Pick n Pay Retailers Proprietary Limited v Lakeside City Trading 226 Proprietary Limited t/a Pick n Pay Family Store Protea North (2025-056881) [2025] ZAGPPHC 505 (16 May 2025)

Case Note

Case Name: Pick 'n Pay Retailers Proprietary Limited v Lakeside City Trading 226 Proprietary Limited t/a Pick 'n Pay Family Store Protea North
Citation: Case No: 2025-056881
Date: 16 May 2025

This matter is significant as it deals with an urgent application for the perfection of a general notarial covering bond over movable assets, a core issue in commercial franchise relationships. The judgment reflects the judiciary’s approach to balancing contractual enforcement and preventing irreparable harm to creditor interests.

The case underscores the judicial willingness to intervene promptly in circumstances where a franchisor’s security is threatened by the franchisee’s default, thereby protecting financial and reputational stakes in national supply chains.

Reportability

This case is reportable because it addresses the urgent need for the perfection of a security bond in the context of an ongoing commercial relationship, thereby highlighting the enforcement of contractual rights in franchise structures. The judgment is significant as it confirms that contractual remedies, even those leading to drastic measures, are not necessarily oppressive when agreed upon in good faith.

The case is of interest to other judges given its detailed exploration of the balance between creditor protection and franchisee risk management. It clarifies the legal thresholds for intervention when default occurs and provides practical guidance on the execution of security interests in complex commercial arrangements.

Reportability is further accentuated by the potential financial and operational consequences for well-known business entities involved in national supply chains. The decision thus provides a precedent for addressing similar disputes in the future.

Cases Cited

Juglal NO and Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division 2004 (5) SA 248 (SCA) has been cited as a guiding case in determining the nature of franchise relationships and the enforceability of contractual rights within them.

The judgment also references Pick n Pay Retailers Proprietary Limited v Kemptongate Foodlane Proprietary Limited and others, 2024 JDR 0952(GJ), which supports the legal foundation for the urgent perfection of similar bonds.

These cases together form the jurisprudential backbone that informs the court’s understanding of the application of notarial covering bonds, franchise agreements, and the extent of the enforcement rights available under such contractual arrangements.

Legislation Cited

The Promotion of Access to Information Act (PAIA) is referenced, particularly in relation to the Respondent’s counterapplication for a stay pending its finalization.

This legislation is important in contextualizing procedural concerns associated with the disclosure of relevant information under statutory provisions.

Its inclusion ensures that the court’s decision carefully weighs application process fairness while addressing urgent security interests.

Rules of Court Cited

No explicit rules of court were cited in the judgment text beyond the general reference to procedural norms typically observed in urgent applications.

The court’s approach was predominantly guided by legal principles and contractual provisions rather than technical rules of court.

The absence of detailed court rule citations emphasizes the focus on substantive legal rights and the interpretation of contract law in franchise relationships.

HEADNOTE

Summary

The Applicant, Pick 'n Pay Retailers Proprietary Limited, sought urgent relief to perfect a general notarial covering bond registered over the movable assets of the Respondent, Lakeside City Trading 226 Proprietary Limited t/a Pick 'n Pay Family Store Protea North. This application was grounded on the Respondent’s default in paying for goods delivered on credit and the subsequent risk that the respondent’s financial position would further deteriorate. The urgency of the matter was underscored by the potential irreparable harm to the Applicant’s security interests.

The court considered extensive oral and written submissions from counsel, the evidence presented in numerous affidavits, and applicable legal principles regarding the enforcement of franchise agreements and security bonds. The judgment made clear that contractual provisions, including those allowing for the immediate perfection of the bond, were essential to ensuring the Applicant’s rights are protected in light of the Respondent’s substantial indebtedness.

Ultimately, the court granted the order on 13 May 2025, authorizing Pick 'n Pay to take possession of the Respondent's movable assets to secure its financial interests. This decision reinforces the legal position that a franchisee’s acceptance of contractual risks does not preclude a franchisor from exercising its clear contractual rights in cases of default.

Key Issues

The primary issue in the case was whether the Applicant could legally perfect the general notarial covering bond as an urgent remedy against the Respondent’s substantial default and overdue liabilities. The court was tasked with determining the extent to which a franchise agreement protects a franchisor’s security interests when faced with a defaulting franchisee.

Another critical point was the admissibility of the urgent application amidst the Respondent’s counterapplication for a stay pending the PAIA process. The interrelationship between secure contractual rights and the statutory mechanisms for obtaining information was closely examined.

Furthermore, the court evaluated whether the potential consequences of enforcing the bond – including taking over the business and exercising significant control – were oppressive or within the bounds of acceptable commercial risk assumed under the franchise agreement.

Held

The court held that the Applicant was duly entitled to perfect the bond and exercise the rights conferred therein, including taking possession of the Respondent’s movable assets. It determined that the urgency of the situation justified the immediate intervention to prevent further devaluation of the bond’s security.

The judgement emphasized that the contractual provisions agreed upon by the parties clearly permitted the enforcement actions outlined in the bond. The court underscored that Protea North had willingly accepted these terms through its franchise agreement and the bond.

In conclusion, the court granted the order on 13 May 2025, authorizing all stipulated measures and ordering the Respondent to cover the costs of the application. This holding affirms that when contractual risks are assumed, enforcement actions—even if sweeping—are legally permissible in the event of default.

THE FACTS

The Applicant, Pick 'n Pay Retailers Proprietary Limited, initiated an urgent application to take possession of the Respondent’s movable assets by perfecting a general notarial covering bond registered in its favor. The contention arose from the Respondent’s failure to satisfy its debt obligations amounting to at least R6,000,000.00, stemming from unpaid goods ordered on credit and rental defaults. This default jeopardized the value of the secured assets and the Applicant’s financial interest in the bond.

The Respondent opposed the application and countered with a request to stay proceedings pending the finalization of a PAIA application, highlighting the procedural urgency and informational disputes inherent in the case. The factual matrix was complicated by the interplay between the franchise agreement and the bond, where both parties had tacitly agreed to the enforcement conditions upon default.

These facts underline a practical conflict in commercial franchising, where the timely enforcement of contractual rights must be balanced against procedural safeguards and informational transparency as required by statutory law.

THE ISSUES

The central legal issue for the court was whether the Applicant could immediately perfect the bond and take possession of the Respondent's assets despite the ongoing financial default and tentative procedural challenges. The court needed to determine whether enforcing such sweeping rights, including the control over business operations, was legally justifiable under the existing franchise and bond agreements.

Another issue was the Respondent’s contention that the ongoing PAIA process should delay the enforcement of the bond. The court was required to ascertain the precedence of contractual rights over procedural stays where urgent commercial interests were at stake.

Furthermore, the court had to consider whether the imposition of stringent enforcement measures, such as taking over the business operations of the Respondent, went beyond the acceptable commercial risk assumed in the contract. This involved a careful reading of the contractual clauses and relevant legal precedents regarding franchise agreements and notarial bonds.

ANALYSIS

In analyzing the case, the court placed significant emphasis on the Applicant’s demonstration of the Respondent’s substantial indebtedness and default on payment obligations. The detailed submissions and affidavits provided a compelling argument that the immediate perfection of the bond was essential to protect the financial interests of the Applicant. The analysis recognized that any delay could lead to irreparable harm and a further devaluation of the secured assets.

The court drew extensively on the established legal principles set forth in Juglal NO and Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division 2004 (5) SA 248 (SCA), which validated the enforcement of contractual rights under a franchise structure. It noted that the risks associated with default and the subsequent enforcement actions were inherent in the very nature of the franchise agreement, which Protea North had voluntarily accepted.

Moreover, the court considered the Respondent’s counterarguments regarding the PAIA application but maintained that the urgency of preserving the security's value outweighed any procedural delays. By relying on both precedent and a reasoned assessment of the contractual provisions, the court affirmed that the Applicant was entitled to act swiftly and decisively in its own interest.

REMEDY

The court granted the Applicant comprehensive authorization to take possession of the Respondent’s movable assets to perfect the general notarial covering bond. This remedy enables Pick 'n Pay to secure, control, and manage the business operations of the Respondent, thereby safeguarding its financial interests as outlined in the bond.

The order specifically empowers the Applicant to exercise a range of actions—including claiming sums owed, taking over premises, managing business affairs, and eventually selling assets—to discharge the Respondent's liabilities. Such measures are designed to prevent further financial erosion and ensure that the Applicant maintains a superior ranking in the event of any future liquidation process.

Additionally, the court directed that the Respondent pay the costs of the application on an attorney and own client scale, thereby reinforcing the principle that contractual default should attract the full burden of enforcement costs. This remedy underscores the court’s commitment to protecting contractual security in high-stakes commercial transactions.

LEGAL PRINCIPLES

The decision reaffirms that the enforcement rights stipulated in franchise agreements and backed by general notarial covering bonds are enforceable when a party defaults on its obligations. The court made clear that the immediate perfection of such bonds is both an urgent and necessary measure to provide security in business transactions. The principle here is that contractual risks, once assumed by the franchisee, justify the enforcement actions by the franchisor if defaults occur.

Another key legal principle established is that the operational and commercial risks intrinsic to franchise relationships do not preclude the exercise of stringent contractual remedies. The court clarified that while these measures may seem severe, they are entirely within the ambit of the agreed contractual terms, thereby upholding the sanctity of the contract.

Finally, the judgment solidifies the understanding that procedural concerns such as those raised under PAIA do not automatically delay the enforcement of clear and urgent rights under a security bond. By doing so, the decision provides a clear legal framework for addressing the tension between administrative processes and the necessity of immediate commercial relief.