration depends partly upon the will of the tributors, as they have control of the extent and method of mining; partly upon the content and nature of the ground and partly upon luck" , as had been pointed out by the respondent's counsel in argument. [20]

31. Indeed (and irrespective of whether peat is regenerative in nature or not, an issue which was not traversed during the trial and upon which it is not open to me to take a view), it would seem to me that the contract in this instance is akin to a mineral lease of the kind identified in Drymiotes v Du Tait, where the court noted that apart from the right to extract minerals,

"The other elements in a mineral lease are the right to occupy the mineral­ bearing land for the purpose of extracting the minerals and the payment by the ‘lessee’ to the owner of the agreed remuneration. The latter may take any commercial form, such as periodical payments similar to a rental ,a fixed or sliding scale commission on the output of the mining operations. a lump sum, and the like. It matters little what the parties call the quid pro qou, the statutory title of lease itself is inappropriate.[21] [emphasis supplied]

32. As such, it appears to me that the mere fact that the contract in this instance was identified as a "lease" (whether properly so-called or akin to a mineral lease) and that the minimum monthly payment was "rent does not show that the Trust is entitled to retain it irrespective of whether Middleground extracted any peat. It is thus necessary to go beyond the mere use of the words "huur'' and " verhuur'' in the contract in order to understand the true nature of the minimum monthly payment.[22]

33. There are overwhelming indications in the language of the contract that even though the minimum monthly payment constituted "rent", that rental was in the form of a prepayment made by Middleground in respect of peat. The key provisions in this regard are clauses 4.2 and 4.3.

34. In clause 4.2, even though the minimum monthly amount is identified as being " vir die huur van die eiendom" , it is specifically stipulated that it " is 'n vooruitbetaling van die bedrag van die betaling van R25-00 / m3 (R25 per kubieke meter) (plus BTW indien van toepassing), vir die Veen wat per maand deur [Middleground] verwyder is". As noted above, the mere fact that a payment constitutes rent, does not mean that it can't also be a different kind of payment such as a royalty payment (or in this instance, a "pre-payment" in exchange for a good).

35. What is more, clause 4.3 expressly provides that the minimum monthly payment would be " verreken" (set-off) monthly against the amount of the consideration owing to the Trust by Middleground in respect of the peat, that a monthly reconciliation would be undertaken and that "betaling sat geskied 30 dae na maand-einde."

36. While it may be possible to envisage provisions stipulating that the set-off would not apply in the event that less than 600 m3 of peat were to be extracted in a given month, no such provisions appear in the contract. To the contrary, the clause provides that the set-off would be done monthly and introduces no conditionality allowing for it not to apply in certain circumstances, and the Trust did not plead (or seek in argument to suggest) the existence of a tacit term reflecting its interpretive argument.

37. The Trust seeks to overcome the textual barriers to its claim by recourse to the factual context of the agreement, arguing that since the leased property was rendered unsuitable for any activity other than peat extraction, it was " importantfor the [Trust] to receive an income from the leased property during the term of the lease". In other words, the Trust argues that Middleground's interpretation would lead to " insensible" or "unbusinesslike" results.

38. I do not agree, for two reasons.

39. Firstly, clause 3.6 provides that vis major "sal 'n geldige rede ... daar stef' (would constitute a valid reason) for Middleground not to " oefen" (undertake) "sy werksaamhede" (its industrial activities) in terms of the contract. The phrasing of this clause - together with clause 2.2, which indicates that the " alfee nlik" (sole) purpose of the lease was the extraction of peat and it would not be achieving this purpose if no peat was extracted - indicates that Middleground was actually contractually obliged to undertake the peat extraction activities and that the Trust could, if it so wished, either compel Middleground to do so or cancel the contract. In other words, it is not the case that the Trust would be obliged to simply accept a voluntary decision by Middleground to cease the peat-extraction activities and occupy the property 'rent free'.

40. Secondly, it was common cause at the trial that (apart from the small portion,seemingly to be used for the "gepaardgaandebesigheidsaktiwitei"te) the property was of no economic value (whether to the Trust or to anyone else) other than as a source of peat. I note that this must of course only refer to value other than the economic value of the property as a wetland, the preservation of which (whether undisturbed or potentially including peat extraction using appropriate methods) was evidently regarded by the Department of Environmental Affairs as having economic value as a water source for the community of Potchefstroom.

41. In the circumstances, I do not consider that there is any ambiguity regarding the nature of the minimum monthly payment, let alone one that would justify recourse to evidence of the subsequent conduct of the parties. In any event, and even if this were not the case, none of the subsequent conduct evidence takes the matter any further because it is not " indicative of a common understanding of the terms and meaning of the contract' as required by the SCA in Urban Hip Hotels.

42. The fact that Middleground did not pursue the amount of R228,915.38 does not indicate a common understanding that it was prevented from doing so by the terms of the contract. There are a number of possible explanations for this conduct on Middleground's part that are consistent with a conclusion that it was contractually entitled to repayment of the amount.

43. The Trust's attempt to rely on Middleground's own proposals in the email of 29 May 2012 is neutralised by the reconciliation accounts (entitled " rekonsiliasievan veen reeds betaal') which indicate an understanding by Middleground that the payment of the minimum monthly amount was to be treated as a credit in its favour to be set-off against the consideration it owed for the peat - even in respect of those months where less than 600 m3 was extracted. The fact that Mr Kruger testified that he contacted Middleground to dispute this characterisation of the payment is irrelevant - it only goes to show that there was not a common understanding of the terms and meaning of the contract.

44. In conclusion, the first issue for determination on appeal falls to be decided in Middleground's favour: on a proper construction of the contract, the minimum monthly payment constituted a prepayment in respect of peat that was subject to set-off and reconciliation on a monthly basis. Even though it also constituted 'rent' in respect of the lease element of the contract, it was not an amount that the Trust was entitled to retain irrespective of the volume of peat that Middleground extracted.

The effect of the compliance notice on Middleground's obligation to pay

45. Counsel for Middleground approached the appeal on the basis that a determination of the first issue in its favour would be the end of the matter. In other words, it was contended that the Trust has no claim for payment of the minimum monthly payments in circumstances where (as a result of the fact that no peat extraction activities could took place and no peat was extracted after the issuing of the compliance notice), it would have been contractually obliged to repay them in full to Middleground on a monthly basis in accordance with the reconciliation mechanism provided for in clause 4.3.

46. The basis of this contention is presumably the tacit term pleaded by Middleground in paragraph 5A of its amended plea to the effect that the minimum monthly payments " were payable only for so long as [Middleground] was able to legitimately carry out its" peat extraction activities. To this, the Trust replicated that such a tacit term could not be imported into the contract as it is in conflict with the express terms of the contract, and even if it could be imported, it was subject to the proviso that it would not apply where Middleground's inability to legitimately carry out its peat extraction activities "was brought about by [Middleground's] failure to comply with the then existing permit and/or authorisations and/or legislation in the course of [those activities]'.

47. A tacit term is ...

"... an unexpressed provision of the contract which derives from the common intention of the parties, as inferred by the Court from the express terms of the contract and the surrounding circumstances In supplying such an implied term the Court, in truth, declares the whole contract entered into by the parties".[23]

48. It is correct, as the Trust pleads, that a tacit term cannot be imported into a contract "in respect of any matter to which the parties have applied their minds and for which they have made express provision in the contract'.[24] However, in light of the proper interpretation of the contract set out above, and in particular the fact that the minimum monthly payment was a not only a rental payment but also a pre­ payment for peat, I do not agree that the tacit term contended for by Middleground conflicts with the express terms of the contract. In particular, I do not consider that it conflicts either with clause 3.4.1 (which only deals with new legislation, which is not the case here) or clause 3.6 (which provides an excuse not to undertake peat extraction, not to decline to make the minimum monthly payment).

49. In this instance, the tacit term contended for is an 'imputed'one as identified in the leading case of Wilkins v Voges, namely one where the parties would have assented about the pertinent 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."[25] Nienaber JA went on to express the test for the establishment of an imputed tacit term in the following terms:

"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 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".[26]

50. In my view, the tacit term contended for by Middleground is not merely " wise" , "reasonable" and " desirable" ,[27] it is in fact necessary in view of the fact that the minimum monthly payment constitutes a pre-payment. The contract could not be said to be fully functional if Middleground were to be required to make a 'pre­ payment' in respect of peat for which it will,

objectively-speaking, not be required to 'pay' in terms of the contract (bearing in mind that the pre-payment is made in respect of peat to be extracted during the month in question).

51. Moreover, it seems to me that the tacit term would apply in the current circumstances even on an assumption that it incorporates the proviso contended for by the Trust. Counsel for the Trust argued in this regard that the compliance notice could not have " fallen out of thin air' and that it arose because Middleground culpably failed to meet its obligations under the contract to obtain and maintain the necessary regulatory authorisations. Contentious evidence was led at the trial as to whether the peat extraction methods employed by Middleground were suitably environmentally-friendly and whether, to the extent that there had been any environmental degradation, this had been caused by Middleground or by Stander Veen. I do not, however, consider that it is necessary to attempt to resolve these disputes. This is because it is apparent that the compliance notice would (rightly or wrongly) have been issued even if the necessary environmental authorisations had indeed been obtained, and even if the most environmentally-friendly peat extraction methods had been employed.

As appears from the extracts quoted above from paragraphs 12, 13 and 22 of the compliance notice, it was peat extraction per se that the Department sought to (and did) prohibit by means of the compliance notice.

52. As such, it cannot be said that the compliance notice and Middleground's consequent inability to legitimately carry out its

peat extraction activities resulted from any "failure to comply with the then existing permit and/or authorisations and/or legislation in the course of [its peat extraction activities]' .

53. I therefore conclude that Middleground must succeed in its contention that it was entitled to invoke a tacit term excusing it from the obligation to make payment of the minimum monthly payment for the period when no peat extraction activities were undertaken between February 2012 and September 2014.

54. Furthermore, even in the absence of the pleaded tacit term, I consider that Middleground would be excused from performance of the obligation to pay the minimum monthly payment on the basis of the second alternative pleaded in paragraph 7.2 of the plea, namely that it "was no longer [liable] to pay the amounts" after the compliance notice was issued.

55. This would appear to me to raise the defence of temporary supervening impossibility of performance, which " neither terminates an obligation nor gives rise to a right to terminate an obligation" , but "merely suspends the duty to perform the obligation thus rendered temporarily impossible, while the impossibility continues", on the basis of the maxim legit non cogit impossibilia.[28] Synallagmatic obligations are likewise suspended.[29] In this case, the suspension of the duty to make pre- payment in respect of the peat that could not be extracted as a result of the compliance notice is indistinguishable from the suspension in Niemand v Okapi of the obligation on the purchaser to pay interest on the unpaid balance of the purchase price where transfer of a property had been delayed because of a caveat that had been entered against the title deed.

56. Although this defence would be defeated if the (continued) temporary impossibility caused by the compliance notice was the result of fault on the part of Middleground, I do not agree with the Trust that "it was in the power of Middleground to do what was required to harvest peat on the leased property' prior to the termination of the contract by effluxion of time on 30 September 2014.

57. It is apparent from what is set out above that Middleground could have done nothing to prevent the compliance notice from being issued in the first place. After that, the matter was entirely out of Middleground's hands until at least July 2013, when the Minister

declined the internal appeal. This would have come as no surprise, especially given the evidence that on one occasion during February

2012 (i.e. after the appeal was lodged) one of the departmental officials told both Fourie and Kruger that he would do everything in his powers to prevent the issuing of peat extraction permits in South Africa. In response to questions from the bench, Fourie testified that he then said to Kruger: "Chris dit lyk vir my ons gaan nie regkom nie. Hier gaan nie verder veen uitgehaal word nie" .

58. Subsequent to July 2013, the only option open to Middleground was to seek to review and set aside the compliance notice and the Minister's appeal decision. Even assuming that Middleground had launched a review application as soon as reasonably possible after receipt of the Minister's decision in July 2013, and even assuming in the Trust's favour that the decision would indeed have been found to be reviewable on the merits, I do not accept that this course of action could have resulted in the eradication of the impediment to peat extraction before the contract expired at the end of September 2014. Not only were there no grounds to persuade a court to hear the matter urgently, it is in any event abundantly clear from the Department's implacable opposition to peat mining that a decision in Middleground's favour would have been appealed, which would immediately have resulted in the suspension of the order and reinstatement of the prohibition under the compliance notice. I cannot conceive that a court would find the existence of "exceptional circumstances" justifying the exercise of its discretion under section 18(2) and (3) of the Superior Courts Act, 10 of 2013.

59. In the circumstances, it is unnecessary to consider the further defences raised by Middleground. In particular, it is not necessary

to decide the vexed question whether the compliance notice constituted a permanent impediment excusing Middleground from the obligation to pay the minimum monthly amount, either on the basis of the defence of supervening impossibiltiy of performance leading to the termination of the contract pleaded in the first alternative in paragraph 7.2 of the plea, or on the basis of the contractual vis major provision in clause 3.6 of the contract pleaded in paragraph 8 of the plea.

Costs

60. Mr Swart contended that if Middleground was successful, the court's order or judgment should conclude or signal that, although he appeared alone, this was a matter that justified the employment of senior counsel.

61. Where a single counsel (even senior counsel) is employed, it is for the taxing master to determine a fair and reasonable fee to be allowed on taxation, and it would not be appropriate for the court to make a special costs order or "to somehow attempt to fetter [the taxing master's] discretion" .[30] We are bound by that dictum. To the extent that the concern is that the taxing master may not necessarily be in possession of all of the facts that would allow for a proper exercise of discretion, this should be remedied by providing the relevant information.[31]

62. The usual order regarding costs will therefore be made.

Order

63. In the premises, I propose the following order:

1. The appeal is dismissed.

2. The appellant is ordered to pay the respondents' costs.

RJA MOULTRIE

Acting Judge of the High Court

Gauteng Division, Pretoria

JANSE VAN NIEUWENHUIZEN J:

I agree and it is so ordered.

Judge of the High Court

APPEARANCES

For the Appellant: Instructed by: Adv R Grundlingh

Instructed by:

Robert Schoeman Attorney, Potchefstroom

Van Schalkwyk Attorneys, Pretoria

For the Respondents: Adv B Swart SC

Instructed by:

Japie van Zyl Attorneys, Potchefstroom

Couzyn Hertzog & Horak, Pretoria

[1] The second respondent pledged himself as surety and co-principal debtor for the obligations of Middleground.

[2] I deduce this from the contractual stipulation that Middle ground was required to give a months' written notice for this purpose, but nothing turns on it for the purposes of this judgment.

[3] Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18 & 20 - 24.

[4] CA Focus CC v Village Freezertla Ashmel Spar2013 (6) SA 549 (SCA) para 18.

[5] Bath v Bath (952/12) [2014] ZASCA 14 (24 March 2014) para 15.

[6] Bothma-BathoTransport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494 (SCA) para 12.

[7] KZN Joint Liaison Committee v MEG for Education, KZN and Others 2013 (4) SA 262 (CC) para 128.

[8] Hubbard v Cool Ideas 1186 CC 2013 (5) SA 112 (SCA) para 14.

[9] Mansingh v General Council of the Bar and Others 2014 (2) SA 26 (CC) para 9.

[10] National Credit Regulator v Opperman & Others 2013 (2) SA 1 (CC) paras 93, 100 & 104.

[11] Endumeni (above) para 18.

[12] Endumeni (above) para 26.

[13] KPMG Chartered Accountants (SA) v Securefin Ltd and Another2009 (4) SA 399 (SCA) para 39.

[14] KPMG v Securefin (above) para 39.

[15] Unica Iron and Steel (Pty) Ltd and Another v Mirchandani 2016 (2) SA 307 (SCA) para 21.

[16] Endumeni (above) paras 20 - 24.

[17] Urban Hip Hotels (Pty) Ltd v K Carrim Commercial Properties (Pty) Ltd 2016 JDR 2213 (SCA) para 21.

[18] Graham v Local and Overseas Investment (Pty) Ltd 1942 AD 95 at 101 .

[19] Graham (above) at 108.

[20] Graham (above) at 98.

[21] Drymiotes v Du Toit 1969 (1) SA 631 (T) at 633A-B.

[22] I note that there can thus also be no suggestion that a finding in Middleground's favour would require (or entail) a conclusion that the contract was a simulated transaction, as the Trust sought to argue.

[23] Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 531- 532.

[24] Robin v Guarantee Life Assurance Co Ltd [1984] ZASCA 72; 1984 (4) SA 558 (A) at 567C-D

[25] Wilkins v Voges [1994] ZASCA 53; 1994 (3) SA 130 (A) at 136I.

[26] Wilkins NO v Voges (above) at 136H - 1370 and 1430-I.

[27] Techni-Pak Sales (pty) Ltd v Ha// 1968(3) SA 231 (:N) at 236-237.

[28] Ramsden "Temporary Supervening Impossibility of Performance" (1977) 94 SALJ 162 at 170, citing Spencerv Gostelow 1920 AD 617 at 626. See also Niemand v Okapi Investments (Edms) Bpk 1983 (4) SA 762 (T) at 766A-B and World Leisure Holidays (Pty) Ltd v Georges 2002 (5) SA 531 0N) para 7.

[29] Ramsden (above) at 170- 171.

[30] Johannesburg Metro Municipality v Chairman, Valuation Appeal Board 2014 (4) SA 10 (SCA) para 34.

[31] Society of Advocates of KwaZulu-Natal v Levin 2015 (6) SA 50 (KZP) paras 13 - 14