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[2012] ZASCA 32
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Primedia (Pty) Ltd t/a Primedia Instore v Radio Retail (Pty) Ltd and Others (354/11) [2012] ZASCA 32 (29 March 2012)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 354/11
(Not reportable)
In the matter between:
PRIMEDIA (PTY) LTD t/a PRIMEDIA
INSTORE
….......................................
Appellant
and
RADIO RETAIL (PTY) LTD
…...........................................................
First
Respondent
RADIO RETAIL FOR SPAR (PTY) LTD
…..................................
Second Respondent
ZaPOP (PTY) LTD
….......................................................................
Third
Respondent
Neutral citation:
Primedia v
Radio Retail
(354/2011)
[2012] ZASCA 32
(29 March 2012).
Coram:
Mthiyane DP, Cloete,
Cachalia, Malan, Leach JJA
Heard:
15 March 2012
Delivered: 29 March 2012
Summary
:
Unlawful
competition – appellant enforcing rights in terms of
pre-existing contracts – no unlawful competition proved.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
Western Cape
High Court, Cape Town (Henney AJ sitting as court of first instance):
1. The appeal is upheld. Save as set
out in para 2, the respondents are ordered to pay the costs of the
appeal, including the costs
of two counsel.
2. The appellant is to pay the costs
of the appeal against the dismissal of its counter-application
including the costs of two counsel.
3. Paras 3 and 5 of the order of the
court a quo are set aside and the following order is substituted:
‘
The main
application is dismissed with costs, including the costs of two
counsel.’
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA (Mthiyane DP, Cloete,
Malan, Leach JJA concurring):
[1] This is an appeal against a
judgment of the Western Cape High Court (Henney AJ) – with its
leave – granting the
respondents final interdictory relief
against Primedia, the appellant in these proceedings. The high court
found that Primedia
had unlawfully interfered with the contractual
relationships between the respondents and 330 retail franchisees
associated with
the well-known Spar Group. It also dismissed
Primedia’s counter-application for an interdict restraining the
respondents
from unlawfully interfering with its contractual
relationship with 110 of these franchisees.
[2] As is evident the parties compete
in the retail in-store industry in the area of product marketing.
They do so inter alia by
providing media types to attract the
attention of customers who patronise these stores. Stores that use
these services enter into
agreements with service providers, such as
the parties in this case, who market, sell and install the media
types.
[3] The three respondents have since
early in 2009 collaborated in marketing their services to Spar
franchisees, and have entered
into exclusive agreements with 330
franchise stores to provide in-store promotions for their media
types.
[4] The present dispute began when Mr
Riaan Labuschagne, the managing director of ZaPOP, learnt that
Primedia’s representatives
had visited two of the stores with
whom the respondents had exclusive agreements to promote its
products. So he wrote to Mr Graham
Bouwer, Primedia’s chief
executive officer, on 6 August 2010 to request Primedia to stop
promoting the respondents’
identified media types or similar
media types at any of the 330 stores in question, and to remove any
such products from the stores
where they had been installed.
[5] In response, Mr Bouwer distributed
a notice on 19 August 2010 to suppliers of the Spar Group. It read
thus:
‘
TO
OUR VALUED CUSTOMERS
It
has come to my attention that ZaPOP [the third respondent] have
announced that they have been awarded rights to provide instore
media
services in Spar Group stores.
The
announcement is creating confusion in the market place and I
consequently want to reaffirm that Primedia Instore remains the
official and exclusive provider of instore media services for the
Spar Group (Super Spars, Spars, Kwikspar and Tops).
Mike
Prentice (Group Marketing Executive – Spar) and Julian Evans
(Group Merchandising Manager – Spar) have endorsed
this
communication. If anyone is still unclear concerning the above
status, you can contact Mike or Julian on 031 7191900 or myself
on my
cell, 082 451 2307 (
graham@primeinstore.co.za
).
I
trust that this letter serves to remove all confusion.’
[6] A week later Mr Labuschagne sent
another letter to Mr Bouwer complaining that this notice contained
several false and misleading
statements: it suggested, he said, that
ZaPOP had no right to provide media services to Spar stores despite
the respondents having
written agreements to do so; it implied that
the Radio Retail was creating ‘confusion’ in the market
by announcing
that it had rights to provide these services when it
did not, and it asserted untruthfully that the appellant was the
‘official
and exclusive’ provider of these services to
stores of the Spar Group. The letter called upon Primedia to retract
the notice
within 14 days. A copy of this letter was sent to Mr
Prentice and Mr Evans, the two Spar officials mentioned in the
notice.
[7] The respondents’ attempts to
secure a retraction of the notice failed. On 7 September 2010
Primedia’s attorneys
responded to the letter maintaining that
the notice was intended only for suppliers of the Spar Group, and not
the franchisees.
They also requested proof, on behalf of Primedia,
that the respondents had in fact entered into exclusive agreements
with the franchisees.
[8] On 10 September 2010 the
respondents’ attorneys made an extract of an agreement with the
relevant exclusivity provisions
available to Primedia’s
attorneys and reiterated their demand that Primedia remove ‘all
media types’ installed
in any of the 330 stores.
[9] Primedia’s attorneys
responded by letter on 21 September. They questioned the validity of
the exclusivity agreement, asserted
that the media types installed by
Primedia were ‘markedly different’ from those of the
respondents and declared that
in the absence of the respondents being
able to demonstrate a clear right to provide services to the
franchise stores exclusively,
Primedia would not accede to the
request to remove its media types from the stores in question.
[10] On 8 October 2010 the respondents
instituted interdictory proceedings against Primedia seeking urgently
to restrain it from
competing unlawfully with them by interfering
with their contractual rights with the franchisees. They alleged that
Primedia was
marketing, selling and installing media types similar to
theirs in those stores. They also sought to prevent Primedia from
making
false representations, allegedly of the kind in Mr Bouwer’s
notice of 19 August 2010, concerning them.
[11] The application was initially set
down for hearing on 15 October 2010. Two days earlier Primedia’s
attorneys had written
to their counterparts and had undertaken, on
behalf of their client, not to make any false representations about
the respondents.
The parties then agreed on a timetable for the
filing of further affidavits.
[12] In its answering affidavit, filed
on 28 October 2010, Primedia reiterated its earlier undertaking not
to make false representations
about the respondents. It also offered
three defences to the relief claimed: first, it took issue with the
validity of the contracts
that the respondents had allegedly
concluded with the franchisees by asserting that the respondents had
not proved their contractual
rights; second and importantly, it
asserted that it had pre-existing agreements with 110 franchisees,
which entitled it to provide
its media services to them – this
assertion also formed the basis of the counter-application in which
Primedia alleged that
the respondents were interfering with its
rights under these pre-existing agreements; finally, Primedia alleged
that its media
types were not the same as those for which the
respondents sought protection.
[13] When the matter proceeded in the
high court the respondents sought final relief, and the matter was
argued on this basis. They
therefore had to satisfy the well-known
requirements for the grant of an interdict: a clear right, reasonable
apprehension of irreparable
harm to their contractual relationships
with the franchisees with whom they had contracted and the absence of
any alternative remedy
to protect their rights.
[14] The learned judge found that the
respondents had satisfied these requirements and granted the
respondents all the relief they
had asked for. He found that the
contracts that the respondents had entered into with the franchisees
were valid; that by circulating
the notice on 19 August 2010,
and dealing with the franchisees in question, Primedia had unlawfully
interfered with the respondents’
contractual relationships; and
he dismissed Primedia’s assertion that it was merely exercising
its pre-existing contractual
rights. As I have mentioned the judge
also dismissed Primedia’s counter-application.
[15] When the matter came before us Mr
Gautschi, who appeared for Primedia, abandoned his client’s
appeal against the dismissal
of the counter-application. He, however,
persisted with all the defences that Primedia raised before the high
court. Because of
the approach adopted by Mr Gautschi, it is not
necessary to deal with defence concerning the validity of the
respondents’
exclusive agreements.
[16] The thrust of his submission
before us was this. Primedia and ZaPOP are competitors. The
competition between them is lawful.
Of the 330 franchisees with whom
ZaPOP has agreements – assuming their validity, which was not
conceded – Primedia
has pre-existing agreements with 110.
ZaPOP’s exclusive agreements relate to certain media types
only. Primedia has its own
media types, which are not the same as
ZaPOP’s. By virtue of its pre-existing agreements Primedia is
entitled to market,
sell and install its media-types in any of the
110 stores. There is no suggestion in the papers that Primedia has
been entering
these stores for a purpose other than to promote its
own products. And there is no evidence that Primedia was inducing any
of the
franchisees to breach their contracts with the respondents, or
that it was otherwise unlawfully competing with them.
[17] In
Schultz
v Butt
1
this court stated the general rule
relating to unlawful competition thus:
‘
[E]very
person is entitled freely to carry on his trade or business in
competition with his rivals. But the competition must remain
within
lawful bounds. If it is carried on unlawfully, in the sense that it
involves a wrongful interference with another’s
rights as a
trader that constitutes an
injuria
for
which the Aquilian action lies if it has directly resulted in loss
. . . In order to succeed in an action based on unfair
competition,
the plaintiff must establish all the requisites of Aquilian
liability, including proof that the defendant has
committed a
wrongful act. In such a case, the unlawfulness which
is a prerequisite for Aquilian liability may fall into
a
category of clearly recognised illegality . . .’
[18] One such category is inducing or
procuring a breach of a contract: an action for damages, or where
appropriate, an interdict
will lie against any person who
intentionally and without justification induces or procures another
to breach a contract made with
any other person. Where interdictory
relief is sought, as in this case, it is not necessary to prove
actual injury, ie an actual
breach of contract. Proof of reasonable
apprehension will suffice.
2
[19] Although the judge found that
Primedia’s conduct had caused the franchisees to breach their
exclusive agreements with
the respondents, there was no evidence of
any such breach. And before us the respondents did not contend that
there was. Their
cause of action was that Primedia had been
unlawfully competing with the respondents by interfering with their
contractual rights
with the franchisees – hence their claim for
interdictory relief. The respondents therefore had to show that
Primedia was
intentionally and without justification interfering with
their contractual rights.
[20] In this regard Mr Olivier, on
behalf of the respondents, contended that they were not seeking to
prevent Primedia from entering
the stores with which the respondents
had exclusive agreements, or from promoting its own media types in
those stores. The relief
sought was, he argued, much more narrowly
framed and aimed only at restraining Primedia from: (a) interfering
with their contractual
relationships with franchisees in question by
soliciting them to unlawfully breach or to sever their agreements
with the respondents;
and (b) marketing, selling or installing the
respondents’ media types and diverting corporate opportunities,
to which the
respondents were entitled in terms of their agreements,
to itself.
[21] Concerning the diversion of
corporate opportunities, Mr Olivier properly conceded that there was
no such evidence. The high-water
mark for the other relief claimed by
the respondents, as Mr Olivier put it, is contained in the founding
affidavit of Mr Mark Finestone,
the general manager for Radio Retail
and Radio Retail for Spar. As most of the relief claimed hinges upon
the following extract
of the evidence in the affidavit, it is
necessary to reproduce it in full. It reads thus:
‘
The
confusion caused by Primedia’s conduct
1.
It is evident that considerable confusion has been created by
Primedia’s aforestated notice and actions. Some of the stores
are of the impression that they are obliged to contract with Primedia
or to allow its activities in-store, given the latter’s
“status” with the Spar Group as suggested in the
aforestated notice. Primedia has further exacerbated the situation
by
sending representatives to stores, with which the Applicants’
have exclusive agreements, and insisting upon installing
media
services there. I mention a few examples.
1.1
Mr Hein Bakkes of the Paarl East Superspar in Paarl reported to me
that Primedia had on two separate occasions since 1 August
2010
wanted to place advertising and media products on his shop’s
trolleys contrary to our contract with him. The representative
was at
his store on about 18 August 2010 and again on 25 August 2010,
whereupon Mr Bakkes called me to confirm whether the Primedia
representative was allowed to install the media on his trolleys. He
was concerned that he would be acting in breach of his contract
with
Radio Retail for Spar if Primedia was allowed to do so. I advised Mr
Bakkes not to have the media installed on his trolleys.
Mr Bakkes
informed me on 15 September 2010 that Primedia nevertheless continued
with media installations in his store, and that
he was not sure when
this would be removed. He accordingly wanted clarification as to by
when can he expect the placement of ZaPOP
media in-store, and the
removal of the Primedia products. Mr Bakkes concluded an exclusive
agreement with Radio Retail on 30 March
2010.
2.
Mr Shawn Paulsen of the Lakeside Spar in Lakeside sent an e-mail
message to the Spar Western Cape Distribution Centre on 27 August
2010 for clarification regarding the interrelationship between
ZaPOP’s and Primedia’s activity in-store. I telephoned
him on the same day to explain the situation to him. On 16 September
2010 Mr Paulsen confirmed to me that Primedia is currently
still
active in his store, with its representatives coming and going as
they please. They do not announce themselves or their activity
in his
store. Mr Paulsen has recently received a “quarterly cheque”
from Primedia pursuant to media installations in
his store. Mr
Paulsen concluded an agreement with Radio Retail on 31 March 2010,
with effect from 1 August 2010. However, he confirms
that he is
confused due to Primedia still acting in-store. He has allowed them
to continue, but needs clarity. Until the situation
is resolved, he
will continue to collect his quarterly payments from Primedia. I
annex hereto . . . a copy of an email sent by
Mr Paulsen to a
representative of Spar Western Cape . . ..
3.
Mr Yusuf Banderker of the Westerford Kwikspar in Rondebosch, who
concluded an agreement with the Applicants on 18 March 2010,
informed
me on 17 September 2010 that a Primedia representative was in
his store some weeks ago with advertising material,
and that he (Mr
Banderker) had to request the representative to remove the Primedia
products from his store.
4.
Ms Bernadette Visser of the Kraaifontein Superspar reports that
Primedia representatives are very active in her store, and come
and
go in an
ad hoc
fashion. They do not announce
themselves upon arrival, and place or remove media materials in the
store at their own discretion,
contrary to the terms of the agreement
with us. Primedia has recently contacted the store to request the
creation of an invoice
to Primedia for the period April to June 2010
for media which had previously been installed for campaigns in this
period. Ms Visser
feels uncomfortable about the situation, as her
store does not wish to become involved in a dispute between the
Applicants and
Primedia. The Kraaifontein Superspar concluded an
agreement with the Applicants on 31 March 2010.
5.
Mr Andre van Rensburg of the Kuilsriver Superspar, who concluded an
agreement with the Applicants on 18 November 2009, reported
that
Primedia representatives had been in his store in the week of 17
September 2010. They come in on an
ad
hoc
basis and show
him what they will be putting up in store, and which will be in
breach of his contract with us. Mr van Rensburg is
confused as to
what the impact of his agreement with the Applicants is on the
situation. He has requested confirmation that Primedia
“must
go” and ZaPOP must “come in”. He does, however,
still collect quarterly rebates from Primedia for
previous media
installations and campaigns in-store. I annex, marked . . . a copy of
a letter dated 18 January 2010 from Primedia
to the Kuilsriver Spar,
in which various promotions conducted in the store by Primedia for
the period July to September 2009 are
set out. It is evident from the
description of the media types used in respect of each supplier, that
those media types are similar
to the ones offered by the Applicants.
6.
Ms Mari Meyer of the Sonstraal Superspar, who concluded an agreement
with the Applicants on 31 March 2010, stated on 17 September
2010
that Primedia representatives come into her store approximately every
two weeks, without announcing themselves to her. They
simply install
their products, in breach of the terms of the agreement with us, and
leave. She does not know how to handle the
situation.
7.
Ms Annalize Putter of the Bellville Kwikspar reported that Primedia
was in her store on 17 September 2010, asking her for an
invoice for
previous media supporting campaigns installed in their store.
Primedia had given her a letter . . . from which she
had to create
the invoice. Ms Putter requires confirmation as to when the Primedia
products must be removed from her store. She
concluded an agreement
with the Applicants on 20 May 2010.’
[22] Primedia answered these
allegations by stating that in respect of all of the franchisees
mentioned above, except Mr Bardenker’s
Westerford Kwikspar in
Rondebosch, it had pre-existing contracts with which its
representatives were lawfully exercising Primedia’s
rights
under these agreements. The judge, however, rejected Primedia’s
answer on the basis that its contracts were, unlike
those of the
respondents, not exclusive. And he appeared to attach some
significance to the fact that some of the franchisees had
been
uncomfortable and confused for having to deal with Primedia’s
representatives while they also had exclusive agreements
with the
respondents.
[23] It is understandable that some of
the franchisees found it awkward in having to deal with two
competitors with whom they had
contractual arrangements. But the fact
that some of the franchisees were not sure how to manage their
relationship with the two
parties can hardly be laid at Primedia’s
door. There is no suggestion from any of them that Primedia’s
representatives
were doing anything other that enforcing the terms of
their contracts with the franchisees in question.
[24] I can see no reason why the fact
that these were not exclusive agreements had any bearing on
Primedia’s right to enforce
them. In two of the seven examples
of unlawful interference that the respondents mention –
Lakeside Spar and Kuilsrivier
– the franchisees specifically
say that they continued to collect their fees or rebates for
Primedia’s media installations
– obviously because of
their existing agreements with Primedia. In not one of the remaining
examples is there even a vague
suggestion that Primedia’s
representatives were attempting to induce any of the franchisees to
breach or to terminate their
contracts with the respondents
unlawfully. Nor is there evidence to suggest that any of the media
types that Primedia’s representatives
were marketing, selling
and installing were the same as those of the respondents.
[25] In the case of Mr Bardenker of
Westerford Kwikspar Rondebosch – the only instance where
Primedia does not appear to have
an agreement – he requested
Primedia’s representatives to remove their products from the
store. The judge considered
this to be a case of ‘clear
interference’. But I respectfully disagree. Mr Bardenker
does not say that the representatives
refused to remove their
products from the store or that they in any other way behaved in a
manner that suggested that they were
intentionally interfering with
his agreement with the respondents. And the papers come nowhere near
permitting any inference to
be drawn that this was the case.
[26] This brings me to the only
remaining relief that the respondents sought – that Primedia be
interdicted from making false
representations about the respondents.
The basis for this relief was the notice that Mr Bouwer distributed
to the Spar suppliers
on 19 August 2010. But once Primedia, two days
before the respondents had launched their application, and later
again in their
answering affidavit, had given an undertaking not to
disseminate false statements about the respondents, the respondents
could
have had no reasonable apprehension that Primedia would repeat
the statements – assuming that they were unlawful. An interdict
is not granted for past invasions of a right; it is concerned only
with future infringements,
3
and there was no evidence to suggest
that the respondents had a legitimate fear in this regard. There was
therefore no longer any
ground to interdict the further dissemination
of false representations. So the high court ought not to have granted
the respondents
this relief.
[27] To conclude, I stated at the
outset that the parties to the present dispute are competitors. To
succeed in its application
for final relief, the respondents had to
prove that Primedia was competing unlawfully with them. The interdict
could have been
granted only if the facts stated by Primedia in its
answering affidavit, together with the admitted facts in the
respondents’
affidavits, justified this finding.
[28] In all but one of the seven
examples that the respondents cited as evidence of unlawful
interference with their contractual
relationships with the
franchisees in question, Primedia asserted, as a fact, that they were
merely enforcing their pre-existing
contacts with those franchisees,
as they were entitled to do. That this may have caused some
discomfort and uneasiness among of
the franchisees does not mean that
Primedia was not entitled to enforce their contracts, and there was
no proper basis for the
high court to have rejected Primedia’s
claim that this is what it was doing. In the only case where Primedia
did not have
a pre-existing agreement – Westerford Kwikspar
Rondebosch – there was simply no evidence that Primedia
unlawfully interfered
with the respondents’ exclusive contract.
Finally, for the reason already given, there were no grounds to
interdict Primedia
from making false statements about the
respondents.
[29] It follows that the appeal must
succeed and the respondents must pay the costs of the appeal.
Primedia belatedly abandoned
its appeal against the dismissal of its
counter-application. So it will have to pay the costs of the appeal
in this regard. We
were concerned in this appeal only with the orders
at paras 3 and 5 of the order of the high court (which concerned the
relief
sought in the main application). It follows that those are the
only orders that fall to be set aside.
[30] The following order is made.
1. The appeal is upheld. Save as set
out in para 2, the respondents are ordered to pay the costs of the
appeal, including the costs
of two counsel.
2. The appellant is to pay the costs
of the appeal against the dismissal of its counter-application
including the costs of two counsel.
3. Paras 3 and 5 of the order of the
court a quo are set aside and the following order is substituted:
‘
The main
application is dismissed with costs, including the costs of two
counsel.’
____________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
For Appellant: A Gautschi SC (with him
L Hollander)
Instructed by:
J Sweidan Attorneys c/o Walkers Inc,
Cape Town Symington & De Kok, Bloemfontein
For Respondent: S Olivier SC (with him
P S van Zyl)
Instructed by:
Werksmans Attorneys, Cape Town
McIntyre & Van der Post,
Bloemfontein
1
Schultz
v Butt
1986 (3) SA 667
(A) at 678.
2
V
& A Waterfront Properties v Helicopter & Marine Services
2006 (1) SA 252
(SCA) paras 20-22.
3
National
Council of SPCA v Openshaw
[2008] ZASCA 78
;
2008
(5) SA 339
(SCA) para 20;
Simonlanga
& others v Masinga & others
1976
(4) SA 373
(W) at 375H-376A.