THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case no: 1159/2019

In the matter between:
TRANSNET NATIONAL PORTS AUTHORITY
APPELLANT

and

REIT INVESTMENTS (PTY) LIMITED
FIRST RESPONDENT
M C SEOTA NO

SECOND RESPONDENT

Neutral citation: Transnet National Ports Authority v Reit Investments
(Pty) Limited and Another (Case no 1159/2019) [2020]
ZASCA 129 (13 October 2020)
Coram:
PETSE DP, SALDULKER, PLASKET and DLODLO
JJA and MATOJANE AJA
Heard:
3 September 2020
Delivered: This judgment was handed down electronically by circulation to
the parties’ legal representatives by e-mail, publication on the Supreme Court

of Appeal website and release to SAFLII. The date and time for hand-down is
deemed to be 09H45 on 13 October 2020

Summary: Notarial deeds of lease – determination of rental payable by
umpire appointed jointly by lessor and lessee – umpire executing mandate in
accordance with its terms – no legal basis established for reviewing and setting
aside determination.
Contract – interpretation of – s 67 of National Ports Act 12 of 2005 –
applicability of.

ORDER

On appeal from: Gauteng Division of the High Court, Johannesburg
(Moshidi J sitting as court of first instance):
1 The appeal is upheld with costs, including the costs of two counsel.
2 The order of the court below is set aside and in its place is substituted the
following:
‘The application for review is dismissed with costs, including the costs
occasioned by the employment of two counsel.’

JUDGMENT

Petse DP (Saldulker, Plasket and Dlodlo JJA and Matojane AJA
concurring)

[1] This appeal raises two interrelated issues. The first issue concerns the
circumstances in which the determination made by an expert valuer or umpire
jointly appointed by two parties to a contract is susceptible to being reviewed
and set aside by a court. In a broader context, the subject of the appeal is the
correct basis upon which valuations of immovable property, situated in
Maydon Wharf in the port of Durban, should be made for purposes of
determining rentals payable in respect of those properties. The second issue
raises the question whether the agreements concluded between the parties in
2009 and described as ‘Declaration of Rental’ had the effect of varying the
basis upon which rental would be determined for the remaining period of the
long-term leases terminating by effluxion of time on 30 September 2029.

[2] The appellant, Transnet National Ports Authority (Transnet), is one of
the trading entities under the auspices of Transnet Limited, which is a public
company incorporated in terms of the Legal Succession to the South African
Transport Services Act 9 of 1989 as read with the Companies Act 71 of 2008.
Transnet operates, amongst other things, the port of Durban. The first
respondent is Reit Investments (Pty) Ltd (Reit) which is a private company
incorporated in South Africa. Its principal place of business is in
Johannesburg. The second respondent is Mr Matsobane Charles Seota,
(Mr Seota), who was cited in his official capacity as the registrar of the
South African Council for the Property Valuers Profession (SACPVP).
Although Mr Seota’s valuation took the centre stage in the review proceedings
in the High Court, no substantive relief was sought against him personally.
Not surprisingly therefore, he took no part in the proceedings in the court
below and has not participated in this appeal.

[3] Mr Seota’s valuation was impugned on the narrow basis that he ‘did
not determine the market value of the land when attempting to resolve the
deadlock between the appraisers appointed’ by Transnet and Reit. It was
asserted by Reit that ‘instead of determining the market value of the land, to
which had to be applied the contractually stipulated fixed percentage to
establish the annual rental’, Mr Seota ‘determined (contrary to the terms of
the contract) the market-related rental in respect of the properties’. The
reference to ‘the contract’ is patently a reference to the long-term notarial
leases.

[4] The dispute between the parties had its genesis in five long-term
notarial
agreements
of
lease
concluded
between
Transnet’s

predecessor-in-title called the South African Railways & Harbours, as lessor,
and Reit’s predecessor-in-title, named B & C Properties South Africa (Pty)
Ltd, as lessee during June, August and September 1960. Save for minor
differences relating to the percentages that were to be used in determining the
rental payable in respect of each agreement of lease, the five notarial leases
were otherwise in identical terms.

[5] Reit had initially sought an order reviewing and setting aside
Mr Seota’s determination coupled with an order directing Transnet to procure,
within the period determined by the court, a fresh valuation of the land in
accordance with the principles identified in the judgment of the court below.
However, it so happened that long after Transnet had delivered its answering
affidavit, Reit changed tack some few months before the hearing. It then
sought declaratory orders to the effect that Mr Seota was appointed to value
the land (excluding improvements thereon) in terms of the agreements of lease
but failed to do so. I shall revert to this later.

[6] Despite opposition by Transnet, the High Court (Moshidi J) held that
Reit had made out a case for the relief sought. Accordingly, it granted relief
substantially in the terms sought by Reit in its amended notice of motion.
Although more will be said about the conclusions of the High Court later, it
suffices, for now, to briefly set out its principal conclusions. It said (paras 14
and 15):
‘At the commencement of argument, it was common cause that the second respondent,
when making the rental determination, as he did, was not acting as an arbitrator, but in fact,
as an expert valuer. After all is said and done, the historical exposition described above,
the crisp issue for determination is therefore the question: whether Mr M C Seota NO (“the
second respondent”), in making the rental determination, failed to discharge his mandate

in terms of the notarial deeds of leases, to determine the value of the land, excluding the
improvements constructed thereon, and by determining a market- related rental for the
premises contrary to the express terms of the notarial leases and if the second respondent
was incorrect, as contended by the applicant, whether his determination is susceptible to
review and setting aside by the Court.

The first respondent, in also relying on the provisions of section 67 of the National
Ports Act 12 of 2005 (“the Ports Act”), advanced the submission in its heads of argument,
that the parties amended the notarial leases pursuant to the conclusion of the 2009
Declarations to provide that the valuer would determine a market-related rental for the
leased premises, instead of determining the market value of the land, excluding
improvements. In the process, the first respondent also invoked the principle of res judicata
in support of its argument that the applicant is not entitled to challenge the second
respondent’s valuation. It is to these competing submissions, and related ones, I must now
turn, having in mind some legal principles, applicable.’

[7] The Court then continued (paras 33 and 34):
‘On the other hand, and on this aspect, the applicant, as observed above, presented entirely
different arguments. I have already discredited the second respondent’s rental
determination.
. . .

It is so, in my view, and as argued by the applicant that, the parties never amended
the notarial leases pursuant to the conclusion of the 2009 Declarations to provide that the
valuer (the second respondent) would determine a market-related rental for the leased
premises instead of determining the market value of the premises, excluding
improvements. Neither was there any evidence, in whatever form, to suggest so. I must
therefore find that Transnet’s assertion that the notarial deeds of leases were amended in
the manner suggested, as entirely unsustainable in the circumstances of this case. On a
proper construction, the terms of the 2009 Declarations concluded on 17 August 2009, do
not show that an amendment to the notarial leases in the terms as alleged by the first
respondent. If this was so then the parties would have been obliged to follow the procedure

as set out in the Deeds of Leases. For starters, the Declarations signed by the applicant in
2009, were conditional. . . .’

[8] As already indicated, the High Court proceeded to grant relief to Reit
substantially in terms of its amended notice of motion. This appeal is against
that order and comes before us with the leave of this Court after the
High Court had refused leave. In order to promote a better understanding of
the nature and ambit of the issues in this appeal, the facts giving rise thereto,
which are largely common cause, require to be canvassed in some detail.

[9] As previously mentioned, the parties concluded five long-term notarial
leases in respect of properties located in the Durban Port precinct at what by
all accounts were nominal rentals based on an agreed percentage of the market
value of the land excluding improvements thereon.1 As the various leases were
to endure for periods in excess of 60 years, the rental payable was to be fixed
for five-year periods only at any given time. It bears mentioning that although
the five long-term leases were to terminate by effluxion of time at different
times, (some in 2025 and others in 2029) Transnet and Reit agreed, four years
after signing the 2009 declarations of rental, to vary the termination dates of
the leases so that they would all terminate on 30 September 2029.

[10] Clause 5 of the various agreements, which is central to the dispute
between the parties, bears special mention. It provides, to the extent relevant
for present purposes, that:

1 Clause 4 of the leases provides:
‘In determining the market value of the land for the purposes of clause 3 hereof, account shall not be taken
of the value of any buildings or other structures on the said land, but the fact that railway siding facilities
have been or can be provided, shall be taken into account.’

‘(a)
The Administration may, and if called upon by the Lessee shall, at any time within
three (3) months prior to the commencement of any period of five (5) years
contemplated in clause 3 hereof, but excluding the initial period referred to in
paragraph (a) of that clause, determine the market value of the land and notify the
Lessee of the value so determined and of the rent which will consequently be
payable in respect of the full period of five (5) years with reference to which such
determination was made.

(b)
If the Lessee is not prepared to accept the Administration’s determination of the
market value, it shall forthwith notify the Administration accordingly, whereupon
the value shall be determined by sworn appraisement as hereinafter provided.

(c)
Such appraisement shall be undertaken by a sworn appraiser to be selected by the
parties jointly. If the parties cannot agree on one sworn appraiser, each party shall
appoint one sworn appraiser to undertake the valuation jointly with the one
appointed by the other party, and if these two appraisers cannot agree on their
valuation, they shall jointly select a third as umpire, whose valuation shall be final
and binding on the parties. The cost of all appraisements shall be borne by the
parties in equal shares.

(d)
If the Administration does not notify the Lessee of any change in its determination
of the market value and the Lessee does not request such determination both within
the three (3) months aforesaid, it shall be deemed that there has been no change in
land values to justify a revision of the rental and in that case the rental for the then
current period of five (5) years shall, except where a higher percentage rate on
market value becomes applicable in terms of clause (3), be the same as that which
was applicable during the immediately preceding period.’

[11] It is also necessary to make reference to clause 18 that provides:
‘It is specifically understood that no amendment or variation of the terms and conditions
of this lease in any form or manner whatsoever will be recognised by or be binding upon

the Administration, unless and until such amendment or variation has been embodied in a
formal written agreement duly executed by the Administration and by the Lessee.’

[12] It is apposite at this juncture to make reference to the National Ports
Act, 12 of 2005 (the NPA) which came into operation on 26 November 2006.
The objects of the NPA are set out in s 2 which reads:
‘The objects of this Act are to–
(a)
promote the development of an effective and productive South African ports
industry that is capable of contributing to the economic growth and development of
our country;
(b)
establish appropriate institutional arrangements to support the governance of 45
ports;
(c)
promote and improve efficiency and performance in the management and
operation of ports;
(d)
enhance transparency in the management of ports;
(e)
strengthen the State’s capacity to–
(i)
separate operations from the landlord function within ports;
(ii)
encourage employee participation, in order to motivate management and workers;
(iii)
facilitate the development of technology, information systems and managerial
expertise through private sector involvement and participation; and
(f)
promote the development of an integrated regional production and distribution
system in support of government’s policies.’

[13] Section 67, which is headed ‘Restructuring and reform of ports’,
provides in subsec (1)(b) thereof that:
‘If, in any area within a port–
(b)
the terms of a long-term lease which existed immediately before this section took
effect are substantially prejudicial to the operation of a port, including terms
providing for unreasonable low rentals or containing no restrictions on sub-letting
or no provision confining the use of the property to a use relating to the relevant

port, the Authority may in writing addressed to the lessee direct that the applicable
terms be renegotiated in order to remove the prejudice.’

[14] It is manifest even on a cursory reading of s 67(1)(b) that Transnet is
empowered, in circumstances where the terms of a long-term lease concluded
before this section took effect are thought to be substantially prejudicial to the
operation of a port, because they, amongst other things, provide for
unreasonably low rentals, to address a letter to the lessee concerned and direct
that the applicable terms be renegotiated in order to remove the prejudice. It,
therefore, comes as no surprise that on 28 October 2008 Transnet caused a
letter to be addressed to Reit in which it pointed out that Reit’s leases ‘have
been identified as falling under review in the port of Durban.’

[15] Transnet’s letter just mentioned in the preceding paragraph calls for
closer scrutiny. And because of its great import, it is necessary to quote it in
full. It was penned by a Ms Linda Nodada who is designated as ‘Manager –
Real Estate, Transnet National Ports Authority.’ It is headed: ‘RE –
AGREEMENTS OF LEASE BETWEEN EMERGENT INVESTMENTS
(PTY) LTD AND THE TRANSNET NATIONAL PORTS AUTHORITY –
MAYDON WHARF – PORT OF DURBAN’. It reads:
‘We refer to the abovementioned subject, duly authorized.
The Transnet National Ports Authority (TNPA) has embarked on a process of
reviewing all our Agreements of Lease, with various tenants – to align the contractual
arrangements with our designated functions as provided for in the National Ports Act.
The objectives of the lease review include, inter alia:
 The commercialization of lease terms and conditions to standardize our leases.
 Review of onerous lease terms, terms heavily in favour of the tenant and grossly
prejudicial to the TNPA and other tenants on the port.

 Alignment of our leases with normal market practices in the commercial real estate
environment.
 Assessing leases that have no direct or no port related use – historically occupying our
land.
 Licensing of certain tenants in line with the provisos in the Act.
Your leases have been identified as falling under this review in the Port of Durban.
To this end, the TNPA has commissioned a valuation of the property leased to
yourselves and the table below outlines the leased areas and the applicable rates:

TENANT
EXTENT
CURRENT
RATE/M2
CURRENT
MONTHLY
RENTAL
NEW RATE
/M2
NEW MONTHLY
RENTAL
EMERGENT
INVESTMENTS
4121
1.80
R 7 404.86
R 15.00
R 61 815.00
EMERGENT
INVESTMENTS
5216
1.87
R 9 743.25
R 15.00
R 78 240.00
EMERGENT
INVESTMENTS
10632
1.03
R 10 901.14
R 15.00
R 159 480.00
EMERGENT
INVESTMENTS
6407
2.04
R 13 102.31
R 15.00
R 96 105.00
EMERGENT
INVESTMENTS
3966
2.04
R 8 110.47
R 15.00
R 59 490.00

The rentals will escalate annually by 10% for the next five years, whereafter the
rentals will be reviewed by both parties to align with the prevailing market rate at the time.
The leases will be reviewed every five years thereafter until the date of expiry.

We are adamant that the discrepancy between the existing rental rates currently
charged and the prevailing market rate for the leased properties, be addressed.

We invite you for a meeting between the TNPA and your representatives on
Thursday, 27 November 2008. Kindly contact Colleen Rampono on (031) 361 8909 to
confirm or arrange an alternative date for the meeting.
The new rental rates and all other statutory conditions required for these kinds of
leases would be tabled via Declaration of rentals and or Addenda to the existing
Agreements of Lease, which would ultimately be signed by both parties through
appropriate authorization.
This correspondence is sent to you without prejudice to Transnet National Ports
Authority.
We look forward to your positive response.’
As can be observed from the illustration contained in the table showing
comparative figures, the increases proposed by Transnet clearly show that
there was a substantial difference between the then current rental of
approximately R 49 260 per month and the proposed increased rental which
would push the rental to an astronomical figure of some R 455 130 per month.

[16] The meeting requested by Transnet in its letter dated 28 October 2008
was held between representatives of Transnet and Reit on 27 November 2008.
Following this meeting, Transnet advised Reit that its proposed rental rate was
R 15 per square metre per month, exclusive of rates and taxes. Further
discussions between the parties ensued and after much to-ing and fro-ing the
parties’ negotiations ultimately resulted in the conclusion of five ‘declaration
of rental’ agreements which, save for differences in respect of the rental
amount payable for each property, were in identical terms.

[17] The material terms of the declarations of rental read thus:
‘WHEREAS in terms of NOTARIAL DEED OF LEASE NO 62/1960L dated 4 June 1960
and supplementary documents, the LESSEE hires from the LESSOR Lease 28 on Portion

66 of Erf 10004, Durban, being portion of the LESSOR’s land at Maydon Wharf abutting
on the Bay of Durban, Province of KwaZulu-Natal.
AND WHEREAS the rental payable by the LESSEE to the LESSOR has been reviewed in
terms of the conditions of lease.
AND WHEREAS the rental payable by the LESSEE to the LESSOR has been reviewed in
terms of Sec 67.1(b) of the National Ports Act, Act 12 of 2005.
NOW, THEREFORE, THE PARTIES HEREBY DECLARE THAT:
In respect of the period 1 June 2009 to 31 May 2014 the annual rental shall be the amount
of Four Hundred and Twenty Five Thousand Nine Hundred and Twenty Rand Only
(R45 920,00), (excluding V.A.T) escalating at 10% (ten percent) per annum compounded.’
It bears emphasising that the new increased rentals were intended to take
effect from 1 June 2009 to 31 May 2014 subject to a compound 10 per cent
annual escalation.

[18] On 1 June 2009 Transnet caused a further letter to be addressed to Reit
in which it advised, amongst other things, that other than the terms reviewed
and agreed to in terms of the declarations of rental, it had no intention of
varying the other terms of the leases. On 24 July 2009 Reit’s attorneys advised
Transnet that Reit had agreed, on a without prejudice basis, to sign the
declarations of rental subject to the following conditions:
‘1.
Our clients agreement to increase the rental in accordance with the declarations of
rental and our client’s signature thereof does not constitute an acceptance by our
client of Transnet’s entitlement to rely of Section 67 of the National Ports Act,
No 12 of 2005 to review the rental and/or lease agreements and our client has
agreed to the review process on a without prejudice basis and without waiving or
novating any of its rights in this regard; and
2.
Transnet shall not in future and for the duration of the remainder of the lease periods
attempt to again rely on Section 67 of the National Ports Act, No 12 of 2005 to
enforce increased rentals or any cancellation of the lease agreements; and

3.
The increased rental amounts shall be paid by our client to Transnet quarterly in
arrears, in the same cycles as it has prior to the signature of the declarations of
rental; and
4.
All of the remaining terms and conditions as contained in the various registered
lease agreements will remain unchanged, unless otherwise agreed to in writing
between the parties.’
I pause here to observe that the contents of paragraph 4 of this letter are
revealing. Their implication is that Reit unequivocally accepted that there had
been a variation of the various leases in the respects set out in the declarations
and that other than the agreed changes ‘all of the remaining terms and
conditions as contained in the various registered lease agreements will
remain unchanged unless otherwise agreed to in writing between the parties.’
(My emphasis.) Reit also contested Transnet’s entitlement to invoke
s 67(1)(b) of the NPA.

[19] Having signed the declarations of rental on 16 July 2009, Reit dutifully
paid the increased rental as contemplated therein. Some few weeks before the
period covered by the 2009 declarations of rental came to an end, Transnet
instructed Mr Humphrey Moyo, a professional valuer, to prepare a fresh
valuation of the properties leased by Reit pursuant to clause 5(a)2 of the
notarial leases based, not on a percentage of bare land value, but on the
market-related rental with a view to determining the rental which would be
payable in respect of the period of five years commencing on 1 June 2014 and
ending on 31 May 2019. Pursuant to this valuation, Transnet prepared new

2 For convenience clause 5(a) is quoted again and reads:
‘The Administration may, and if called upon by the Lessee shall, at any time within three (3) months prior to
the commencement of any period of five (5) years contemplated in clause 3 hereof, but excluding the initial
period referred to in paragraph (a) of that clause, determine the market value of the land and notify the Lessee
of the value so determined and of the rent which will consequently be payable in respect of the full period of
five (5) years with reference to which such determination was made.’

declarations of rental which it forwarded to Reit for signature in terms of
which the new rental would be R 17 per square metre per month.

[20] On 23 July 2014 Reit responded and advised that it objected to the
proposed rental and that it would instead appoint its own valuer to prepare its
own valuation. To this end, Reit likewise instructed JVR Valuations (Pty) Ltd
(JVR) to prepare a valuation on its behalf based on a market-related rental of
bare land. In the interim, Transnet confirmed that Reit was at liberty to obtain
its own valuation ‘if the lease agreement allows you to obtain your own
valuation’ and also reiterated that Mr Moyo’s valuation was based on ‘the
rental for land, excluding the buildings . . . based on a comparison of rentals
achieved for other leases in the Maydon Wharf precinct’.

[21] On 12 August 2014 Transnet wrote to Reit advising the latter that its
rental account was in arrears and imploring Reit to pay the invoiced amount
in the interim ‘until the issue of valuation has been sorted’. On the same day,
Reit responded and reiterated that it had not agreed to the latest valuation
proposed for the five-year period from 1 June 2014 to 31 May 2019. After
noting that it was being invoiced on the basis of the declarations of rental that
expired on 31 May 2014, Reit confirmed that, pending the resolution of the
dispute, it would continue to pay the invoiced amount ‘provided that if [they]
have overpaid from 1 June 2014 onwards . . . Transnet [would] refund or credit
our account [with the] said overpayment’.

[22] In due course Reit obtained its own valuation from JVR and on 9
September 2014 representatives of the parties met with JVR’s representatives
with a view to resolving the impasse. Subsequently, Reit offered to pay R 11

per square metre per month (i.e. R 1 more than what JVR had recommended
in its valuation). Still, these efforts did not bear fruit. It bears mentioning that
the fact that Mr Moyo’s valuation and that of JVR were far apart does not
necessarily render either of the valuations questionable. Radically divergent
views as to the value of a thing are all too common. For as Scott JA said in
Abrams v Allie NO and Others 2004 (4) SA 534 (SCA) para 25:
‘. . . This Court has in the past frequently commented on the nature of the inquiry and hence
the approximate nature of its result. In South African Railways v New Silverton Estate Ltd
1946 AD 830 at 838 Tindall JA stressed the importance of bearing in mind that a valuation
“is to a material extent a matter of conjecture”. Ogilvie Thompson JA in Estate Marks v
Pretoria City Council 1969 (3) SA 227 (A) at 253A described a valuation as “essentially a
matter which is in the realm of estimate”. Botha JA in Bestuursraad van Sebokeng v M &
K Trust & Finansiële Maatskappy (Edms) Bpk 1973 (3) SA 376 (A) at 391E similarly
described it as “noodwending ‘n kwessie van skatting in die lig van al die omstandighede”.
Nothing, I think, demonstrates this more than the regularity with which good and honest
valuers arrive at relatively widely different conclusions.’

[23] As the parties’ respective positions became entrenched the negotiations
floundered. It came to pass that on 17 October 2014 Reit suggested to Transnet
that in view of the impasse it would be best to invoke the dispute-resolution
mechanism of the notarial leases. The relevant clause that provides for
deadlock-breaking mechanisms in relation to the determination of the rental
by Transnet is clause 5(b) and (c). For convenience its provisions are repeated
here. It reads:
‘If the Lessee is not prepared to accept the Administration’s determination of the market
value, it shall forthwith notify the Administration accordingly, whereupon the value shall
be determined by sworn appraisement as hereinafter provided.

Such appraisement shall be undertaken by a sworn appraiser to be selected by the
parties jointly. If the parties cannot agree on the sworn appraiser, each party shall appoint

one sworn appraiser to undertake the valuation jointly with the one appointed by the other
party, and if these two appraisers cannot agree on their valuation, they shall jointly select
a third as umpire, whose valuation shall be final and binding on the parties. The cost of all
appraisements shall be borne by the parties in equal shares. . . .’

[24] Relying on this clause, Reit proposed to Transnet that the parties jointly
appoint a sworn appraiser to determine the market-related value of the land.
In response, Transnet instead counter-proposed that as each party had already
independently obtained separate valuations from their respective valuers it
would be sensible that they agree to submit the two disparate valuations to the
council of the SACPVP to be reviewed by an umpire appointed by the council
to determine which one between the valuations of JVR and that of Mr Moyo
‘was the most appropriate’ and for the costs expended therefor to be shared
equally between Transnet and Reit. Reit agreed to Transnet’s
counter- proposal without any reservations. The council in turn appointed
Mr Seota pursuant to the parties’ agreement who, after considering the
conflicting valuations, concluded that the rental determination contained in
Mr Moyo’s valuation ‘is fair and reasonable’. Notwithstanding the ruling of
the umpire, several months passed without Reit signing the declarations of
rental for the five-year period under consideration despite undertaking that
this was being attended to.

[25] The respective positions taken by the parties had by now become
hardened with Transnet contending that unless Reit took Mr Seota’s valuation
as the umpire on judicial review it was final and binding as provided for in
clause 5(c) of the notarial leases. For its part, Reit persisted in its stance that
it stood by its earlier tender of R 11 per square metre per month.

[26] When the parties’ best endeavours failed to break the logjam, Reit
instituted review proceedings in the Gauteng Division of the High Court,
Johannesburg on 24 October 2017 for the following relief:
‘1.
. . .
2.
The award of the second respondent . . . dated 4 May 2015 – in which he determined
the rental to be paid by the applicant to the first respondent . . . in respect of premises
leased by the applicant from the first respondent at the Durban Port known as
Maydon Wharf (“the premises”) at R17m2 per month – is reviewed and set aside.
3.
The first respondent . . . is hereby ordered to procure, within twenty-one (21) court
days of this Court’s order, a fresh valuation of the land on which the premises are
situated, in accordance with the principles identified in the judgment of this court.
4.
. . .’

[27] On 9 May 2018 Reit amended its notice of motion and sought an order
in the following terms:
‘1.
Declaring that the second respondent was appointed to act as an expert valuator
(and not an arbitrator) to value the land (“the land”) (excluding any improvements
constructed thereon) leased by the applicant from the first respondent in terms of –
1.1
Notarial Deed of Lease K47/1960 concluded in 1960, annexed to the founding
affidavit marked “FA3”;
1.2
Notarial Deed of Lease K62/1960 dated 29 August 1960, annexed to the
founding affidavit marked “FA4”; and
1.3
Notarial Deed of Lease K63/1960 also dated 29 August 1960, annexed to the
founding affidavit marked “FA5”,
(collectively “the notarial leases”)
2.
Declaring that the second respondent failed to execute his mandate in terms of the
notarial leases to value the land, excluding any improvements constructed
thereon;
3.
Declaring that the second respondent was not entitled in terms of the notarial leases
to determine a reasonable commercial rental payable in terms thereof by the
applicant;

4.
Setting aside the second respondent’s valuation report dated 4 May 2015 (“the
valuation report”) in terms of which the second respondent determined a reasonable
rental payable by the applicant in terms of the notarial leases instead of the value
of the land;
5.
Directing the first respondent to procure, within 21 days of this Court’s order, a
fresh valuation of the land, in accordance with the principles identified in the
judgment of this Court.
6.
In the alternative to prayers 1 to 5 above and should it be found that the second
respondent was acting as an arbitrator and not an expert valuator in terms of the
notarial leases, the applicant seeks the following relief –
6.1
granting the applicant condonation for the late filing of its review application;
6.2
reviewing and setting aside the valuation report in which the second
respondent determined the rental to be paid by the applicant to the first
respondent in respect of land;
6.3
directing the first respondent to procure, within 21 days of this Court’s order,
a fresh valuation of the land on which the premises are situated, in accordance
with the principles identified in the judgment of this Court.
7.
The first respondent is ordered to pay the applicant’s costs.’

[28] The review application came before Moshidi J, who was persuaded that
Reit had made out a case for the relief sought. The learned Judge held that
(para 14):
‘. . .the crisp issue for determination is therefore the question: whether Mr M C Seota NO
(“the second respondent”), in making the rental determination, failed to discharge his
mandate in terms of the notarial deeds of leases, to determine the value of the land,
excluding the improvements constructed thereon, and by determining a market-related
rental for the premises contrary to the express terms of the notarial leases and if the second
respondent was incorrect, as contended by the applicant, whether his determination is
susceptible to review and setting aside by the Court.’

[29] He held further that Mr Seota, who it was common cause between the
parties, did not act as an arbitrator but as an expert valuer, ‘made a manifestly
incorrect rental determination; he failed to discharge his mandate in terms of
the notarial leases; . . . He, instead, determined a market-related rental for the
premises . . . He had no authority and/or mandate to do so, regardless of what
was submitted to him’. In the event the learned Judge concluded that
Mr Seota’s ‘determination . . ., was a nullity and of no force and effect’.

[30] Apropos s 67 of the NPA, he held that this section did not avail Transnet
for at no stage were the notarial leases amended ‘in the terms alleged’ by
Transnet. Nor could the 2009 declarations of rental assist Transnet because
these were subject to the conditions that Reit had stipulated in the letter of
24 July 2009, addressed on its behalf by its attorneys to Transnet. He therefore
concluded that this was quite apart from the fact that Transnet had, in any
event, not complied with the dictates of s 67 upon which it relied.

[31] Having concluded that the review application ought to succeed, he
granted an order that:
‘1.
. . .

2.
The award of the second respondent (M C Seota NO) made on 4 May 2015 in which
he determined the rental to be paid by the applicant to the first respondent
(Transnet) in respect of premises leased by the applicant from the first respondent
at the Durban Port and known as Maydon Warf (“the premises”) at R17 m2 per
month, is hereby reviewed and set aside.

3.
The first respondent (Transnet), is hereby ordered to procure, within twenty-one
(21) court days of this order, a fresh valuation of the land on which the premises
are situated, and in accordance with the principles identified in this judgment.

4.
. . .’
The correctness or otherwise of this order is what confronts us in this appeal.

[32] Before the contentions of the parties are considered, it is appropriate to
say something about Mr Seota’s role as umpire. It is common cause between
the disputants that Mr Seota was an expert valuer and not an arbitrator. The
fundamental significance of this distinction lies in this. Our law has for over
a century now always drawn a clear distinction between an arbitrator and a
valuer. Thus, in Estate Milne v Donohoe Investments (Pty) Ltd and Others
1967 (2) SA 359(A) at 373H-374C, Ogilvie Thompson JA said the following:
‘This argument assumes something in the nature of an appeal to the arbitrator against the
decision of the auditor. That is, however, not the position. In making his valuation, the
auditor hears neither party. His is not a quasi-judicial function. He reaches his decision
independently on his knowledge of the company's affairs. His function is essentially that
of a valuer (arbitrator, aestimator), as distinct from that of an arbitrator (arbiter), properly
so called, who acts in a quasi-judicial capacity. The distinction between arbitri and
arbitratores was well known to our writers (see e.g. Voet, Bk. 4, 8, 2; Wassenaer, Praktijk
Judicieel, Ch. 26, sec. 17; Huber, Bk. 4, chap. 21, secs. 1 and 2, and other authorities listed
by Gane at p. 93 of vol. 2 of his translation of that work). See also Sachs v Gillibrand and
Others, 1959 (2) SA 233 (T) at A p. 236, and Divisional Council of Caledon v Divisional
Council of Bredasdorp, 4 S.C. 445. Voet, in the above-mentioned passage, distinguishes
between the respective functions of an arbitrator (arbiter) and a valuer or referee
(arbitrator) and, in relation to the latter, uses the phrase in quibus viri boni arbitrio opus
erat. This phrase is rendered by Sampson (p. 110) as “requiring the arbitrament of an
impartial person”, but by Gane (vol. 1, p. 738) as: “in which there is need of the discretion
of a good man”. Although the use of the word “discretion” may perhaps be open to
criticism, Gane’s translation appears to me to reflect Voet’s meaning more correctly. The
arbitrator or aestimator need not necessarily be an entirely impartial person. In discharging
his function he is of course required to exercise an honest judgment, the arbitrium boni
viri; but a measure of personal interest is not necessarily incompatible with the exercise of

such a judgment (see Dharumpal Transport (Pty.) Ltd., v Dharumpal, 1956 (1) SA 700
(AD) at p. 707).’

[33] This distinction serves an important purpose in review proceedings
because, as Ponnan JA put it in Lufuno Mphaphuli & Associates (Pty) Ltd v
Andrews and Another [2007] ZASCA 143; 2008 (2) SA 448 (SCA) para 22:
‘. . . A finding that Andrews was a valuer would not assist Lufuno and does not require a
decision. Unlike an arbitrator, a valuer does not perform a quasi-judicial function but
reaches his decision based on his own knowledge, independently or supplemented if he
thinks fit by material (which need not conform to the rules of evidence) placed before him
by either party. Whenever two parties agree to refer a matter to a third for decision, and
further agree that his decision is to be final and binding on them, then, so long as he arrives
at his decision honestly and in good faith, the two parties are bound by it. . . .’

[34] Accordingly, the power of the courts to interfere with an expert’s
decision in review proceedings is severely circumscribed. The juridical ambit
of this power was described by this Court in Wright v Wright [2014] ZASCA
126; 2015 (1) SA 262 (SCA) para 10 as follows:
‘The position of a referee under s 19b is, as the high court correctly found, similar to that
of an expert valuator who only makes factual findings but dissimilar to that of an arbitrator
who fulfils a quasi-judicial function within the parameters of the Arbitration Act 42 of
1965. In this regard, the dictum of Boruchowitz J in Perdikis v Jamieson is apposite:
“It was held in Bekker v RSA Factors 1983 (4) SA 568 (T) that a valuation can be rectified
on equitable grounds where the valuer does not exercise the judgment of a reasonable man,
that is, his judgment is exercised unreasonably, irregularly or wrongly so as to lead to a
patently inequitable result.”
This is also the position in respect of the referee’s report – it can only be impugned on these
narrow grounds.’3

3 See also: Civair Helicopters CC v Executive Turbine CC and Another 2003 (3) SA 475 (W) para 34 and the
authorities therein cited.

[35] I revert to the crux of the appeal. The foundation upon which the edifice
of the High Court’s reasoning rested was, as alluded to above, predicated on
at least four principal findings. These were: (i) Mr Seota’s mandate derived
from the notarial leases as they stood in 1960; (ii) the terms of the mandate
given to him by Transnet and Reit jointly which were not consonant with the
terms of the leases were irrelevant (I interpose here to remark that the
implication of this finding is that Mr Seota should have ignored his mandate
and followed the notarial leases of which he was not aware); (iii) because
Mr Seota was an expert valuer and not an arbitrator his determination was not
final and binding, meaning that Reit was not precluded from impugning it;
and (iv) there had been no variation of the 1960 leases for the 2009
declarations of rental were incapable of effecting variations as they were
signed by Reit conditionally.

[36] The principal findings of the High Court bring to the fore the two broad
issues mentioned in para 1 above, which are what requires determination in
this appeal. I pause to observe that the difficulty I have with the reasoning of
the High Court relates to its fundamental premise. It mischaracterised the
nature of the dispute between the parties. The crux of the dispute, as I see it,
was essentially whether Mr Seota had acted in accordance with his mandate
from the parties and, if so, whether his determination was otherwise
manifestly unjust. On this score, Reit never even came out of the starting
blocks. Nowhere in its affidavits did Reit allege, still less establish, that Mr
Seota had strayed outside the terms of his mandate. Nor did Reit establish that
Mr Seota acted in bad faith, dishonestly or in any other improper manner.
Where no case was made out to establish how and where Mr Seota went wrong
the High Court should have been slow to interfere. (See in this regard: S A

Breweries Ltd v Shoprite Holdings Ltd [2007] ZASCA 103; 2008 (1) SA 203
(SCA) para 41 (S A Breweries).

[37] It is necessary to emphasise that in the context of the facts of this appeal,
Transnet’s case is even stronger than what obtained in S A Breweries. Here,
Mr Seota’s determination was not assailed on any of the recognised grounds.
Reit, instead, was content to confine its case to the assertions that the
determination was not consonant with clauses 3 and 4 of the notarial leases.
In Telcordia Technologies Inc v Telkom SA Ltd [2006] ZASCA 112; 2007 (3)
SA 266 (SCA) para 51, Harms JA made the following pointed remarks:
‘Last, by agreeing to arbitration the parties limit interference by courts to the ground of
procedural irregularities set out in s 33(1) of the Act. By necessary implication they waive
the right to rely on any further ground of review, “common law” or otherwise. . . .’
Although these remarks were made in the context of a review of an arbitral
award, they apply with equal force to the facts of this case. It is as well to
remember that Mr Seota was at no stage instructed by the parties to determine
rental in terms of clause 3 of the notarial leases. On the contrary, the parties’
clear and unambiguous mandate to him was to compare two valuations
provided to him by the parties and then determine which one ‘was the most
appropriate’. Having considered the valuations placed at his disposal by the
parties, Mr Seota came to the conclusion that:
‘The rental determination as contained in the report by Humphrey Moyo is fair and
reasonable.’

[38] Thus, it was not open to him to disregard the parties’ explicit
instructions and, on a frolic of his own, have regard to the provisions of clause
3 of the lease (of which incidentally he was unaware as neither party had
alerted him to them). In reaching its conclusion to the contrary, the High Court

failed to see the wood for the trees and consequently committed a fundamental
error. Mr Seota’s source of authority was not the notarial leases but the joint
mandate of the parties from which he was not at liberty to depart. In a
comparable but different situation this Court said the following in Hos+Med
Medical Aid Scheme v Thebe Ya Bophelo Healthcare Marketing & Consulting
(Pty) Ltd and Others [2007] ZASCA 163; 2008 (2) SA 608 (SCA) para 30:
‘In my view it is clear that the only source of an arbitrator’s power is the arbitration
agreement between the parties and an arbitrator cannot stray beyond their submission
where the parties have expressly defined and limited the issues, as the parties have done in
this case to the matters pleaded. . . .’

[39] It bears emphasising that in agreeing to a slight deviation from the terms
of the notarial leases, Reit was obviously aware of the provisions of clause
5(c) because this was the very clause that it must have had in mind when it
initially proposed to Transnet that the mechanism contained therein must be
applied. But when Transnet proposed a different method, Reit readily agreed.
Thus, the mandate given to Mr Seota was consonant with what both Transnet
and Reit had ultimately agreed to in the course of their negotiations. It can
therefore hardly now lie in Reit’s mouth to complain about or question the
methodology consensually adopted to break the deadlock between the parties.
In truth, at no stage was the dispute between Transnet and Reit ever about the
formula that JVR and Mr Moyo had adopted in determining the rental payable
for the five-year period between 1 June 2014 and 31 May 2019, namely, the
market-related rental based on the value of the land, excluding buildings.

[40] On the authorities discussed above, it is now well established that an
expert’s bona fide determination or award will not be lightly interfered with
by the courts. For as observed by Ponnan JA in Lufuno:4
‘. . . Whenever two parties agree to refer a matter to a third for decision, and further agree
that his decision is to be final and binding on them, then, so long as he arrives at his decision
honestly and in good faith, the two parties are bound by it. . . .’
As already mentioned, in early May 2014 Mr Moyo was instructed by
Transnet to prepare a fresh valuation based on a market-related rental in
respect of the five-year period commencing from 1 June 2014 to 31 May 2019.
And it was on this basis that the parties negotiated the issue of rental related
to this period. Indeed, Reit itself instructed JVR to prepare a valuation on the
same basis. All of this is not disputed by Reit. On the contrary it is accepted,
if not explicitly, at the very least tacitly.

[41] But in pursuit of its review application, Reit contended that all of this
was irrelevant simply because what Mr Seota did was at variance with the
express provisions of the leases. No thought was given to how it came about
that Mr Seota came into the picture as explained above. It therefore did not
pertinently engage Transnet’s case which was that the basis for determining
rental had changed once s 67 of the NPA was invoked by Transnet,
culminating in the 2009 declarations of rental. In response to a question from
a member of the Bench, counsel for Reit was constrained to accept that in
2009 a change occurred. He nevertheless argued that this admitted change was
limited to the 2009 – 2014 five-year period. Beyond that, argued counsel for
Reit, the parties would revert to the initial formula provided for in the notarial
leases in terms of which it is the percentage of the value of bare land that

4 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another [2007] ZASCA 143; 2008 (2) SA 448
(SCA) para 22.

mattered. I do not agree. Were this to be the case, this would have the effect
of putting the rental revision exercise that Transnet embarked upon in
October 2008 to nought, meaning that s 67 of the NPA would, as a result, be
rendered nugatory. I can think of no possible reason why parties would engage
in such an irrational and unbusinesslike exercise.

[42] The aforegoing conclusion would, in the normal course of events, have
been the end of the matter as it is dispositive of the appeal. But taking one’s
cue from the decision of the Constitutional Court in S v Jordan and Others
(Sex Workers Education and Advocacy Task Force and Others as
Amici-Curiae) 2002 (6) SA 642 (CC),5 it is necessary to consider the second
leg of the argument advanced by Transnet. It is this. Transnet contended that
the various notarial leases were validly amended to provide for the
determination of rental on a market-related basis, albeit still limited to the
market value of the bare land.

[43] From Reit’s perspective, as its counsel urged upon us at the outset of
his address, the crux of the dispute between the parties concerns the question
whether the notarial leases had at any stage been varied. Accordingly, counsel
for Reit implored us to determine this issue for failure to do so would, as he
put it, result in endless disputes between the protagonists. It is to that aspect
that I now turn.

[44] As already indicated, in setting aside the umpire’s determination the
High Court held that a determination of the rental payable under the notarial

5 See para 21. Although in Jordan the Constitutional Court was dealing with a constitutional challenge on a
number of grounds where the High Court upheld one ground and held that it was unnecessary to deal with
the remaining grounds, the principle remains the same for all cases.

leases could only be properly done on the basis of the notarial leases
themselves, which provide that the rental is calculated on the basis of a set
percentage of the market value of the bare land, rather than simply a
market-related rental. Reit embraced this finding as its springboard to argue
that absent a finding that the notarial leases were validly amended to provide
for a market-related rental the reasoning of the High Court is unassailable.
This contention therefore entails that the question whether the notarial leases
concerned were validly amended must be confronted head-on.

[45] The amendment or variation of the notarial leases at issue here is
governed by clause 18 thereof. This clause is not couched in the language of
a typical non-variation clause. It says that ‘no amendment or variation of the
terms and conditions of this lease in any form or manner whatsoever will be
recognised by or be binding upon the Administration6 unless it has been
embodied in a formal written agreement duly executed by the Administration
and by the Lessee’. (My emphasis.)

[46] It is now well established that a stipulation or condition in a written
contract that provides that any variation or amendment of its terms by the
parties shall have no force or effect unless it is reduced to writing is binding
on the parties and cannot be altered verbally. (See in this regard: S A Sentrale
Ko-Op Graanmaatskappy Bpk v Shifren and Another 1964 (4) SA 760 (A) at
766D-H.)7 Nevertheless, our law recognises that as a non-variation clause
curtails the common law freedom to contract it must be restrictively

6 A reference to Transnet.
7 Shifren has been consistently followed in a series of judgments of this Court such as Brisley v Drotsky 2002
(4) SA 1 (SCA) and Tsaperas and Others v Boland Bank Ltd 1996 (1) SA 719 (A) at 725 B-C.

interpreted. (See: Randcoal Services Ltd and Others v Randgold and
Exploration Co Ltd 1998 (4) SA 825 (A) at 841E-842D.)

[47] It is necessary to say something about the words ‘will be recognised by
or be binding upon the Administration’ contained in clause 18 of the leases
already quoted in para 11 above. As a general rule, clause 18, being a
non-variation clause, must be construed restrictively. This is, however, not to
say that if its language is clear effect must not be given to it or that it must be
interpreted otherwise than sensibly.8

[48] In its heads of argument, Transnet submitted that the requirements of
clause 18 were complied with when the 2009 declarations of rental were
signed by the parties. It further argued that in any event clause 18, particularly
the words put in inverted commas in para 47 above are indicative of the fact
that clause 18 was inserted for the benefit of Transnet and not Reit. Thus, so
proceeded the argument, ‘There can be no issue at all if Transnet chooses not
to assert its rights in terms of the clause’.

[49] I do not agree. To my mind the object of the clause is clear. It offers
Transnet an election to wave its rights flowing from the notarial leases if it
chooses to do so. But it does not follow that where the variation, as contended
for by Transnet in this case, which imposes what, by all accounts, is an
onerous financial obligation on Reit is asserted clause 18 should not be
accorded its full effect. Here the variation upon which Transnet relies has
far-reaching implications for Reit in that it has the effect of increasing the

8 See for example: Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012
(4) SA 593 (SCA) paras 18 and 23.

rental payable by a substantial amount. A clause such as this, for example,
would only assist Transnet in circumstances where a lessee asserts that it has
been released from its obligations under the leases. If the release relied upon
by the lessee is not in writing and signed by the parties, Transnet would not
be bound but would be at liberty to recognise the claimed release if it so
chooses. There can be no doubt that the object of a clause such as this is to
protect Transnet and enable it to determine its rights vis-à-vis its several
lessees by reference to documents in its possession. It seeks to protect
Transnet against spurious defences by lessees who might want to assert that
they were released from one or some of the obligations undertaken in terms
of the lease. (Compare: Tsaperas and Others v Boland Bank Ltd 1996 (1) SA
719 (A) at 724D-E.) This is all the more so considering that Transnet is a large
entity comprising different divisions with a large number of employees.

[50] Did the 2009 declarations of rental about which there is no dispute
between the parties have the effect of varying the basis for determining rental?
More particularly, is their effect that Transnet is now entitled to determine
rental with reference to a market-related rental, as opposed to a percentage of
the market value of the leased land, at the date of commencement of each
succeeding five-year period? Unsurprisingly, the protagonists answer this
question differently. Transnet says Yes, whilst Reit says No. The High Court
agreed with Reit and went on to hold that s 67 of the NPA found no application
to the dispute.

[51] Whether the High Court was correct in taking this view of the matter is
the second leg of what confronts us in this appeal. As I see it, the answer to
this question depends, first and foremost: (i) on the interpretation to be

ascribed to the section; (ii) the evaluation of the factual narrative recounted
above; and (iii) the interpretation of the 2009 declarations of rental, of course,
subject to the conditions stipulated on Reit’s behalf. Section 67 opens with
subsec (1)(a) which deals with change of use of the leased property found
necessary in order to improve the safety, security, efficiency and effectiveness
of the operations of the port. It is not relevant for present purposes. It has no
bearing on the issue at hand whatsoever.

[52] Subsection 1(b) which is central to the appeal has already been quoted
above. Its object is clear from the text. It seeks to remove prejudice to Transnet
associated with the terms of a long-term lease concluded before it came into
operation – as has happened in this case – providing for, crucially in the
context of this appeal, unreasonably low rentals. It goes on to state that the
Ports Authority (ie Transnet) may in writing direct the lessee to renegotiate
the rental in order to remove the prejudice. The subsection employs
permissive language by using the word ‘may’. But the reason for doing so is
not far to seek because its invocation is dependent upon it being found, firstly
that the rental payable is ‘unreasonable low’ and, secondly, that such
unreasonable low rental is prejudicial to Transnet. Both factors entail a factual
inquiry and determination. Subsections 1(c); (2); (3) and (4) also find no
application in this appeal. Although subsec (2) is not germane to this case, the
High Court appears to have given Transnet’s argument based on s 67 short
shrift because, in its view, Transnet had not followed its requirements to the
letter before invoking them and was therefore precluded from relying on them
until it had fully complied with its prescripts. In this regard the High Court
erred. So far as subsec (3) is concerned, it too finds no application because
here, when Transnet invoked subsec 1(b) on 28 October 2008 and the parties

commenced negotiations, they were able to reach an agreement. Hence the
2009 declarations of rental about which there is no dispute.

[53] However, what is in serious contention between the parties is the
question whether these declarations had the effect of changing the
rental- determination basis for each of the successive five-year periods
beyond 31 May 2014. On this score, diametrically opposed contentions have
been advanced by the parties. In the view I take of the matter this aspect of
the case lies in a narrow compass.

[54] The logical starting point in this exercise is the 2009 declarations of
rental and the proper construction to be ascribed to them, read together with
the letter of 24 July 2009 from Reit’s attorneys. The contents of the 2009
declarations of rental have already been quoted in para 17 above and will not
be repeated here. The relevant part of the letter of 24 July 2009 reads:
‘Having regard to our latest e-mail of the 30th of June 2009, and in order to bring this matter
to a head, our client has instructed us to advise you that it will sign the declarations of rental
in respect of the above leases in the format presented by yourselves, however, the signature
thereof are strictly subject to and conditional upon the following:-
1.
Our clients agreement to increase the rental in accordance with the declarations of
rental and our client's signature thereof does not constitute an acceptance by our
client of Transnet’s entitlement to rely on Section 67 of the National Ports Act, No
12 of 2005 to review the rental and/or lease agreements and our client has agreed
to the review process on a without prejudice basis and without waiving or novating
any of its rights in this regard; and
2.
Transnet shall not in future and for the duration of the remainder of the lease periods
attempt to again rely on Section 67 of the National Ports Act, No 12 of 2005 to
enforce increased rentals or any cancellation of the lease agreements; and

3.
The increased rental amounts shall be paid by our client to Transnet quarterly in
arrears, in the same cycles as it has prior to the signature of the declarations of
rental; and
4.
All of the remaining terms and conditions a-; contained in the various registered
lease agreements will remain unchanged, unless otherwise agreed to in writing
between the parties.
Subject to the aforesaid conditions, we attach hereto the signed declarations of rental in
respect of the various lease agreements.’

[55] As already indicated, the declarations of rental were a culmination of
protracted negotiations between the parties over several months which were
triggered by the letter of 28 October 2008 addressed to Reit by Transnet. It
bears repeating that in its letter of 28 October 2008, Transnet made plain that
it had embarked on a process of reviewing all of its agreements of lease with
various lessees with a view to aligning ‘the contractual arrangements’ with
the NPA. In particular, it spelt out the current rental that Reit was hitherto
paying in respect of its leases and the rental that Transnet proposed to charge
with effect from 1 June 2009 which was a substantial increase. There is no
dispute between the parties about all of this and the fact that, properly
construed, the 2009 declarations of rental had the effect of changing the basis
upon which rentals payable under the notarial leases from market value of
bare land to a market-related rental basis. Nevertheless, the parties part ways
on the question of whether the admitted change was limited to the five-year
period between 1 June 2009 and 31 May 2009.

[56] The rivalling contentions of the parties require that something, by way
of prelude, be said about the proper approach to the interpretation of

documents, be it contracts, statutes or any other kind of document.9 The
approach to the interpretation of documents is well settled. It was admirably
explained by this Court in Natal Joint Municipal Pension Fund v Endumeni
Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para 18 thus:
‘. . . The present state of the law can be expressed as follows. 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 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.’

[57] Nearly two and a half years earlier, Lewis JA had occasion to restate
the principles of interpretation in Ekurhuleni Municipality v Germiston
Municipal Retirement Fund [2009] ZASCA 154; 2010 (2) SA 498 (SCA)
(Ekurhuleni Municipality) as follows (para 13):

9 See for example: Bastian Financial Services (Pty) Ltd v General Hendrik Schoeman Primary School [2008]
ZASCA 70; 2008 (5) SA 1 (SCA).

‘The principle that a provision in a contract must be interpreted not only in the context of
the contract as a whole, but also to give it a commercially sensible meaning, is now clear.
. . The principle requires a court to construe a contract in context – within the factual matrix
in which the parties operated. . . .’

[58] In conclusion on this topic, reference may be made to yet another
decision of this Court in Bothma-Batho Transport (Edms) Bpk v S Bothma
and Seun Transport (Edms) Bpk [2013] ZASCA 176; 2014 (2) SA 494 (SCA)
where the following was stated (para 12):
‘. . . Whilst the starting point remains the words of the document . . . the process of
interpretation does not stop at a perceived literal meaning of those words, but considers
them in the light of the relevant and admissible context, including the circumstances in
which the document came into being. . . Interpretation is no longer a process that occurs in
stages but is “essentially one unitary exercise” . . . .’

[59] The contentions advanced on behalf of Reit on this aspect of the appeal
rest, in essence, on two pillars. First, it was contended that the various notarial
leases were never varied in line with the requirements of clause 18 thereof.
Secondly, it was further submitted that absent a valid variation of the leases,
Reit is not obliged to pay the amount required of it by Transnet because its
obligation to pay rental arises, not from the determination, nor the instructions
given to Mr Seota but, from the terms of the notarial leases. Relying on the
reasoning in the judgment of the High Court, counsel for Reit argued that s 67
of the NPA only contemplates that there must be a renegotiation of the terms
of leases concluded before it came into operation and that if renegotiations
fail, a declaration of invalidity. Without a successful renegotiation of the terms
of the various leases or failing that a declaration of invalidity, so went the
argument, the terms of pre-existing leases remain unaffected.

[60] In counter, counsel for Transnet contended that one need only look at
the language, context and purpose of the 2009 declarations of rental to
determine the purport of the declarations having regard to the factual matrix
in which the parties operated since October 2008. And that if this is done, the
absurdity of the interpretation for which Reit contends will be revealed. As to
the factual matrix in which the parties operated, it is necessary to briefly deal
with the preliminary objection raised by Reit in relation to the parties’
renegotiations preceding the conclusion of their agreement as recorded in the
2009 declarations. It was argued that the content of the exchanges between
the parties is inadmissible because they relate to negotiations that were
conducted on a without prejudice basis. This issue can easily be disposed of.

[61] It is true that some of the letters which were exchanged between the
parties from the time when Transnet asserted its statutory rights under
s 67(1)(a) of the NPA and the general tenor of the discussions at various
meetings – some of which were confirmed in subsequent correspondence
between the parties – were written and the discussions conducted on a without
prejudice basis. Thus, ‘as a general rule negotiations between parties that are
undertaken with a view to settling a dispute between them are protected from
disclosure’. (See: Absa Bank Ltd v Hammerle Group [2015] ZASCA 43; 2015
(5) SA 215 (SCA) para 13.) The rationale for this rule is rooted in public
policy. Parties to disputes are encouraged to avoid litigation by resolving their
differences amicably through full and frank discussions in the knowledge that,
should the negotiations fail to bear fruit, any admissions made by them during
their negotiations will be protected from disclosure in the event of litigation
ensuing. (See in this regard: Naidoo v Marine and Trade Insurance Co Ltd

1978 (3) SA 666 (A) at 677B-D; KLD Residential CC v Empire Earth
Investments 17 [2017] ZASCA 98; 2017 (6) SA 55 (SCA) para 20.)

[62] However, it bears emphasising that the rule is contingent upon the
failure of the negotiations. Where the settlement negotiations succeeded and
ultimately culminated in the conclusion of an agreement – as has happened in
this case – the content of the settlement negotiations can be disclosed in court
and admitted as evidence. This is premised on the fact that the basis for
non- disclosure has fallen away. (See, for example, Gcabashe v Nene 1975 (3)
SA 912 (D) at 914; Adkins and Hunter v M J Crosbie and F W Crosbie and
M M Crosbie’s Executors 1916 EDL 357 at 361.) In this case the parties’
settlement negotiations, as already indicated, culminated in an agreement that
led to the production and signing of the 2009 rental declarations.
Consequently, Reit’s reliance on the privilege relating to the parties’
negotiations preceding the production of the 2009 rental declarations is
misplaced.

[63] I now revert to the crux of the matter. As in Ekurhuleni Municipality,
the considerations discussed above raise the question as to what, then, was the
commercially sensible, businesslike and reasonable interpretation of the 2009
declarations read with the letter of 24 July 2009, regard also being had to their
underlying purpose and the relevant background factual matrix? It is a fact
that brooks no argument to the contrary that the various long-term notarial
leases were concluded in 1960. And that they will terminate by effluxion of
time only in 2029. Thus, if they run their full course they will have endured
for almost 70 years. The inference is therefore irresistible that this was one of
the considerations that led to the enactment of the provisions of s 67(1)(b) that

took effect on 26 November 2006. Pursuant thereto, Transnet addressed a
letter to Reit proposing that the terms of the five notarial leases be renegotiated
in relation to the rental payable which was considered to be unreasonably low.
The basis of Transnet’s proposed increase in the rental was, to Reit’s
knowledge, a market-related rental. It is common cause that the renegotiations
succeeded in bearing fruit. Hence the signed 2009 declarations of rental
coupled with the letter of 24 July 2009 from Reit’s attorneys.

[64] The High Court moved from the premise that s 67 of the NPA found no
application because Transnet had not complied with its prescripts. It then
proceeded to hold that any oral amendment of the notarial leases would be
ineffective as the leases ‘contain express non-variation clauses’. For this
conclusion, it relied on Shifren stating that ‘the principles thereof are still good
law’. Finally, it held that the 2009 declarations of rental did not avail Transnet
because they do not constitute amendments of the leases. I cannot agree.

[65] A careful reading of the 2009 declarations read in conjunction with the
relevant letter leaves no room for any doubt as to their purpose. After the
description of the parties, the preambles of the five declarations all made
reference to the notarial leases. They proceeded to proclaim that the rental
payable by the lessee to the lessor (these being references to Reit and Transnet
respectively) has been reviewed in terms of s 67(1)(b) of the NPA and the
conditions (presumably terms) of the leases. They then concluded by
stipulating the annual rental payable in respect of the period 1 June 2009 to
31 May 2014, subject to a ten per centum annual escalation.

[66] Reit seized upon the fact that the annual rental stipulated in the
declarations relates only to the five-year period from 1 June 2009 to
31 May 2014 to contend that the rental revision in terms of s 67(1)(b) was
specifically for that period and no other. That cannot be for several reasons.
First, to sustain Reit’s contention would entail disregarding the background
facts that gave rise to the production of the rental declarations and the purpose
to which they were directed. Second, Reit’s construction would undermine the
legislative purpose of s 67(1)(b) of the NPA. Third, one would have to entirely
ignore the material known to those responsible for the production of the rental
declarations such as s 67(1)(b) itself; the mischief it sought to address which
would, as a result, be perpetuated and the like. The fact that Transnet would
be precluded from invoking s 67(1)(b) again,10 meaning that from 1 June 2014
until 2029 it would only be entitled to about a third of the annual rental that it
had enjoyed during the five-year period immediately preceding 1 June 2014.
And, lastly, the fact that Reit’s preferred interpretation would not be
reasonable, sensible or businesslike.

[67] Indeed, condition 4 of the conditions stipulated by Reit’s attorneys in
their letter of 24 July 2009 is telling and bears repeating. It reads:
‘All of the remaining terms and conditions as contained in the various registered lease
agreements will remain unchanged, unless otherwise agreed to in writing between the
parties.’
On a reasonable, sensible and businesslike reading of the wording of this
particular condition, it becomes manifest that Reit itself had accepted that the
basis of calculating the annual rental provided for in clause 3(b) was

10 This was expressly agreed to between the parties in the correspondence exchanged between them because
Transnet was understandably of the opinion that it could invoke s 67(1)(b) to regulate the remaining period
of the notarial leases only once.

consensually varied in writing to a market-related rental whilst the unaffected
terms of the leases would remain unchanged ‘unless otherwise agreed to in
writing between the parties’. Any other interpretation of the rental
declarations coupled with the letter, as Reit would have it, would not be
commercially sensible.

[68] In sum, that the 2009 rental declarations in their operative clause
expressly provided that the rental amount stated therein (subject to a ten per
centum escalation) was in respect of the period from 1 June 2009 to
31 May 2014 can easily be explained. Clause 3 of the long-term leases
provides that rental is to be determined periodically for a five-year period,
hence the five-year period in this instance was from 1 June 2009 to
31 May 2014. However, by no means does this detract from the overarching
objective of the parties initiated by Transnet in October 2008 that the
unreasonably low rentals hitherto payable in terms of the 1960 leases needed
to be renegotiated. Renegotiations then ensued and a resolution was found.
And the fact that in early May 2014 Transnet, in keeping with the terms of the
leases which it understood to have been varied in respect of the
rental-determination basis in 2009 already, proposed a revised rate of R 17
per square metre per month for the succeeding five-year period from
1 June 2014 to 31 May 2019 reinforces this point.

[69] Moreover, to interpret the 2009 declarations of rental in the way for
which Reit contended, would not be sensible or businesslike. It would, in
addition, not make economic and commercial sense which is how contracts
ought to be construed. The absurdity of Reit’s interpretation becomes stark
when regard is had to the fact that the rental payable would, in the result, be

drastically reduced from some R 450 000 per month to a measly R 45 000 per
month.

[70] Accordingly, I am satisfied that the appeal must succeed with costs,
including the costs occasioned by the employment of two counsel.

[71] In the result the following order is made:
1 The appeal is upheld with costs, including the costs of two counsel.
2 The order of the court below is set aside and in its place is substituted the
following:
‘The application for review is dismissed with costs, including the costs
occasioned by the employment of two counsel.’

________________________
X M PETSE
DEPUTY PRESIDENT

Appearances

For appellant:

A M Annandale SC (with her J Thobela-Mkhulisi)
Instructed by:

Hughes-Madondo Inc., Durban

McIntyre van der Post, Bloemfontein

For Respondent:

J J Brett SC (with him D Mahon)
Instructed by:

Vining Camerer Inc., Sandton
Honey Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY - JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL
Transnet National Ports Authority v Reit Investments (Pty) Limited and Another (Case no
1159/2019) [2020] ZASCA 129 (13 October 2020)

From:
The Registrar, Supreme Court of Appeal
Date:
13 October 2020
Status:
Immediate
Please note that the media summary is for the benefit of the media and does not form part of
the judgment of the Supreme Court of Appeal.
Today the Supreme Court of Appeal (SCA) handed down its judgment in terms of which it upheld the
appeal by the appellant with costs including the costs of two counsel and set aside the order of the
court a quo.
The appellant in this case is Transnet National Ports Authority (Transnet) which is a public company
incorporated in terms of the Legal Succession to the South African Transport Services Act 9 of 1989
as read/ with the Companies Act 71 of 2008. The first respondent is Reit Investments (Pty) Ltd (Reit)
which is a private company incorporated in South Africa. The second respondent is Mr Matsobane
Charles Seota, (Mr Seota), who was cited in his official capacity as the registrar of the South African
Council for the Property Valuers Profession (SACPVP). This appeal raises two interrelated issues,
firstly, the correct basis upon which valuations of immovable property, situated in Maydon Wharf in
the port of Durban, should be made for purposes of determining rentals payable in respect of those
properties. Secondly, whether the agreements concluded between the parties in 2009 and described
as ‘Declaration of Rental’ had the effect of varying the basis upon which rental would be determined
for the remaining period of the long-term leases terminating by effluxion of time on 30 September
2029.
Mr Seota took no part in the proceedings in the court below and has not participated in this appeal.
Reit’s case was that ‘instead of determining the market value of the land, to which he had to apply the
contractually stipulated fixed percentage to establish the annual rental’, Mr Seota ‘determined
(contrary to the terms of the contract) the market-related rental in respect of the properties’. The
parties’ dispute was based on five long-term notarial agreements of lease. Reit had initially sought an
order reviewing and setting aside Mr Seota’s determination coupled with an order directing Transnet
to procure, within the period determined by the court, a fresh valuation of the land in accordance with
the principles identified in the judgment of the court below. Reit later sought declaratory orders to the
effect that Mr Seota was appointed to value the land (excluding improvements thereon) in terms of the
agreements of lease but failed to do so. Despite opposition by Transnet, the High Court held that Reit

had made out a case for the relief sought. Accordingly, it granted relief substantially in the terms
sought by Reit in its amended notice of motion. This appeal was against that order and came before
the SCA with its leave after the High Court had refused leave.
Clause 5 of the various agreements was central to the dispute between the parties. Transnet was
empowered in terms of section 67 of the National Port Act 12 of 2005, in circumstances where the
terms of a long-term lease concluded were thought to be substantially prejudicial to the operation of a
port, to address a letter to the lessee concerned and direct that the applicable terms be renegotiated
in order to remove the prejudice. Two letters were sent to this effect and it was stipulated that other
than the terms reviewed and agreed to in terms of the declarations of rental, Transnet had no
intention of varying the other terms of the leases. Reit’s attorneys advised Transnet that Reit had
agreed, on a without prejudice basis, to sign the declarations of rental. Transnet’s case was that Reit
unequivocally accepted that there had been a variation of the various leases whereas Reit contended
that the variation related only to the five-year period from 1 June 2009 to 31 May 2014.
Both parties later appointed valuers to determine the rentals for the succeeding five-year period.
However they did not reach an agreement on the rentals. Reit confirmed that, pending the resolution
of the dispute, it would continue to pay the invoiced amount provided that if they had overpaid
Transnet would refund or credit their account. Reit suggested to Transnet that in view of the impasse
it would be best to invoke the dispute-resolution mechanism of the notarial leases. The parties agreed
to submit the two disparate valuations to the council of the South African Council for the Property
Valuers Profession (SACPVP) to be reviewed by an umpire appointed by the council to determine the
most appropriate valuation. Transnet’s valuation was considered to be fair and reasonable. Reit did
not sign the declarations and they later successfully instituted review proceedings in the High Court.
Transnet’s rental determination and the correctness or otherwise of the high court order is what was
before the SCA on appeal The incorrect rental determination and the correctness or otherwise of that
order is what confronted the SCA on appeal. The SCA noted that the High Court mischaracterised the
nature of the dispute between the parties.
The SCA did not agree with Reit’s contention that the parties would revert to the initial formula
provided for in the notarial leases in terms of which the percentage of the value of bare land was what
mattered. However, the SCA held that Reit’s preferred interpretation was not commercially sensible.
The SCA further noted the necessity to consider the argument advanced by Transnet where it
contended that the various notarial leases were validly amended to provide for the determination of
rental on a market-related basis. The SCA emphasised that to interpret the 2009 declarations of rental
in the way for which Reit contended, would not be sensible or businesslike. It would, in addition, not
make economic and commercial sense which is how contracts ought to be construed. Accordingly,
the Court was satisfied that the appeal must succeed with costs, including the costs occasioned by
the employment of two counsel