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[2016] ZAGPJHC 73
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Easi Gas (Pty) Limited v Gas Giant CC t/a Independent Gas and Another; In re: Oryx Oil South Africa (Pty) Limited v Gas Giant CC t/a Independent Gas and Another (11660/2015, 11656/2015) [2016] ZAGPJHC 73 (14 April 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
In
the matters between:
Case
No 11660/2015
DATE:14
APRIL 2016
EASI
GAS (PTY)
LIMITED
.............................................................................................
APPLICANT
And
GAS
GIANT CC t/an INDEPENDENT
GAS
..................................................
FIRST
RESPONDENT
GROENEWALD,
BERNARDUS HERMANUS
........................................
SECOND
RESPONDENT
Case
No 11656/2015
ORYX
OIL SOUTH AFRICA (PTY)
LIMITED
.............................................................
APPLICANT
And
GAS
GIANT CC t/a INDEPENDENT
GAS
....................................................
FIRST
RESPONDENT
GROENEWALD,
BERNARDUS HERMANUS
........................................
SECOND
RESPONDENT
JUDGMENT
FRANCIS,
AJ:
[1]
On 15 April 2015 interim interdicts and ancillary relief sought on an
ex parte
basis in Part A of the notice of motion was granted
in each of the matters with immediate effect. I deal with both
matters in this
judgment where the final interdict and ancillary
relief sought in Part B of the notice of motion is consolidated in
one judgment.
[2]
The respondents, their servants and employees were interdicted and
restrained from
filling or distributing any liquefied petroleum gas
(LPG) in cylinders which was the property of the applicant and or to
which
the applicant have a lawful claim and which bear the
applicant’s brand names and logo ‘Easigas’, ‘Oryx’
and ‘BP’ (the applicants cylinders).
[3]
The issues for adjudication are whether the applicants have satisfied
the requirement
for the granting of a declaratory order and the final
interdicts sought. In both matters the applicant sought relief
against the
respective respondents aimed at preventing the
respondents from acting unlawfully and from using the applicant’s
property
without its permission. The ownership of the gas cylinders
is central to this determination. The next issue is whether any case
has been made out against the second respondent in his private
capacity. And the final issue for determination is whether the
applicants’ conduct constitutes a contravention of the
provisions of the Competitions Act 89 of 1998.
[4]
The declaratory order and final interdicts sought are contested and
opposed on the
basis that the applicant has not proved that it is the
owner of each of the cylinders inventoried, attached and containing a
unique
serial number. If the applicant fails to prove its alleged
ownership of each of the gas cylinders concerned and that the first
respondent conducts itself and or operates its business in
contravention of the applicant’s alleged rights and or
statutory
prohibitions
the applicant
cannot be entitled to the declaratory order and the final interdicts
sought.
[5]
The applicant’s complaint is that it has purchased large
quantities of gas cylinders
at considerable cost to it and in order
to obtain a return on its capital investment, the applicant expects
to sell its LPG in
its cylinders. It is common cause that new
cylinders, unfilled with LPG, excluding vat have a landing cost of
approximately R271.57
for a 9kg cylinder; R434.49 for a 14kg or 19kg
cylinder; R752.53 for a single-value 48kg cylinder; and R 995.57 for
a double-value
48kg cylinder. The applicant expects and wants to
ensure the return of its cylinders from time to time by way of the
exchange practice.
Its ability to service the market depends on an
adequate stock of cylinders being circulated by any of its authorized
gas distributors
or suppliers. The need for its cylinders to remain
in circulation in the market and for it to have the ability to regain
possession
of its empty cylinders, to inspect, refill and
re-introduce them into the market is the purpose for the relief
sought.
[6]
The exchange system operates in a manner in which a customer may
return an empty cylinder
(A) to a supplier (Easigas) of LPG and
receive her standard deposit or replace the empty cylinder for a full
cylinder (B) and pay
only for the LPG. The deposit for a cylinder is
standard in the industry and is presently R150.00 excluding VAT,
irrespective of
the size of the cylinder. The empty cylinder (A)
returned to the supplier, if it is a cylinder belonging to another
supplier (Oryx),
will be returned to that supplier for exchange of
its own branded cylinder or the standard deposit of R150.00 will be
received.
A supplier (Easigas) may only refill its own cylinders or
refill cylinders belonging to other suppliers who have authorized by
agreement to refill and distribute its cylinders. The refilled
cylinder (A) will be distributed to another customer and similarly
be
exchanged repeatedly in the LPG market.
[7]
The applicant encounters the on-going problem that unauthorized
suppliers such as
the first respondent retain and utilize cylinders
belonging to the applicant to refill and sell their LPG in the
market. Where
suppliers unlawfully make use of the applicants’
cylinders to sell their LPG, the applicant experiences a shortage of
cylinders
with which to supply its customers. This alleged
unauthorized conduct also deprives the applicant of the commercial
and economic
benefit from cylinders which it has, as owner of the
cylinders supplied into the market. As a result unauthorized
suppliers do
not incur the costs of providing their own cylinders
they are able to undercut legitimately operating suppliers and
distributors.
[8]
It is common cause that the first respondent does not have a
participatory or distribution
agreement with the applicant. The
applicant’s evidence is that the first respondent is conducting
a substantial LPG distribution
business using cylinders belonging to
the applicant, bearing its branding and without its permission. On
the basis that the applicant
faces competition from competitors in
the LPG industry it is entitled to prevent unauthorized parties such
as the first respondent
to sell its own LPG using the applicant’s
cylinders. The LPG price is regulated by statute. This has the result
that suppliers
and distributors may compete only on service.
Ownership
[9]
It is trite that the applicant must establish a clear right of its
alleged ownership
of the cylinders concerned. Each of the gas
cylinders is identifiable by means of a unique serial number,
specific brand name and
logo. The respondents argue that the
applicant lacks ownership by virtue of there being more than one
category of cylinder in circulation
in the market. They submit that
there are four different categories of cylinders in the market
namely:-
[9.1]
in the first category there are cylinders bearing the name and logo
of the applicant that was ‘purchased’
by the respondent
from an authorized distributor of the applicant;
[9.2]
the second category refers to cylinders received from the applicant’s
authorized distributor;
[9.3]
in the third category are cylinders received from members of the
public (the end user); and
[9.4]
the fourth category does not fall within any of the other categories.
[10]
Our courts have over the years recognized the existence of the
reservation of ownership in LRP
cylinders, the deposit system and the
trade practice more specifically the exchange system. See
Mobil
Oil Southern Africa (Pty) Ltd v Afrox Ltd
1983 (1) SA 649
(C);
Tolgaz (SA)(Pty) Ltd v Solgas (Pty) Ltd and Another; Easigas (Pty)
Ltd v Solgas (Pty) Ltd
2009 (4) SA 37
(W),
BP Southern
Africa (Pty) Limited & Nfosoft CC and Others
(unreported case
no 47010/2012 of South Gauteng High Court) (BP).
[11]
The respondent argues that the precedent set in the
Tolgaz
decision referred to the cylinders in the third category only. The
facts in the present matter are fundamentally distinguishable
from
those in
Tolgaz
as it refers to cylinders in three more
categories than that considered in
Tolgaz.
I turn to consider
these other categories on the question of the applicant’s
vested ownership of the cylinders.
[12]
It is not in dispute that more than half of the cylinders found on
the premises of the first
respondent and attached by the sheriff in
terms of the interim interdict were found to be legally obtained from
a distributor nominated
by the applicant. These are the cylinders
that fall within the first category as described by the respondents.
[13]
In this respect the respondent submitted annexures G3.1 to G3.25
which are invoices for purchase
of filled gas cylinders bearing the
colours, logo and originally branded seals of Easigas, which it
legally purchased. Annexures
G4.1 to G4.7 are invoices reflecting the
purchase of Oryx gas cylinders that the first respondent legally
purchased from Oryx’s
nominated distributor. The number of Oryx
gas cylinders referred to in annexures G4.1 to G4.7 exceeds the
number of Oryx gas cylinders
found at the first respondent’s
premises. In respect of all of these cylinders the applicant concedes
that the cylinders
should not have been attached and removed and
further that these cylinders be released from attachment and returned
to the first
respondent.
[14]
The crisp question remains whether the applicant or the first
respondent is the owner of the
cylinders falling in the first
category? The first respondent contends that it has been purchasing
filled cylinders from the applicant’s
distributers for years
which have the original branded seals of the applicant. Despite the
notice on the cylinder that it remains
the property of the applicant
the evidence of the first respondent is a legal distributor of the
applicant has ‘sold’
cylinders to the first respondent
for the purchase price of 285.00 per cylinder. The respondent relies
on annexure G3.13 which
refers to a tax invoice detailing a unit
price of 285.00 for a 9kg Easigaz cylinder. The same unit price of
285.00 is charged for
a 19kg cylinder, and similarly for a 48 kg S/V
cylinder. The price charged excludes the charge for the LPG contained
in the cylinder.
A separate price is charged for the LPG.
[15]
The unit price charge of 285.00 is not claimed to be the standard
deposit amount. The applicant
does not dispute the unit price of
285.00 being a purchase price of the cylinder but counsel argues that
where an authorized distributor
sells its cylinders with LPG it does
not result in ownership passing. Although no further explanation is
offered for the said charge,
it is noteworthy that the cylinders
‘purchased’ contained LPG and was not empty.
[16]
In
Tolgaz
it was accepted that major suppliers,
did not
sell its cylinders to others
and it was the practice that empty
cylinders once received by a supplier or distributor was returned to
the owner.(my emphasis)
For this reason it was held that ownership of
the cylinders was retained by the applicant. The basis of the
respondent’s
defence is that all suppliers of LPG in practice
lose their ownership of gas cylinders concerned after introduction
thereof into
the market. Ownership passes many times during the
lifespan of a gas cylinder.
[17]
In particular ownership in a movable thing passes to another where
the owner delivers it to another
with the intention of transferring
ownership to him and such intention may be proved in various ways:
Trust Bank van Afrika Bpk v Western Bank bpk en Andere NNo
1978 (4) SA 281
(A) at 302,
Cape Explosive Works Ltd and Another v
Denel (Pty) Ltd and Others
2001 (3) SA 569
(SCA). The
respondents’ content that one of the ways in which ownership
passes is the applicant loses total control over
each of the gas
cylinders introduced by itself into the market. It does not keep
records of serial numbers of its cylinders and
to whom the cylinders
have been supplied to. The respondents contend that this lack of the
applicant’s exercise of rights
of ownership results in transfer
of ownership or alternatively in the abandonment of ownership.
[18]
To abandon moveable property, the intention of the owner to abandon
the said property must be
present. See
Meintjes v Coetzer
2010 (5) SA 186
(SCA) and
Minister van Landbou v Sonnendecker
1979 (2) SA 944
(A) at 946 H. To effect transfer of ownership the
subjective intention of the owner to transfer is required also - see
Legator Mckenna Inc and Another v Shea and Others
2010(1) SA
35 (SCA). Similarly in
Dreyer and Another NNO v AXZS Industries
(Pty) Ltd
2006 (5) SA 548
(SCA), the court held that without the
intention to pass ownership, ownership of movables passing by
delivery did not pass. Intention
will remain the crucial factor for
transfer or abandonment of ownership. It follows that the applicant
has persisted that it had
and/or have no intention to transfer or
abandon its ownership. Moreover the applicant has taken steps to
identify its property
with specific branding, logos, colours, and a
visible notification on the cylinder of reservation of ownership
which identifies
its property specifically and its vested ownership.
I accept the argument of the applicant that the transaction is not a
sale or
an alienation of the cylinder into the market but can be
aptly described as an ‘agreement of use’ to enable it to
supply
and sell LPG in the market.
[19]
Regulations and safety standards prescribe the giving of permission
by an owner of a cylinder
in writing except where the cylinder is
owned by the end user to entitle another to refilling and
distributing its cylinders. Sections
42 read with 43 of the
Occupational Health and Safety Act 85 of 1993
, incorporate Safety
Standard 9.5 of SANS 10019 of the Code of Practice of the South
African Bureau of Standards, which reads:-
…’
(d)
permission to fill the container has been granted by the owner of the
container, in writing, except where the cylinder is owned
by the end
user. This requirement is for safety reasons, since the cylinder
containment history is an essential reference for correct
filling.’
[20]
These regulations and safety standards impose rigid conditions on the
service and maintenance
of LPG cylinders which must be carried out on
each and every occasion when a cylinder is refilled. There is a duty
to ensure that
all cylinders, including their fittings are on their
return to owners, visually inspected and checked for damage or
corrosion.
Defective ones are repaired or discarded. The exchange
practice allows end users to purchase LPG without costs of purchasing
cylinders
and the responsibility of maintaining them and ensuring
they remain safe for use. The
regulations and the
applicable safety standards prohibit the unauthorised filling of the
LPG cylinders. It requires the express
authority of the owner to
refill the cylinder as confirmed in
Tolgaz
.
The
safety measures as prescribed are well founded to ensure
the protection from the dangers inherent in the use thereof and
places
the duty legally upon owners of cylinders, specifically
distinguishing between ownership by a primary supplier and an end
user.
The duty exclusively placed on an owner who is a supplier
arises from the recognition of its vested ownership of the cylinders
supplied in the LPG market. It follows therefore, in my view that in
the first category as described by the respondents’,
ownership
of the cylinders continues to vest in the applicant.
[21]
Referring to the third category of cylinders the first
respondent justifies its conduct by maintaining that it and its
customers
have always regarded the customer as the end user of a
specific gas cylinder, who is not only entitled to give same in
exchange
for a filled gas cylinder, but is also entitled to fill it
where authorized. Once the pre-filled gas cylinder is exchanged for
an empty gas cylinder, the first respondent becomes the common law
owner of the empty cylinder by virtue of exchange or transfer
and is
thereafter permitted as owner to fill the gas cylinder. Although this
category of cylinders obtained from the end user was
considered in
Tolgaz
, the issue of transfer of ownership was not. However,
for reasons I have set out earlier, irrespective of whether the end
user
had the intention of acquiring ownership (as supported by
affidavits of two end users), ownership will pass when the original
owner
intents to relinquish ownership. Above all ownership was not
relinquished by the applicant and therefore it could not be acquired
by the end user or subsequently by the first respondent.
[22]
The second category of cylinders which the first respondent received
from the applicant’s
authorized distributor relates to the
trade practice. The trade practice envisages the exchange, refilling
and distribution of
cylinders. The first respondent calls into
question the exchange system
that the practice
that exists is not uniformly observed, not reasonable, not certain
and there is
no control over the gas cylinders. The
respondent’s evidence is that the applicant (Oryx) a party to
the exchange agreement
acts in contravention of the agreement by
exchanging gas cylinders of the other wholesaler suppliers with the
first respondent
in exchange for empty cylinders of Oryx. Instead,
these empty cylinders should have been given to Easigas and not to
the first
respondent. Therefore they d
escribe the
exchange system as unreliable and further that non-participants to
the exchange agreement are forced into the exchange
system.
[23]
The disadvantage of the
exchange system is acknowledged by the
applicants for a different reason in that an unauthorized distributor
or filler can take
advantage of cylinder support by acquiring
cylinders belonging to the applicants and other suppliers at below
the cost of the cylinder
and by using them to supply their own LPG.
However it is common cause that the first respondent freely
participates in the exchange
practice but disregards the vested
ownership of the applicants. It was confirmed in
Tolgaz
that
ownership of the cylinders vested in the applicant on the basis that
the respondents acknowledged the exchange practice. Flaws
in the
exchange practice described by the parties are evident but it does
not
exonerate the first respondent from
disregarding the vested ownership of the applicant, the trade
practice and its unauthorised
re-filling of the applicant’s
cylinders.
The first respondent is free
to either introduce its cylinders into the market or to conclude
agreements with suppliers of cylinders
that would permit the first
respondent to fill and distribute the cylinders of such suppliers.
The applicant in my view is entitled
to expect others to adhere to
the exchange practice to ensure the safety of its cylinders and
safeguard its cylinder investment.
[24]
The respondents further allege that
the purpose of the
exchange agreement is to protect the interest of the dominant role
players being the four largest wholesale suppliers
and it is
therefore monopolistic or anti-competitive as it excludes legitimate
competition in contravention of chapter 2 of the
Competition Act 89
of 1998
. The purpose of the exchange agreement is to ensure that
other role players within the LPG market such as the first respondent
is prevented from re-filling an empty gas cylinder obtained by the
first respondent in exchange for a pre-filled gas cylinder of
the
first respondent. This agreement is aimed at and has the effect of
substantially preventing or lessening competition in the
LPG market.
For the reasons already discussed earlier the regulations and the
health and safety standards render the unauthorized
filling of
cylinders unlawful and the respondents’ single claim that
prevention of it re-filling cylinders of the applicant
constitutes
unlawful competition is misguided. On similar facts unlawful
competition was fully considered by Jaybhay, J in
Tolgaz
at 50
G-H where it was held that
‘…
several
factors are relevant and must be taken into account and evaluated.
These factors include the honesty and fairness of the
conduct
involved, the morals of the trade sector involved, the protection
that positive law already affords, the importance of
competition in
our economic system, the question whether parties are
competitors,
conventions with other countries and the motive of the actor.’
[25]
Notably all of these relevant factors should be weighed in terms of
good morals and understood
in terms of the values of the Constitution
of RSA, 1996. Similar to that held in
Tolgaz
all relevant
factors necessary to consider a determination of wrongfulness are
absent and no finding can be made that the applicant’s
conduct
constitutes unlawful competition.
[26]
Relief sought against the second respondent is based on him being a
joint wrong doer. The second
respondent argues that there is an
independent legal existence of the first respondent and that on the
papers there is no evidence
that the business operation of the first
respondent and the conduct that is complained of is conducted by the
second respondent
in his personal capacity. The second respondent
acts as a representative of the first respondent and joint
wrong-doing is factually
and legally misplaced.
[27]
In
Nel and others v Metequity Ltd and another
2007(3) SA 34 at
38, Streicher JA said that:
“
A
company has a legal personality separate from that of its
shareholders. That separate personality may, however, in certain
circumstances
be disregarded by a court. The mere fact that a company
has only one shareholder who is in full control of the company does,
however,
not constitute a basis for disregarding its separate legal
personality.”
[28]
However, it is evident that where there are circumstances that
justify lifting the corporate
veil, where an element of improper
conduct is established joint liability will follow. See
Shipping
Corporation of India Ltd v Evdomon Corporation and Another
[1993] ZASCA 167
;
1994
(1) SA 550
(A) at 566C-F. The applicant seeking an interdictory
relief is entitled to proceed against a joint wrong-doer. In similar
decisions
the courts have unequivocally held the second respondent’s
blameworthy conduct in being a party to the activities of the first
respondent to constitute a basis for joint wrongdoing. And further,
referring to
BP Southern Africa (Pty) Limited v Nfosoft CC and
others
(for citation see para 10 above), if the court does not
grant an interdictory relief against the second respondent, he will
simply
evade the relief granted by continuing the prohibited conduct
in the name of a different entity. The second respondent admits that
he fills the applicant’s cylinders and this admission is
sufficient to enable the applicant to obtain a final interdict
against him.
[29]
Above all the LPG market operates in a manner
in which a deposit system and reservation of ownership in the
cylinders subsists.
It is evident that there is a visible
notification on the cylinder that the
applicant is the owner of its LPG cylinders
and it has a clear right to prevent unauthorised filling and dealing
with its cylinders.
The applicant has a well-grounded apprehension of
irreparable harm by losing incalculable revenue. No satisfactory
remedy is available
to the applicant.
Consequently I am
satisfied that the applicant has made out a case on the balance of
probabilities for the declaratory order and
the final interdicts
sought for the unlawfully acquired gas cylinders.
[30]
The final order is granted in terms of
amended Part B of the notice of motion.
It
is ordered that:-
30.1
The unlawfully acquired cylinders (excluding those cylinders
inventoried with the applicant’s branded
seals), inventoried
and attached at the premises as belonging to the applicant are to be
released from attachment and returned
to the possession of the
applicant, with the applicant having to refund the deposit for the
cylinder.
30.2
Interdicting and restraining the respondents or any of them, and/or
any servant or employee or other person
purporting to act on their
behalf from receiving or being in possession of any of the unlawfully
acquired cylinders of the applicant.
30.3
Interdicting and restraining the respondents or any of them, and/or
any servant or employee or other person
purporting to act on their
behalf from filling or distributing any of the applicant’s
cylinders.
30.4
Representatives of the applicant are permitted to attend at and to
enter upon the premises or any other premises
within the jurisdiction
of this court from which the respondents conduct business, on a
weekly basis during normal business hours,
and that the respondents
are directed to surrender and hand over to the applicant and/or any
other person duly authorised thereto
by the applicant, any of the
unlawfully acquired cylinders of the applicant, which can be
identified as such and/or which are in
the possession of the
respondents.
30.5
Failing compliance by the respondents with the terms of 30.4 above,
the relevant sheriff (who may be accompanied
by a representative of
the applicant), is directed to take possession of any of the
unlawfully acquired cylinders of the applicant
which are found by the
sheriff in the possession of the respondents at any premises where
the respondents may be trading, or which
are found by the sheriff on
any vehicle or vehicles which are identified as those of the
respondents, or any of them, or which
are being used to convey any
such cylinders for or on behalf of the respondents, either presently
or in the future, and whether
such cylinders contain LPG or not and
that the sheriff is authorised forthwith to hand these over to the
applicant and/or the applicant’s
duly authorised
representatives.
30.6
The respondents are ordered to return to the applicant any of the
unlawfully acquired cylinders of the applicant in their possession
from time to time.
30.7
As agreed between the parties, with the resultant outcome, each party
is to bear its own costs.
R.
FRANCIS, AJ
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
Counsel
for the Applicant : Adv P Strathern S C & Pressler
Instructed
by: Yammin Hammond Inc
6
th
Floor, Bedford Centre
Smith
Street
Bedfordview
Counsel
for the Respondent: Adv U Lottering & G F Heyns
Instructed
by: Manong Badenhorst Incorporated
601
Rubenstein Drive
Moreletapark
Pretoria
Date
Judgment given: 14 April 2016