Summary of Judgment

Introduction

The matter was an urgent motion application in the Gauteng Division of the High Court, Pretoria, in which the applicants sought relief directed at the removal (ejectment) of the respondent from certain commercial premises used for the operation of a franchised restaurant business.

The first applicant, Hennies Sports Bar (Pty) Ltd, was described as the franchise owner of various restaurants and, on the facts before the court, also the leaseholder of the relevant premises. The second applicant, Concrete Keg and Co (Pty) Ltd, was the purchaser of the franchise business in question. The respondent, Wpret Enterprises (Pty) Ltd, was the existing operator of the business and occupied the premises as sublessee.

In procedural terms, the urgent ejectment application was opposed, and the respondent also delivered an urgent counter-application seeking, among other relief, the termination of the parties’ arrangements by court order, directions relating to occupation, and a mechanism for dealing with a disputed 40% share of the sale proceeds. On the day of the hearing, the respondent sought to withdraw the counter-application, but the applicants did not consent. The court therefore had to determine whether leave to withdraw should be granted, as well as urgency and the substantive relief.

The general subject matter of the dispute arose from a deteriorated franchise relationship, the parties’ inability to continue in that relationship, and the commercial consequences of the sale of the business to the second applicant, including the requirement that the first applicant provide vacant possession to give effect to the sale.

Material Facts

The court accepted that, during August 2020, the first applicant and the respondent concluded a franchise agreement. During or early 2021, a dispute arose between them which was referred to arbitration. In September 2021, the parties settled that dispute and concluded a settlement agreement.

A further dispute later developed. The first applicant alleged that the respondent breached aspects of the settlement arrangement, including a restraint of trade obligation. The respondent denied the alleged breaches and, in addition, raised complaints regarding the first applicant’s alleged failure to follow processes referred to as being contained in an Operating Manual. The court recorded that the business relationship between franchisor and franchisee had, on the first applicant’s version, been terminated either by lawful cancellation or by the conduct of the parties, and that the respondent did not wish to continue the relationship but asserted it could not “walk away” without financial security and without agreement on how termination would occur.

It was common cause on the papers that the respondent occupied the premises as a sublessee, and the respondent’s stance included that a sub-lease existed which, it contended, had not been validly cancelled. The settlement agreement was also said (on the respondent’s version) to contain an arrangement that the respondent’s input would be sought before formal offers were made to potential franchisees, which formed part of the respondent’s dissatisfaction with the subsequent sale process.

On 10 August 2023, the first applicant concluded a sale of business agreement with the second applicant, effective from 18 August 2023. Following this, the first applicant demanded that the respondent provide an undertaking to vacate by the effective date. On 11 August 2023, a further demand recorded, among other things, that the respondent had no valid right to occupy and that the first applicant had to provide possession to the second applicant on the effective date, failing which urgent proceedings would be brought.

The court recorded that the parties were, in substance, agreed that they must separate and that the premises should be vacated, although the respondent tied its willingness to vacate to a condition of payment. The court identified the principal live dispute as whether the respondent was entitled to 40% of the business sale proceeds, which the court treated as a dispute sounding in contract and requiring determination in subsequent proceedings.

The first applicant tendered a mechanism to allow separation and transfer to proceed, namely that 40% of the proceeds be held in trust pending resolution of the underlying dispute, and indicated agreement to refer the dispute to urgent arbitration.

Legal Issues

The court was required to determine three central questions.

First, the court had to decide whether to grant the respondent leave to withdraw its counter-application at the hearing stage. This question involved the exercise of a discretion, informed by considerations of procedural fairness and potential prejudice.

Second, the court had to decide whether the main dispute was sufficiently urgent to justify enrolment and hearing under the urgent court procedure. This was primarily an application of law to fact, including whether the applicants would obtain substantial redress in due course if the matter were not heard urgently, and whether commercial urgency was established.

Third, on the merits, the court had to decide what orders were necessary to give effect to possession and separation, including whether the respondent’s sub-lease should be terminated by court order to enable ejectment. This involved the application of established principles regarding possession and ejectment to the relationship between a leaseholder and a sublessee, together with an evaluative determination of a practical vacating date and the handling of the disputed portion of the sale proceeds pending later determination.

Court’s Reasoning

On the attempted withdrawal of the counter-application, the court approached the matter as discretionary. It identified two guiding principles. The first was the need to consider potential injustice to the other party if withdrawal were permitted at the stage sought. The second was a caution against forcing a litigant to conduct its case in a particular way. The court nevertheless emphasised that the counter-application was sought to be withdrawn at the last minute, and that this would cause prejudice because the applicants had prepared on the basis that the counter-application was part of the case to be met. On this footing, the court refused leave to withdraw.

On urgency, the court recorded that both parties appeared to accept that the matter was urgent and noted that commercial urgency can establish urgency. The court was satisfied that the sale of the business and the first applicant’s obligation to provide a vacant premise to the purchaser meant that, if the premises were not vacated, the applicants would not obtain substantial redress in due course. It therefore condoned non-compliance with the rules and allowed the matter to proceed as urgent insofar as the ejectment-related relief was concerned.

On the merits, the court reasoned from the characterisation of the parties’ rights in the premises. The first applicant was treated as the leaseholder, while the respondent was the sublessee. On this basis, the court held that any sublease had to be terminated by the court for ejectment to occur, and that once termination was ordered the first applicant would be entitled to possession. The court also made a pragmatic evaluative determination that a vacating date of 1 September 2023 would resolve difficulties regarding pro-rata reimbursements for rental and payment to suppliers.

The relief ultimately granted reflected the court’s approach to enabling the commercial separation to occur while preserving the parties’ rights to have their contractual dispute—particularly the claim to 40% of the sale proceeds—determined in subsequent court, arbitration, or agreement. The court therefore directed that the disputed amount be paid into the respondent’s attorneys’ trust account and held there pending later determination, and it reserved the parties’ broader rights to institute action in relation to the agreements governing their relationship.

Outcome and Relief

The court granted condonation for non-compliance with the rules and heard the matter as urgent in terms of Rule 6(12)(a) of the Uniform Rules of Court.

The court refused the respondent leave to withdraw the counter-application and, “in terms of the urgent counter-application”, ordered that the respondent’s sub-lease agreement was terminated, that the respondent vacate the premises on or before 1 September 2023, and that it may remove its personal belongings and must ensure a proper handover to the second applicant.

The court further ordered that the first applicant would have no claim against the respondent for royalties, franchise fees, rent, or any other right or interest that might have accrued by virtue of the respondent’s continued occupation of the premises from the date of vacating until 31 October 2023. It directed that the respondent’s claimed 40% of the sale proceeds be paid into the respondent attorneys’ trust account (with proof of payment to be made available before the respondent vacates), to be held in trust pending determination by a further court order, arbitration, or agreement.

The court reserved the parties’ rights to institute action regarding the franchise agreement, settlement agreement, and interim arrangement, and it reserved costs, including the costs of two counsel, for determination in later court or arbitration proceedings.

Cases Cited

Pearson and Hutton NNO v Hitzeroth and Others 1967 (3) SA 591 (ECD).

Karroo Meat Exchange Ltd v Mtwazi 1967 (3) SA 356 (CPD).

Twentieth Century Fox Film Corporation v Anthony Black Films (Pty) Ltd 1982 (3) SA 582 (W) at 586.

Chetty v Naidoo 1974 (3) SA 13 (A).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

Uniform Rules of Court, Rule 6(12)(a).

Held

The court held that the respondent was not entitled to withdraw its counter-application at the hearing stage because doing so would cause injustice to the applicants who had prepared to meet it, and leave to withdraw was therefore refused.

The court held that the matter was sufficiently urgent, including on the basis of commercial urgency flowing from the concluded sale of the business and the need to provide vacant possession, and it condoned non-compliance with the rules under Rule 6(12)(a).

The court held that termination of the respondent’s sub-lease was necessary to enable ejectment and ordered termination, vacating by a specified date, and a trust mechanism to hold the disputed 40% pending later adjudication, while reserving costs and reserving the parties’ rights to pursue further proceedings concerning the governing agreements.

LEGAL PRINCIPLES

The judgment applied the principle that a court retains a discretion whether to permit a party to withdraw proceedings, and that this discretion is informed by the avoidance of injustice or prejudice to the opposing party, while also recognising that a court should generally be slow to compel a litigant to prosecute a case in a particular procedural form.

The judgment applied the principle that commercial urgency may justify urgent enrolment, and that urgency turns materially on whether the applicant will be able to obtain substantial redress in due course if the matter is not heard urgently.

In relation to ejectment and rights of occupation, the judgment applied the principle that where a party’s occupation derives from a sublease, the termination of that sublease (where required) is a necessary step to confer a right to possession upon the party seeking ejectment, and that once the occupational entitlement is terminated, the party with the superior right is entitled to possession.

The judgment further reflected a practical, case-management approach to urgent commercial disputes by crafting interim protective measures—such as directing payment of a contested amount into a trust account—to facilitate immediate performance (vacation and handover) while preserving the parties’ rights to have the underlying contractual dispute determined in subsequent proceedings.