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[2016] ZASCA 182
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Louistef (Pty) Ltd v Snyders and Others (1060/2015) [2016] ZASCA 182; 2017 (5) SA 276 (SCA) (29 November 2016)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1060/2015
In
the matter between:
LOUISTEF
(PTY) LTD
APPELLANT
and
CWA
SNYDERS NO AS TRUSTEE OF:
LOUIS
SNYDERS FAMILIE
TRUST
FIRST RESPONDENT
THE
CONTROLLER OF PETROLEUM PRODUCTS
SECOND RESPONDENT
MACROBERT
INCORPORATED
THIRD RESPONDENT
Neutral
citation:
Louistef
v Snyders NO
[2016]
ZASCA 182
(29 November 2016)
Coram:
Lewis,
Pillay, Zondi and Mocumie JJA and Fourie AJA
Heard:
14
November 2016
Delivered:
29
November 2016
Summary:
Petroleum
Products Act 120 of 1977
: sale of site licence issued in terms of
s
2D
of the Act: whether site licence constituted a merchantable merx:
held to be a valid agreement of sale.
ORDER
On
appeal from:
Gauteng
Division of the High Court of South Africa, Pretoria (Janse van
Nieuwenhuizen J sitting as court of first instance):
1
The
appeal is upheld with costs.
2
The
order of the court a quo is set aside and the following substituted
therefor:
‘
(a)
The application is dismissed with costs.
(b)
The counter-application succeeds with costs.
(c) It
is declared that the agreement of 26 March 2014 was legally and
validly concluded between the applicant and the
first
respondent and is not null and void.
(d)
The applicant is ordered to pay the first respondent the amount of R1
million plus R140 000 VAT against delivery of a valid
tax
invoice.’
JUDGMENT
Fourie
AJA (Lewis, Pillay, Zondi and Mocumie JJA
concurring):
[1]
This appeal concerns the validity of a written agreement of sale (the
agreement) in terms of which the appellant, Louistef (Pty)
Ltd
(Louistef), sold a site licence issued to it in terms of the
provisions of the Petroleum Products Act 120 of 1977 (the Act),
to
the respondent, the Louis Snyders Familie Trust (the trust), for a
purchase consideration of R1 million.
[2]
The trust subsequently took the view that the agreement was invalid
and unenforceable and launched application proceedings in
the Gauteng
Division of the High Court, Pretoria, seeking a declaratory order to
that effect. Louistef, on the other hand, maintained
that the
agreement was valid and binding and as it had complied with all its
obligations thereunder, it opposed the application
and sought, by
means of a counter-application, payment of the purchase price of R1
million.
[3]
In the event, the matter was heard by Janse van Nieuwenhuizen J, who
upheld the trust’s application with costs and granted
the
declaratory order. The counter-application was dismissed with costs.
Louistef now appeals the whole of the judgment and orders
of the
court a quo, which appeal is with the leave of that court. The second
respondent, the Controller of Petroleum Products contemplated
in s
3(1) of the Act (the Controller), and the third respondent, MacRobert
Incorporated, the former attorneys of the trust, were
cited as
parties, but they abided the decision of the court a quo and have not
participated in this appeal.
[4]
The background facts giving rise to the litigation are largely common
cause: The trust is the registered owner of certain immovable
property situated at Brits, North West Province (the site), which
Louistef had hired from the trust since 1991. Louistef conducted
a
Toyota motor vehicle dealership at the site which included, inter
alia, a fuel filling station. The lease had been renewed from
time to
time, finally until 31 May 2014. With effect from 17 March 2006, the
Petroleum Products Amendment Act 58 of 2003 (the Amendment
Act)
introduced a new dispensation regarding the licencing of retail
activities concerning petroleum products. The relevant statutory
provisions will be discussed in more detail hereunder, but for
present purposes it would suffice to record that on 9 October 2008,
a
‘site licence’ and a ‘retail licence’ were
issued to Louistef in terms of the Act, as amended, authorising
it to
retail prescribed petroleum products at the site. Louistef continued
to conduct the business of a filling station at the
site under the
new dispensation until 15 May 2014.
[5]
During November 2013, MacRobert Incorporated, on behalf of the trust,
commenced negotiations with Louistef with a view to obtaining
the
transfer of the site licence held by Louistef, to enable the trust to
apply for a retail licence authorising it to conduct
the business of
a filling station at the site. These negotiations culminated in the
conclusion of the agreement on 26 March 2014,
which provided for the
sale of Louistef’s site licence to the trust for a purchase
price of R1 million. Louistef took the
necessary steps to effect the
transfer of the site licence, with the result that, on 14 May 2014,
the Controller issued a site
licence in the name of the trust. When
Louistef ceased to conduct the business of a filling station at the
site on 15 May 2014,
the trust set in motion the process to acquire a
retail licence to enable it or its nominee to retail petroleum
products at the
site. However, on 26 June 2014, the trust’s
present attorneys addressed a letter to Louistef stating that the
agreement was
‘invalid and unlawful’. The letter recorded
that the trust objected to the payment of the agreed purchase price
which
had by then been deposited into the trust account of MacRobert
Incorporated.
[6]
It is rather difficult to discern the trust’s cause of action
from the affidavits filed and the submissions made on its
behalf.
Shorn of unnecessary verbiage, it appears that its case was based on
common mistake, namely that both of the parties mistakenly
believed
that the res vendita, ie the site licence, constituted a merchantable
merx, whilst this was not the case. This mistake
rendered the
agreement impossible of performance, with the result that it was void
ab initio.
[7]
In adjudicating upon the validity of the agreement, it is necessary
to first have regard to the relevant provisions of the Act,
as
amended. The Act initially did not, apart from price regulation,
prescribe any method of control over the retailing of petroleum
products in South Africa. However, the amended Act now provides for,
inter alia, the issuing of licences by the Controller to persons
involved in the manufacturing and sale of certain prescribed
petroleum products. ‘Regulations Regarding Petroleum Products
Site and Retail Licences, GN R286,
GG
28665,
27 March 2006’ (the regulations) were simultaneously
promulgated under the Act, prescribing, inter alia, the procedures
to
be followed for the obtaining of licences. Of particular importance
in this appeal are the newly created categories of a ‘site
licence’ and a ‘retail licence’.
[8]
Section 1 of the Act defines a ‘site’ as ‘premises
on land zoned and approved by a competent authority for
the retailing
of prescribed petroleum products’. A ‘site licence’
is not defined in the Act, but the regulations
define it as ‘a
licence issued to a person who holds land or has permission from the
owner of the land to develop a site
for the purpose of retailing
petroleum products’. A retail licence in terms of the Act is
defined as a licence to conduct
the business of a retailer, namely,
the sale of petroleum products to an end-consumer at a site. It is
important to note that a
site licence and a retail licence are
interlinked – a site licence application may only be accepted
by the Controller where
a corresponding valid retail licence
application has been lodged for that site (regulations 5(1) and
15(4)), and a site licence
remains valid for so long as there is a
corresponding valid retail licence and the licenced activity (a
filling station in this
instance) remains a going concern (s 2B(3)
(b)
and
(c)
of
the Act, read with regulation 30(1)
(c)
).
[9]
Any person who wishes to apply for a site licence has to do so in
terms of s 2A(4) of the Act,
read with
regulation 13(1). Such a person has to be the owner of the relevant
land or someone who has the written permission of
the owner of the
land. A person who wishes to apply for a retail licence, in terms of
s 2A of the Act, read with regulation 15,
has to be the owner of the
business concerned.
[10]
Section 2D of the Act, however, contains transitional licencing
provisions which provide that any person who, at the time of
the
commencement of the Amendment Act holds and is in the process of
developing a site or retails prescribed petroleum products,
shall be
deemed to be the holder of a licence for that activity, on condition
that an application is made within six months for
a site or retail
licence, as the case may be. Section 2D(1) provides that, for
purposes of this section, ‘hold’ means
to own or lease
land. As recorded above, Louistef as the lessee who had been
conducting the business of a filling station at the
site, made
application for the necessary site and retail licences in terms of s
2D of the Act and both licences were issued to
it on 9 October 2008.
Therefore, at the time of the conclusion of the agreement, Louistef
was the lawful holder of a site licence
in respect of the site, as
well as a retail licence entitling it to conduct the business of a
filling station at the site.
[11]
There is a significant difference between the requirements that an
applicant has to meet when applying for a site licence in
terms of s
2A of the Act, and those that govern the application for a site
licence in terms of the transitional provisions of s
2D of the Act.
In the case of the former, more onerous requirements are prescribed
by the regulations, including, inter alia, the
following:
(a)
The submission of an environmental management plan and proof that
financial provision has been made for the rehabilitation of
the site
upon cessation of the retailing activities (regulations 14
(b)
(i)
and (ii)).
(b)
The obtaining of a record of decision of the environmental
authorities permitting retailing operations on the site (regulation
13(1)
(d)
(ii)).
(c)
Proof that proper notice by way of publication was given for public
participation purposes (regulation 4).
(d)
Proof that there is a need for the site and that the site will
promote the licensing objectives stipulated in s 2B(2) of the
Act.
These include objectives such as promoting an efficient petroleum
industry, facilitating an environment conducive to efficient
and
commercially justifiable investment, creating employment
opportunities, ensuring countrywide availability of petroleum
products
at competitive prices and promoting access to affordable
petroleum products by low-income consumers.
[12]
On the other hand, the requirements for a site licence under the
transitional licencing provisions of s 2D of the Act, are
substantially less. The mere production of formal documentation such
as the relevant lease agreement and documents of identification,
as
well as declarations regarding the retailing operations conducted on
the site, are required (regulation 13(2)).
[13]
The regulations also deal with the transfer of licences. Regulation
22(7) states that a retail licence is not transferable.
A site
licence, however, is freely transferable and regulation 12 deals,
inter alia, with the transfer of a site licence which
had been issued
in terms of s 2D of the Act. As recorded above, this is the section
of the Act in terms of which the site licence
was issued to Louistef
on 9 October 2008. Regulation 12(3)
(a)
requires the lodging of an application for transfer of a s 2D site
licence within six months ‘of change of ownership or lease’.
In such event the site licence has to be transferred to the new owner
or new lessee, as the case may be.
[14]
What is envisaged by regulation 12, read with regulation 15(4), is
the continuation of the licenced retail activity at the
site pending
the transfer of the site licence within six months of the new owner
or lessee taking ownership or possession of the
site. For the site
licence to be transferred it obviously has to be extant. Had the
agreement providing for the transfer of Louistef’s
site licence
to the trust not been concluded, the site licence would have expired
upon the termination of Louistef’s lease
or any earlier
termination of the filling station business. In such event the trust
would have been obliged to apply de novo for
a site licence in terms
of s 2A of the Act. The trust would then have been obliged to comply
with the more onerous requirements
referred to in para 11 above. As
pointed out by Louistef, this would not only have been the more
onerous route to take, but the
trust would then also run the risk of
its application being refused.
[15]
Counsel for the trust submitted that the site licence did not
constitute a merchantable merx as it only creates legal rights
in
favour of a land owner. Therefore, the submission continued, a site
licence is inseparable from the land and as the trust was
at all
relevant times the owner of the site, Louistef derived no legal
rights from its site licence. In view of this, the site
licence could
not have constituted a valid res vendita for purposes of the
agreement of sale, thereby rendering the agreement void
ab initio.
[16]
There is no merit in this submission. It is clear from the above
provisions of the Act that the site licence confers a personal
right
upon the holder thereof which entitles the holder to enter the site
and to prepare it for the purpose of retailing petroleum
products at
the site, upon the granting of a retail licence. There is certainly
no room for the conclusion that the site licence
confers rights upon
the land owner only and not the holder of the licence. The granting
of a site licence constitutes a
delectus
personae
whereby the applicant for the licence is personally granted the right
to exploit the site for the purpose of retailing petroleum
products
upon the granting of a retail licence.
[17]
A site licence bears a close similarity to a liquor licence as to
which this court said in
Aquatur (Pty) Ltd v Sacks & others
1989 (1) SA 56
(A) at 64H-I:
‘
A
liquor licence, it has been stated in decisions of this court, is a
purely personal statutory privilege granted to a particular
person
under the liquor laws to sell liquor at particular premises. Its
grant involves the exercise by the licencing authorities
of a
delectus personae so that the licensee cannot transfer or otherwise
deal with the licence unless authorised thereto in terms
of the Act,
which provides for the strict supervision of the grant, transfer and
removal of licences.’
[18]
Louistef as the licensee was the person to whom the privileges
attaching to the site licence had been granted. The site licence
had
a commercial value, not only to Louistef, but also to the trust,
particularly as the transfer thereof resulted in the trust
not having
to follow the more onerous and risky route of an application for a
site licence in terms of s 2A of the Act. Therefore
the site licence
constituted a merchantable merx, which is described in G Glover
Kerr’s Law of Sale and Lease
4 ed (2014) at 36 as:
‘
The
thing [merx] may be movable or immovable, corporeal or incorporeal.
It must be capable of being the subject matter of a private
legal
transaction (in other words, it must not be a
res
extra commercium
).’
[19]
It follows, in my view, that the site licence was an asset of
Louistef, which it could sell and transfer with the consent of
the
Controller. In this regard too it is apposite to compare it with a
liquor licence, of which the following remarks of Van Zyl
JP (Jones J
concurring) in
Solomon v Registrar of Deeds
1944 CPD 319
at
325, were approved by this court in
Slims (Pty) Ltd & another
v Morris NO
1988 (1) SA 715
(A) at 724J-725A and 737E-G:
‘
[A]
liquor licence is not merely a privilege but is a right which has a
potential commercial value which may sometimes be very considerable.
And it is a right which is alienable and can be sold.’
[20]
In
Shoprite Checkers (Pty) Ltd v MEC for Economic Development,
Eastern Cape & others
[2015] ZACC 23
;
2015 (6) SA 125
(CC),
the main judgment of the court held that a grocer’s wine
licence is ‘property’ for purposes of s 25(1)
of the
Constitution. Madlanga J (albeit in a judgment dissenting on a
different issue) put it as follows (para 143):
‘
By
comparison, the grocer’s wine licence is something in hand: it
grants the holder an entitlement to sell wine under certain
specified
circumstances . . . also, a grocer’s wine licence holds
objective commercial value: its very raison d’être
is to
trade in accordance with its conditions. The licence is transferable,
albeit subject to that being sanctioned by the authorities.
As an
item with objective economic value, the transfer may even be for a
valuable consideration . . . All these point to the grocer’s
wine licence being property for purposes of s 25(1).’
In
my view, the same holds true mutatis mutandis for a site licence
issued under the Act.
[21]
For all the above reasons, and particularly in view of the finding
that the site licence constituted a merchantable merx, it
follows
that the parties did not labour under any mistake at the time of the
conclusion of the agreement. The agreement is accordingly
valid and
enforceable. Therefore, the appeal should succeed.
[22]
In the result, the following order is made:
1
The appeal is upheld with costs.
2
The order of the court a quo is set aside and the following
substituted
therefor:
‘
(a)
The application is dismissed with costs.
(b)
The counter-application succeeds with costs.
(c) It
is declared that the agreement of 26 March 2014 was legally and
validly concluded between the applicant and the first respondent
and
is not null and void.
(d)
The applicant is ordered to pay the first respondent the amount of R1
million plus R140 000 VAT against delivery of a valid
tax
invoice.’
_____________________
P B
Fourie
Acting
Judge of Appeal
APPEARANCES:
Counsel
for Appellant:
J H Dreyer SC
Instructed
by:
Coetzer
and Partners, Pretoria
Hill
McHardy & Herbst Inc,
Bloemfontein
Counsel
for First and
Second
Respondents:
B G Savvas
Instructed
by:
Venn
& Muller Attorneys, Pretoria
J
L Jordaan Attorneys, Bloemfontein