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[2022] ZAKZPHC 29
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Spar Group Limited and Others v Twelve Gods Supermarket (Pty) Ltd and Others (AR31/2021 and AR32/2021) [2022] ZAKZPHC 29 (7 July 2022)

FLYNOTES:
CONTRACT
– HEARING BEFORE TERMINATION
Contract
– Membership of Spar Guild – Memorandum of
Incorporation – Termination of membership –

Requirement and nature of hearing before termination –
Natural justice – Whether members repudiated agreement –

Unilateral amendment of terms of credit – Arbitrio boni
viri.
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Reportable
CASE
NOs: AR 31/2021 and AR 32/2021
In
the matter between: -
THE
SPAR GROUP LIMITED
First
Appellant
THE
SPAR GUILD OF SOUTHERN
AFRICA
NPC
Second
Appellant
(Registration
No. 1962/004186/08)
SPAR
SOUTH AFRICA (PTY) LTD
Third
Appellant
and
TWELVE
GODS SUPERMARKET (PTY) LTD
First
Respondent
MONOTHENDRE
TRADING (PTY) LTD
Second Respondent
VAMVAKOU
SUPERMARKET (PTY) LTD
Third Respondent
TRIGONA
SUPERMARKET
(PTY)
LTD
Fourth Respondent
ELENA
SUPERMARKET (PTY) LTD
Fifth Respondent
EUROTAS
(PTY) LTD
Sixth Respondent
MYSTRA
(PTY) LTD
Seventh Respondent
TAYEGATOS
SUPERMARKET (PTY) LTD
Eighth
Respondent
VRESTHENA(PTY)LTD
Ninth Respondent
MELISANDRE
TRADING (PTY) LTD
Tenth Respondent
ONEIROI
(PTY) LTD
Eleventh Respondent
PARNONA
(PTY) LTD
Twelfth Respondent
ZANELAINVESTMENTS(PTY)LTD
Thirteenth Respondent
KLEOMENIS
GIANNACOPOULOS
Fourteenth Respondent
CHRISTOS
GIANNACOPOULOS
Fifteenth Respondent
YIANNI
GIANNACOPOULOS
Sixteenth Respondent
HARALAMBOUS
GIANNACOPOULOS
Seventeenth
Respondent
This
judgment was handed down electronically by transmission to the
parties' representatives by email. The date and time for hand
down is
deemed to be 13h00 on 7 July 2022
ORDER
The
following order shall issue:
The
appeal against the orders of Barnard AJ issued on 17 July 2020 in
Case Number 8280/19P and Case Number 9215/19P is dismissed
with
costs, such costs to include costs of all senior and junior counsel,
where so employed.
JUDGMENT
Delivered
7 July 2022
Moodley
J (Hadebe and Bezuidenhout JJ concurring)
Introduction
[1)
This
is
an
appeal
against
the
orders
in
two
related
applications
under
case
numbers 8280/19P
('the
termination
application')
and
9215/19P
('the drop-shipment application'). Both applications were brought by
the respondents in this appeal against the appellants,
and in the
termination application, the appellants and twenty two other parties
were cited as respondents.
[1]
Although
not formally consolidated, the two applications were heard together
by Barnard AJ because the parties were effectively
the same and the
issues for determination were interrelated. The issues arose from the
dispute between the parties about the terms
and conditions which
regulated their relationship and the respondents' membership of the
Spar Guild.
[2]
In the termination application, the
issue was whether the appellants had validly terminated the
membership of the respondents from
the Spar Guild in 2019 and/or
2020, and whether the credit terms of the Spar Group with the
respondents, in respect of the time
allowed for repayment and the
quantity they could purchase, were validly amended in accordance with
the terms of the approved credit
facilities. In the drop­
shipment application, the issue was whether the imposition of limits
on the quantity of goods the
respondents could purchase from the Spar
Group and its drop-shipment suppliers was valid and reasonable and in
accordance with
the approved credit application.
[3]
Judgments
in both applications were delivered on 17 July 2020. In his judgment
in the termination application, Barnard AJ found
that the
terminations in 2019 and 2020 of the membership of the respondents
from the Spar Guild were invalid because there was
an agreement that
the respondents would be afforded a hearing prior to a decision being
made about whether the respondents' membership
of the Guild should be
terminated. He held that it was in fact 'the Guild that chose to move
outside the boundaries
of
the MOI when it reached an agreement with the Applicants'.
[2]
Barnard
AJ rejected the averment that the respondents
had
repudiated the agreement by their conduct and in particular, through
their demands in the letter dated 17 September 2019 from
their
attorney to the Chairman of the Spar Guild. Having applied the legal
test for repudiation, he found that the respondents'
conduct and the
impugned letter did
not
constitute repudiation of the agreement to participate in
the
hearing prior to any decision about termination. He also noted that
SPAR did not communicate its acceptance of the alleged repudiation,

but led the respondents to believe the hearing would proceed in due
course.
[4]
Barnard AJ held that the 2020
termination was also invalid because the agreement to hold a hearing
at which the respondents would
be allowed to make representations,
also rendered invalid any termination based on the relevant
termination clauses in the SPAR
Guild's Memorandum of Incorporation
('MOI'), specifically clause 4.10(2)(a)(ii), and without a hearing.
Therefore, SPAR's attempt
to rely on a ground for termination
separate from those in the 2019 notices, did not avail them. He held
further that, pursuant
to a proper interpretation of the MOI, even if
there was no binding independent agreement to convene a hearing, SPAR
was required
to afford the respondents an opportunity to make
representations prior to termination, regardless of the grounds for
termination,
which SPAR failed to do.
[5]
In respect of the unilateral amendment
to the terms of credit granted to the respondents, Barnard AJ found
that, despite the provisions
of clause 5 of the credit agreement
allowing 'Spar to amend the credit terms if need be', the amendments
were not done in good
faith and were unfair for lack of consultation
with the affected retailer members. Consequently, he issued the
following order:
'(a)
That
the decisions and notices of termination
(that
is the 2019 notices as well as the 2020 notices)
of
the First to Thirteenth Applicants retailer memberships
of
the Second Respondent
[3]
be and
is hereby set aside.
(b)
That
the decision by the First Respondent
[4]
to vary the credit facilities in terms of
clause
5
of
the standard terms of the credit application in respect of the First
to Thirteenth Applicants taken on the 23
rd
day of October 2019 be set aside.
(c)
That
the First, the Second and the Twenty Fifth Respondent,
[5]
jointly
and severally the one paying the other to be absolved are ordered to
pay the Applicants' costs -
such
costs to include the costs of two counsel.'
[6]
In
his judgment in the drop-shipment
application,
the learned judge determined that the limitation on the quantity of
drop-shipment supplies which the respondents could
order, imposed by
the SPAR Group and /or SPAR SA from about 29 October 2019 "in
the context the termination of the membership"
[6]
of
the respondents,
similarly
lacked honesty and good faith. He held that the respondents were
entitled to purchase goods sufficient for their usual
trade
requirements, and 'that in any event, clause 5 of the credit
agreement afforded a discretion in favour of SPAR only in relation
to
the time period for payment and not in relation to the quantity'
[7]
purchased by the respondents. He therefore issued a declaratory order
that the imposition of restrictions by the SPAR Group and
/or SPAR SA
on the quantity of drop-shipment supplies to the 5th to the 13th
applicants in case 9215/19P was unlawful and invalid
and ordered
costs against the respondents.
[7]
The appeal to this Full Court by the
first, second and twenty fifth respondents in the termination
application, who are also the
three respondents in the drop-shipment
application, lies with the leave of Barnard AJ against the following
three orders:
(a)
the order setting aside the second
appellant's ("SPAR Guild") notices (of 2019 and 2020)
terminating the first to thirteenth
respondents' ("Giannacopoulos
Respondents") membership of the SPAR Guild;
(b)
the order setting aside the first appellant's ("SPAR Group")
decision of 23October 2019 to vary the terms
of the Giannacopoulos
Respondents' credit facilities; and
(c)
the order declaring invalid the decisions by the SPAR Group and /or
SPAR SA to impose restrictions on the quantity
of the Giannacopoulos
Respondents' drop-shipment supplies.
The
parties and their relationship
[8]
The brand name 'SPAR' is a familiar one,
as stores trading under the name 'SPAR' are located throughout South
Africa, in neighbouring
territories and have an international
footprint. The appellants, (collectively referred to as 'SPAR' in
this judgment)
are
the
three
entities
that
constitute
the
trading
model
and
business operations of SPAR in Southern
Africa. The first appellant, the SPAR Group Limited ('SPAR Group'),
is a wholesaler.
Its
primary business is described as 'the acquisition of goods at best
possible prices, warehousing and exclusive distribution of
those
goods to the retailer members of the Second Appellant ("SPAR
Guild" or "Guild") at competitive wholesale
prices.'
It grants credit facilities to members of the Guild on terms and
conditions as set out in approved credit applications.
Security for
the indebtedness of the retailer members to the SPAR Group is
required in the form of notarial bonds and suretyships.
The SPAR
Group holds the leases or sub-leases for the business premises of
retailer members; alternatively, retailer members are
required to
cede lease agreements for their business premises to the SPAR Group.
[9]
The SPAR Guild is a non-profit company
formed for the purposes of promoting, implementing and regulating
SPAR's system of voluntary
group trading by wholesalers ie the SPAR
distribution centres in the various regions, and independent store
retailers in South
Africa and neighbouring territories as determined
by SPAR SA. The MOI of the Guild provides that its membership is
constituted
by voting and non-voting members, distribution centre
members and the independent store operators ('retailer members'). The
voting
members are the directors of the Guild. The directors or a
regional committee of the Guild are entitled to approve or not
approve
any application for membership (clause 4.3 of the MOI) and to
terminate the membership of a retailer member (clause 4.10 of the

MOI).
[10]
The Guild prescribes regulations and obligations in regard to the
implementation of the voluntary group trading system which
is binding
upon its members. It has the power to implement and enforce the
agreements which members enter into when they are granted
the right
to participate in the voluntary group trading system. Disputes are
referred to the Guild Board of Directors, which is
constituted by ten
directors who are distribution centre members appointed by SPAR SA
and ten directors who are retailer members
appointed by the National
Council.
[11]
The third appellant SPAR South Africa
(Pty) Ltd ("Spar SA"), is a wholly owned subsidiary of the
SPAR Group and holds
the rights to the SPAR name and identity. Spar
SA has granted the right to use the SPAR name and trademarks to the
Guild in terms
of a registered
User
Agreement.
Under
that agreement,
each
retailer member of the Guild may use the SPAR name and trademarks as
long as it remains a member of the Guild.
[12]
The respondents in this appeal, who were
the applicants before the court a quo, are retailer members of the
Guild who control 45
stores trading under the SPAR name. The
relationship between the respondents and SPAR which spans some 21
years, was established
in a Membership Agreement between the
respondents and the Guild, and is subject to the MOI. The Respondents
have a common shareholder
in the Giannacopoulos Family Trust. The
Fifteenth, Sixteenth and Seventeenth
Respondents are the three Giannacopoulos
brothers ('Chris', 'Yianni' and 'Harry' respectively, collectively
referred to as 'the
Giannacopoulos brothers'), who have been the
principal persons involved in the respondents' interactions with SPAR
Factual
matrix and litigation history
[13]
In the light of the arguments advanced
on behalf of the parties, it appears prudent to set out the facts in
the interaction between
the
parties which are relevant to the issues in this appeal. The conflict
and disputes between the parties which culminated
in the applications before the court a
quo, have their genesis as far back as 2016. In brief, the appellants
alleged inter alia
that the respondents, in breach of the MOI, had
violated several labour laws, that they had attempted to bypass the
SPAR trade
model and secure direct supply, that they were disloyal as
they were involved in the operation of a store or stores in
competition
with SPAR, and that the conduct of Chris, specifically,
had brought the SPAR brand into disrepute.
[14]
All these alleged transgressions were
disputed by the respondents, who attributed the attempts to discredit
Chris to the acrimony
between Chris and two directors of the Guild
and Spar, Messrs Borrageiro and Botten. The respondents alleged that
that acrimony
arose because Chris sourced warehouse products from
alternative suppliers instead of the warehouse suppliers of SPAR,
which resulted
in SPAR SA losing revenue in the form of rebates from
its warehouse suppliers
and
not meeting its targets, and which in turn impacted adversely on the
performance bonuses of Messrs Borrageiro and Botten.
[15]
SPAR held a meeting with the
Giannacopoulos brothers on 29 October 2018 to discuss the issues
'which were putting their Spar membership
at risk', as recorded by
SPAR in a letter dated 31 October 2018. The compromise solution
proposed by SPAR included the exit by
Chris from any involvement
in fhe SPAR stores. In a letter dated 15
November 2018 the SPAR Guild reiterated the aforesaid proposals to
the Giannacopoulos brothers
and indicated that they would 'be given
an opportunity to make representation to the National Guild at the
meeting which will be
held on the 28
th
of November 2018.'
[16]
The minutes of the meeting of the SPAR
guild held on 28 November 2018 reflect that the Giannacopoulos
brothers attended the meeting.
Chris made a presentation, and
provided a file of documents relating to the allegations of non­
compliance by the respondents
with the labour laws. After being
questioned, the Giannacopoulos brothers were requested to leave the
meeting. Thereafter a decision
was taken by the directors of the
National Guild to the effect that Chris would be required to exit the
Giannacopoulos Group involved
with SPAR with effect from 3 January
2019 for a period of 3 years, he could not be involved in the
ownership, management or control
of any competing supermarket
business, and the Giannacopoulos family would have to dispose of
their interest in the current 'competing'
stores by 1 May 2019. These
conditions together with notification of a prescribed HR audit in all
the respondent SPAR Stores were
conveyed in a letter dated 3 December
2018 from the Chairman of the Guild, Mr
Roelf Venter ('Mr Venter').
[17]
The respondents' attorney, Mr S Shoot of
Fluxmans Attorneys, responded to the allegations against Chris,
describing them as 'spurious
and false', and the Guild's decision in
a 23-page letter dated 28 December 2018, pointing out in particular
that the Giannacopoulos
brothers were not give the opportunity
to make representations to the board of
directors at the meeting and that the decision and 'order' were
'procedurally and substantively
unfair
and unlawful.'
[18]
On 21 January 2019, Mr Venter responded
that the SPAR Guild had no intention of enforcing the decision which
he had conveyed in
his letter of 3 December 2018, and that he had
conveyed the compromise offered by the Guild in its letter dated 15
November
2018.
The
compromise
had
been
endorsed
by
the
National
Guild Directors on 28 November 2018, and
open for acceptance by the Giannacopoulos group. However, as it was
clear that the proposal
was rejected as unacceptable to them, the
Guild sought compliance with the undertakings given on behalf of the
Giannacopoulos Group
by Harry on 28 and 30 November 2018.
Mr Venter also defended the legitimacy
of the SPAR voluntary trading system and denied the allegations of a
vendetta against Chris
and/or the Giannacopoulos group.
[19]
The minutes of a further meeting of the
board of directors of the SPAR Guild, held on 20 February 2019,
reflect that The
chairman
noted that in terms of the Guild's MOI, the board could not legally
give Chris Giannacopoulos notice to exit his stores
but that they
could terminate membership of entities forming part of the
Giannacopoulos Group' on three grounds. The Board agreed
to the
proposal by management of a compromise to be offered to the
Giannacopoulos Group and further that should the compromise
be
rejected or breached (if accepted), a hearing would take place to
determine whether to terminate membership.
[20]
The compromise was rejected.
Subsequently, in a letter dated 10 April 2019 Mr Venter advised
Chris, Yianni and Harry that the SPAR
Guild had 'resolved that the
hearing to determine whether the members forming part of the
Giannacopoulos Group membership should
be terminated will be held on
the 2nd or 3rd May 2019.' He advised further that:
'The
termination is in terms of the clauses 4.10(1), 4.10(2), 4.10(3) and
4.10(4) of the
Memorandum
of Incorporation
of the SPAR Guild.
You
will be provided with the details of the breaches
of the said clauses in due course. You
will be entitled to attend and make verbal representations.'
[21]
The hearing referred to did not take
place on the proposed dates and was rescheduled for 29 May 2019.
However, Harry and Yianni
were overseas on 29 May 2019. In a letter
dated 31 July 2019 to Fluxmans, Mr Venter stated:
'3.
...More accurately:
(a)
the matter of your client's membership
and the termination or continuation thereof
was not pre-determined and the convening
of a hearing, where evidence can be presented and submissions made,
would enable an
informed
decision to
be
taken;...'
[22]
After confirming that the adjourned
hearing would take place on 1 and 2 October 2019 and dealing with the
queries in respect of
various documents, Mr Venter wrote:
'15.
You are again reminded that the hearing
will take proceed on 1 and 2 October 2019. No further request for
alternate dates will be
entertained.
16.
Please advise which family members will
be representing the Group at the hearing.'
On
6 September 2019, Mr Venter confirmed to Mr Shoot that:
•
...
a
resolution
was passed by The SPAR Guild Directors that a hearing should take
place to consider whether your client's membership
should be
terminated.
In
my capacity as Guild Chairman, I then determined which of The Guild
Directors were available at the time set for the hearing,
and they
were accordingly requested to sit on the panel.'
Together
with the latter Mr Venter enclosed 'a few additional documents which
will form part of files 1 and 4' and confirmed that
the index to the
files 'will be forwarded to your shortly.'
[23]
On 17 September 2019, Mr Shoot addressed
a 23-page letter to Mr Venter, the purpose of which, as set out in
paragraph 10 thereof
was 'to give you
advance
prior
notice
that
"submissions11
of a complex legal nature
will be made by our clients duly
represented on 1 and 2 October 2019.' Mr Shoot then elaborated on the
preliminary submissions to
be made at the hearing, which included:
(a)
the Guild had not resolved to conduct
the proposed hearing to determine whether the 41 businesses of the
respondents should be terminated
on the basis of the termination
charge sheets, which had not even been considered by the Guild;
(b)
the Guild had not duly determined that a
panel (including persons with perceived bias), conduct the hearing
and determine whether
to terminate the membership of the Guild of any
of the respondents' businesses. It was not legally competent for a
panel (identified
by unspecified
persons), as opposed to an unbiased duly
constituted quorum of directors of the Guild, to make such
determination;
and
(c)
the
SPAR
Group
was
precluded
from
presenting
evidence
or
making
any
submissions at the hearing.
[24]
Mr Shoot listed ten further submissions,
and recorded that the respondents would not however be limited to the
submissions listed.
He then projected that the presentation of the
preliminary submissions would take the duration of the two days
allocated ie 1 and
2 October 2019, where after, depending on the
outcome, the merits could be heard at a further hearing. Mr Shoot
also set out several
proposals on the hearing of the merits, intended
to ensure procedural and substantive fairness in the determination of
thereof,
and requested further particulars to the allegations set out
in the 'Second ground for termination' received from Mr Venter. In

conclusion he confirmed that the respondents' legal representatives
would be making the submissions at the hearing and queried
whether
recording facilities would be available. He also requested the
outstanding documentation
and
information in the interim.
[25]
A response to this letter was sent by Mr
O'Connor on 19 September 2019, who advised that he was replying on
behalf of Mr Venter
who was overseas. Mr O'Connor stated that:
The
contents of your letter have been considered and as a result the
hearing
will
not proceed on the 1
and
2 October 2019.
We
will address you further in due course.'
Two
letters from Mr Shoot dated 20 September 2019 and 15 October 2019
respectively elicited no further response about the hearing
from Mr
Venter or the SPAR Guild.
[26]
On 17 October 2019 the SPAR Guild
delivered a notice of termination to each of the retail member
respondents advising that it had
been resolved at a directors'
meeting held on 15 October 2019 to terminate its membership of the
SPAR Guild on one (1) calendar
months' notice. The notice stated that
'the grounds for termination are based on the provisions of:
'1.
clause 4.10.3 of the Guild's Memorandum of Incorporation in that the
Retail Members competed with the business
of other retail members in
respect of their acquisition of two Food Lovers stores and an OK
Foods; and
2.
clause 4.10.4 of the Guild's Memorandum
of Incorporation in that the Retail
Members brought the SPAR brand into dispute in:
a.
the dealings with suppliers;
b.
failing to comply with the provisions of
the Labour Relations
Act;
and
c.
dealing with expired goods.'
[27]
It is common cause that at the directors
meeting which took place on 15 October 2019, various procedural
measures aligned with the
proposals of Mr Shoot, were implemented and
eight witnesses testified. However, the respondents were not notified
of the meeting
nor were they invited to make representations at the
meeting, albeit they were impacted by the decision taken by the
directors.
[28]
However prior to the service of the
notices of termination, on 16 October 2019, the appellants launched
two ex parte applications
in Pretoria and in Pietermaritzburg, for
urgent relief to enable them to perfect their general notarial bonds
and preserve their
security, which was precipitated by the decision
to terminate. Having obtained interim relief in both courts on the
basis that
the respondents' membership of the Guild had been
terminated, the orders were executed over the next two days and the
employees
of SPAR took over several of the respondent stores in
Pretoria and KwaZulu-Natal. On 18 October 2019 the relief obtained ex
parte
was set aside at the instance of the respondents in both
divisions, the application was dismissed by Kollapen J in Pretoria
and
the status quo ante in respect of their affected stores was
restored to the respondents.
[29]
The
standard credit facilities agreement which regulates the supply of
products to the retail members by the SPAR Group,
provides
that,
in
respect of direct purchases from the distribution centres, payment is
due within 19 days of a weekly statement. In respect of

"drop-shipment"
purchases
ie purchases by retail members from third party suppliers who are
paid by the SPAR Group which then invoices the retail
member -
payment is due 31 days from the weekly statement. On 25 October
2019
[8]
,
a
few days after
the
termination
decision,
the
SPAR
Group
amended
the
terms
of
the
credit
facilities agreement by a reduction of the payment periods from 19
days to 7 days and 31 days to 7 days.
[9]
[30]
These actions by the appellants
culminated in an urgent application by the respondents for the
restoration of their status quo as
at 14 October 2019, and
concomitant relief, suspending the notices of termination of the
respondents' retailer memberships of the
Guild and the variation of
the terms of the credit afforded to the respondents by
the SPAR Group alternatively SPAR SA
('the termination application').
[31)
About the time when SPAR altered the respondents' credit terms, it
also issued letters to the major drop-shipment
suppliers in which it
placed purchase limits on certain of the respondent stores. Attempts
to resolve the limitations imposed on
the quantity and value of goods
ordered by the respondents failed and at the beginning of December
2019, the respondents launched
the urgent drop-shipment application
seeking an interim order interdicting the SPAR Group and or SPAR SA
from implementing any
restrictions and limitations on the quantity of
drop-shipment supplies to the respondents, pending the determination
of the final
relief sought viz a declaratory order that the
imposition of the restriction on the quantity of drop-shipment
supplies was unlawful
and invalid. On 11 December 2019, the interim
relief in the form of undertakings by the respondents was ordered,
pending determination
of the final relief sought.
[32]
Both applications were opposed by the
appellants. During the course of the protracted hearing, the
appellants issued a second set
of termination notices to the
respondents
on
19 March 2020, and filed supplementary affidavits explaining why the
notices were dispositive
of
the matter. The matter was however determined in favour of the
respondents
by
Barnard AJ.
The
termination application: the validity of the notices of termination
[33]
The main thrust of the argument advanced
by the appellants is that the contractual relationship between the
parties rendered the
process followed and decision by the directors
to terminate the membership of the respondents from the Guild and
notices subsequently
served on them lawful and valid. They submitted
that SPAR (and the Guild specifically) as a private entity is in the
position of
a private owner and can therefore decide
who it wishes to do business with,
provided that it does not break its contracts with the retailer
members. The appellants contended
that they acted in accordance
with what clause 4.10(1) of the MOI
required them to afford the respondents: a reasonable opportunity to
make representations. They
emphasised that there is nothing in the
MOI that remotely suggests that by affording a retailer member the
opportunity of 'a hearing',
the Guild was extending any invitation
other than that contemplated by clause 4.10(1).
[34]
The appellants submitted further that
clause 4.10(1) envisages an informal, expedited process because the
Guild is a voluntary organisation
where
membership is a privilege and a member's conduct is peer-reviewed,
and there are no express provisions dealing with procedural
or formal
requirements for a 'hearing. Therefore, all that was required, and in
the circumstances
all
that was offered, was a 'hearing' which would facilitate a reasonable
opportunity for the respondents
to
make representations in relation to the grounds of termination that
the directors would be considering. Their submission is consistent

with the enquiry as to which of the family members would represent
the respondents at the hearing.
[35]
The appellants argued further that the
procedure to be followed is at the discretion of the directors as
private associations may
hold domestic disciplinary or other such
proceedings according to their own rules. They pointed out that the
principles of natural
justice do not require a domestic tribunal to
follow the procedures and to apply the technical rules of evidence
observed in a
court of law, provided that the person charged has the
opportunity to deal with the merits of the charges. They expressed
the view
that the admission of lawyers might hamper rather than
enhance the conduct of domestic disciplinary proceedings and was in
any
event not compulsory as the proceedings
were not a civil trial or quasi-judicial
hearing. They contended that the insistence on such formalities and
procedures such as
the observation
of
rules of evidence and the attendance of lawyers would stultify the
process and render the directors' powers to terminate membership

nugatory.
[36]
Mr
Subel
SC
who
presented
the
argument on this ground of appeal on behalf of the appellants,
submitted that the court a quo had taken too narrow an approach
in
its assessment of the two termination notices issued by SPAR. Mr
Subel
addressed
the second notice first, which he contended was dispositive of the
issue of the termination. He submitted that clause
4.10(2)(a) of the
MOI entrenched the right to disassociate or freedom of
disassociation, which was an economically sensible approach
and made
commercial sense in that a member could not be locked into a
contractual, voluntary trading model. He submitted that consequently,

on any construction of the words, the plain meaning of clause
4.10(2)(a)(ii) was that the directors had the right to give written

notice of termination of membership to a retailer member without a
reason. In this case, there was in any event a fundamentally

incompatible relationship between SPAR and the retailer member
respondents. Mr
Subel
submitted
that the court a quo had therefore
erred in reading into this clause that
the respondents had to be given reasonable opportunity to make
representations, as it was
never intended that such a requirement be
included in this sub-clause. He added that it was not necessary for a
contextual interpretation
as the clear wording of the clause could
not be overtaken by context.
[37]
In respect of the first notice of
termination and clause 4.10(1), Mr
Subel
pointed out that there was no
provision in the MOI for a 'hearing' as demanded by the respondents.
He reiterated that all that the
respondents were entitled to was a
reasonable opportunity to make representations, which the court a qua
conflated with an agreement
to convene a hearing. He contended that
the respondents had been afforded many opportunities to make
representations between November
2018 and September 2019, but chose
not to co-operate or even attempt to make representations. Instead
they attempted to subvert
the process decided on by SPAR. Mr
Subel
stated that this was evident in the
demands and challenges to the validity of the composition of the
panel and of the process, and
deferment of representations and
consideration of the merits contained in Mr Shoot's letter of 17
September 2019.
He
argued that the respondents
evinced
this lack of cooperation despite the fact that they had accepted the
SPAR business model and subscribed to the MOI. He added
that to
aggravate the appellants' umbrage, Mr Shoot stated that the
appellants were to be excluded from making submissions at the

hearing. Mr
Subel
argued
that in the premises, it was not necessary for the appellants to
establish repudiation; if the court were to find that the
respondents
had failed to establish that they were not given a reasonable
opportunity to make representations, then their application
had to
fail.
[38]
The
appellants therefore deny that there was an agreement, outside the
constraints of the contractual relationships established
through the
membership agreements and specifically the MOI, that the respondents
would be afforded a hearing, which went beyond
the ambit of 'a
reasonable opportunity to make representations.' Nevertheless they
submit that 'the High Court ought to have found
that the
Giannacopoulos Respondents eschewed the fair opportunity given to
them to make representations
or
have
a
hearing..·.
[10]
(my
emphasis)- which contrary to their submissions, draws the very
distinction they disclaim. Further, the appellants admitted in
their
preliminary answering affidavit:
'93.
It is so that the Guild intended to convene a hearing to allow the
First to Thirteenth Applicants to make representations
as to why
their membership in the Guild should not be terminated.'
[39]
According to the argument advanced on
appeal, the appellants claim that they did not rely on a repudiation
of the agreement by the respondents to
hold a hearing. This would, as pointed out by the respondents, have
necessarily entailed
the acknowledgement of an agreement
between
the
parties
to
hold a hearing, as found by Barnard AJ. Instead the appellants submit
that they relied on the respondents' repudiation of the
membership
agreements to which they voluntarily bound themselves. This is
however not consistent with their affidavits in which
the appellants
aver that the conduct of the respondents in not attending the
hearings previously arranged and the letter of 17
September 2019
constituted a repudiation by the respondents of their agreement to
attend a hearing.
[40]
The
appellants also submit that the repudiation is further evident in the
papers filed by the respondents in these proceedings.
They submit
that the attack by the respondents on 'the lawfulness of various
contractual provisions of the membership agreements
that concern the
termination of membership', and the 'spurious constitutional law,
competition law and company law arguments aimed
at bringing down the
entire SPAR structure (which they ironically seek to remain part
of)'... 'evinces an unequivocal intention
on the part of the
Giannacopoulos Respondents
no
longer to be bound to the provisions of the membership agreements and
constitutes a repudiation of those agreements.'
[11]
As
these papers were delivered post the decision to terminate the
membership of the respondents, the reliance of the appellants
to
sustain the allegation of repudiation by the respondents which
rendered the termination
notices
of 17 October 2019 valid and lawful, is unsustainable.
[41]
In his judgment Barnard AJ properly noted that in the proceedings
before him, the appellants
complained that the respondents repudiated
the agreement by way of their conduct and, in particular, in the
'demands' in their
letter of 17 September 2019. He concluded that the
inferences SPAR had sought to draw from that letter were however
unjustified,
and that it was in fact proper for the litigant's
attorney to bring to the attention of the other party before the
hearing commences,
the issues to be raised, especially points of law.
He reasoned further that the panel of directors could have determined
if there
was any merit in the legal issues as well as the submissions
about the nature and fairness of the hearing; and if they found no

merit in the issues raised, they could have directed that the hearing
continue.
[42]
The appellants' averment of repudiation must be considered firstly in
the context of the correspondence
emanating from the appellants and
the responses from the respondents. As the respondents have correctly
pointed out, on 20 February
2019 the Guild's Board resolved formally
to hold a hearing prior to terminating the respondents' membership
because 'The right
procedure needed to be followed going forward
should the board decide to terminate membership, so that if the
matter went legal,
SPAR would be in a position to show that the
correct procedure was followed in terminating their membership.' The
Board resolved
further that if it could not reach a compromise with
the Giannacopoulos Group then a hearing would take place to determine
whether
to terminate membership. The Guild communicated its intention
to convene a hearing to the respondents in its letter of 10 April

2019, in which it stated that SPAR had 'resolved' that there would be
a 'hearing' to determine whether the respondents' membership
would be
terminated which the respondents would be 'entitled to attend and
make verbal representations.' The letter further stated
that the
termination was in terms of clauses 4.10(1), 4.10(2), 4.10(3) and
4.10(4) of the MOL Consequently, the understanding by
the respondents
that SPAR undertook to first hold a hearing if it intended to
terminate membership pursuant to any of these clauses,
cannot be
impugned.
[43]
It is therefore pertinent, as pointed
out by the respondents, that Mr Venter as representative of the
Guild, specifically articulated
that the respondents could "attend
and make representations" at the hearing, and further confirmed
the existence of this
agreement in his letter to the respondents on
31 July 2019, by recording that the Guild would not pre-determine
whether
to
terminate
their
membership, but would convene a hearing at which evidence could be
presented and submissions made, which would enable an informed

decision to be taken by the Guild. Mr Venter noted further that the
hearing would proceed on 1 and 2 October 2019. On 6 September
2019,
he advised the respondents
that
the directors
resolved
that a hearing should take place in
order to determine whether the respondents' membership should be
terminated, and a panel of
directors had been finalised, and enclosed
further documents to be utilised at the hearing.
[44]
There is nothing in any of these
communications that indicated that the respondents had conducted
themselves in a manner from which
it could be inferred that they had
not availed themselves of the opportunity to make representations, or
that they were intent
upon not availing themselves
of the opportunity to respond to the
charges against them at the hearing convened by the Guild. Once the
Guild resolved to hold
a hearing in February 2019, at no stage were
the respondents requested to make representations outside the hearing
to be convened,
nor was it necessary for them to do so. The
respondents properly point out that SPAR's claim that the respondents
had an opportunity
to make representations in November 2018 is
illogical and incorrect because the events appearing in the charge
sheet had not all
arisen by that stage and because even at that
stage, SPAR did not give them an opportunity to be heard.
[45]
It is also pertinent that in preparation
for the hearing, the Guild sent the respondents charge sheets and
lever arch files of 'evidence'
which it would rely on at the hearing.
It is inconceivable that in this context, as created by the Guild
itself, a fair hearing
would exclude the respondents from responding
to the allegations against them as set out in the charge sheets and
supported by
the 'evidence' presented to them. The respondents
contend that their subsequent request for fairness in the proceedings
and in
the leading of evidence at the hearing was consistent with the
information about intended proceedings
and material presented to them by the
Guild. It is therefore unsurprising that the court a quo concluded
that the respondents' attorney
was correct in giving notice to the
Guild
of
the issues that were to be raised in the interests of achieving a
fair and properly ventilation of the respondents' submissions
in
respect of the charges against them. Similarly, it found no merit in
the submission that 'The persistence in misinterpreting
a right to
(be) make representations at a hearing constitutes a repudiation',
and concluded that the Guild overreacted
to
Mr
Shoot's
letter
of
17
September
2019,
and
drew
unjustified inferences from it.
[46]
I am of the considered view that the
undertaking by SPAR to hold a hearing and its communications with the
respondents undermine
the argument that all that the respondents were
entitled to was a reasonable opportunity to make representations,
strictly in accordance
with the contractual terms of the MOI. To the
contrary, the correspondence confirms that the Guild had resolved to
hold a hearing
and the respondents had accepted that they would be
permitted to attend and make submissions which would enable a fair
determination
of the allegations against them. There was therefore an
agreement between the parties, irrespective of what the appellants
contend
the MOI provides.
[47]
The
accepted legal principle as expressed in
AB
and Another v Pridwin Preparatory School and Others,
[12]
is
that while parties in a private contractual relationship are not
obliged to convene a hearing before termination, nevertheless,
if
there is such an agreement that a hearing will be convened, then the
hearing must be procedurally fair, unless this is expressly
excluded
by the parties.
[13]
Therefore
if "the contract sets up a form of tribunal to hear issues, ...
the
tribunal will be bound by the principles of natural justice."
[14]
[48]
I am unable to find merit in the
argument, given the specific context in which the domestic
hearing
was
convened
by
the
Guild,
that
the
consideration
by
the
directors of oral and documentary evidence without any input from the
respondents, who were directly impacted by such evidence,
was a fair,
just and appropriate
basis
for their decision to terminate membership. The conduct of such a
'hearing' cannot be construed as congruent with the rules
of natural
justice or termed 'fair'. The respondents
were not advised that the Guild had
decided that they had repudiated the hearing agreement and rejected
the reasonable opportunities
afforded to them to make
representations,
and
that the Guild would proceed with
the
hearing without them.
[49]
To the contrary, the respondents were
led to believe that the hearing would take place in due course. In
fact, the appellants
admit
that when the letter in response to Mr Shoot's letter of 17 September
2019 was dispatched, the directors were
not in a position to proceed with the hearing or even respond
adequately to the issues raised.
However, the appellants now protest
that there was in any event no obligation on them to communicate
their decision to the respondents, but
the termination notices served to notify the respondents
that the hearing was cancelled
and to express acceptance of the
repudiation by the respondents.
[50]
This
submission
was
advanced
for
the
first
time
in
argument
and
does
not appear
in
the
answering
affidavits.
Consequently,
and
especially
in
the
light
of
the misleading contents of the response from the Guild on 19
September 2019, the import belatedly assigned to the termination

notices lacks credibility, particularly as by this time, the
membership of the respondents had already been terminated, the
notarial
bonds perfected and SPAR had assumed control of the
respondents' stores.
[51]
In his comments that are quoted below,
Kollapen J in his ruling in which he set aside the
ex
parte
order
in
the
Pretoria
application
to
perfect
the
notarial
bond, pertinently enunciated the
prejudicial consequences emanating from the failure to comply with
agreement between the parties:
'...
the Guild then convened on the 16
th
of October 2019 and
made the decision to terminate their membership. This was done
without any notice to the respondents and without
affording them the
opportunity to be present and participate in the hearing.
The
Spar Group in response argued that firstly the rules of the Guild
provide for termination of the membership without a hearing.
While
that may be so what emerges and it is not disputed that the parties
chose to engage with each other outside of that rule
if regard [is
had] to the correspondence exchanged between the parties and it
reached an agreement that the hearing that would
be held to determine
the future membership of the respondents would be one to which the
respondents will be invited.
That
they were not invited to such a hearing D violated the spirit of the
agreement [that] was reached between the Guild and the
respondents
and importantly deprived them of the opportunity of making
submission[s] both in law and in facts as the[ir] corresponden[ce]

seem
to
suggest that would be relevant and that would ultimately have a
bearing on the decision of the Guild...'
[15]
[52]
Mr
Symon
SC
who
responded on behalf of the respondents to the argument on the
termination application, submitted that in the light of SPAR's

undertaking to convene a domestic tribunal over which directors of
the Guild would preside, the respondents were well within their

rights to seek these procedural safeguards and to know the case
against them. While agreeing with the submission that fairness
is to
be assessed in context,
[16]
Mr
Symon
emphasised
that context, in this case, must include the severe consequences of
loss of employment
and
livelihood for the respondents and their employees, the complexity of
the charges against the respondents and the volume of
evidence SPAR
intended to lead at the hearing, the constitution of the panel of
directors and whether they would be predisposed
to bias against the
respondents and in favour of SPAR. He submitted that in these
circumstances, the letter could not be construed
as unreasonable or
indicating a lack of bona tides; the respondents were merely striving
to achieve a fair hearing as agreed by
the parties.
[53]
Why then did the appellants subsequently
decide that the hearing should proceed without the respondents,
especially as they acknowledge
that the principles of natural justice
require that even a domestic tribunal must afford the person charged
the opportunity to
deal with the merits of the charges?
All that followed the letters of 17
September 2019 were the enquiries by Mr Shoot about the date to which
the hearing would be rescheduled.
A
further relevant question that remains unanswered is why the
appellants did not inform the respondents
of their view (so lucidly expressed in
their arguments before this court) that, as this was a domestic
hearing in a private contractual
context, the directors of the Guild
were entitled to lay down the relevant procedures and that they
considered the proposals of
Mr Shoot as excessive and unnecessary.
[54]
In any event, the Guild did in fact
acknowledge the validity of the concerns raised by Mr Shoot. As set
out by the respondents in
their heads of argument, the hearing in
fact took place within the parameters and with the processes proposed
by Mr Shoot, except
for the obvious and, in my view, unwarranted and
unfair exclusion of the respondents. This clearly demonstrates
that SPAR did not consider Mr Shoot's
suggestions to be contrary to their agreement or unnecessary for a
fair hearing. There would
therefore have been little reason to
conclude that his letter constituted repudiation, whether of the
opportunity to make representations
at the hearing or of the
respondents' obligations under membership agreements.
[55]
The respondents have vigorously resisted
any imputation of deliberate delay to or derailing of the hearing,
or repudiation as attributed to them by
the appellants. They contend that the appellants' claim that because
there was a postponement
in the original hearing date, the agreement
to have a hearing fell away or was repudiated, could never be correct
because as the
31 July 2019 letter reiterated, regardless of previous
postponements, SPAR was committed to the hearing proceeding in
October 2019.
They further deny that their letter of 17 September
2019 was timed and engineered to force another postponement, pointing
out that
it was a response to the contents of the letter dated 6
September 2019 from the Guild, and contained a confirmation that the
hearing
would proceed as scheduled, which again could not be
construed as repudiation.
[56]
In
reaching the conclusion that there was no repudiation
by
the respondents of the agreement to participate in a hearing prior to
any decision about termination, and that the agreement
to have a
hearing remained intact despite the letter of 17 September 2019,
Barnard AJ applied the legal test for repudiation set
out in
Dataco/or
International (Pty) Ltd v lntamarket (Pty) Ltd:
[17]
'[18]
The conduct from which the inference of impending non- or
malperformance is to be drawn must be clearcut and unequivocal,
ie
not equally consistent with any other feasible hypothesis.
Repudiation, it has often been stated, is "a serious matter'',

requiring anxious consideration and - because parties must be assumed
to be predisposed to respect rather than to disregard their

contractual commitments - not lightly to be presumed.·
(References omitted.)
He
also noted that SPAR never communicated its acceptance of the alleged
repudiation but instead led the respondents to believe
the hearing
would go ahead and then secretly convened a hearing in their absence
in breach of the agreement. Barnard AJ therefore,
correctly in my
view, rejected the notion that this conduct could constitute
acceptance of the repudiation.
[57]
However, the opening paragraph of the
Datacolor
judgment
is also relevant, given both the reliance by the appellants on the
repudiation by the respondents before the court a quo
and their
subsequent reliance on the termination
notices to constitute notices of
cancellation of the proposed hearing and SPAR's acceptance of the
repudiation. At the commencement
of
the judgment, Nienaber JA stated:
'[1]
Repudiation has sometimes been said to consist
of two parts: the act of repudiation by
the guilty party, evincing a deliberate and unequivocal intention no
longer to be bound
by the agreement,
and
the act of his adversary,
"accepting"
and
thus
completing the breach
Both
the analogy and the language of offer and acceptance, a legacy from
England, have on occasion been deprecated by this Court.
The better
view is that repudiation is a breach in itself; that the "intention"
does not in truth have to be either deliberate
or subjective but is
simply descriptive
of
conduct heralding non- or malperformance on the part of the
repudiator; and that the so-called "acceptance", although
a
convenient catchword, does not "complete" the breach but is
simply the exercise by the aggrieved party of his right
to terminate
the agreement. This case, and the outcome of the appeal, is concerned
with both "parts" of repudiation:
whether the appellant
improperly repudiated the agreement between the parties
...
and if so whether the respondent. in response, properly cancelled
it...' (References omitted.)
The
learned judge later restated 'the established law that the
manifestation of the election to cancel may consist of conduct and

need not correctly identify its cause.'
[18]
[58]
The
appellants submit that the conduct of the respondents, underscored by
Mr Shoot's letter of 17 September 2019, did in fact manifest
their
intention not to participate in the hearing. They argue that the
respondents asserted 'an alleged right to an entirely different

hearing to that which was being afforded or which could legitimately
be expected.' In the context of the respondents' entire approach
to
the matter, the appellants understood this as a repudiation of the
right to be heard, which was accepted when the directors
decided not
to adhere to the respondents' demands and to proceed with the hearing
in their absence. The appellants point out further:
'DataColor
is
also authority for the proposition that what is required is not
"acceptance" as would be necessary for the formation
of a
contract;
but
simply that the aggrieved party within a reasonable time exercises
the election (which vests in it)
to
cancel the agreement.
It
is also not required that the communication of the cancellation be
done formally by the aggrieved party- it suffices that the
election
of a cancellation
is
brought to the attention of the repudiator by any means.'
[19]
They
contend that the termination notices of 17 October 2019 constituted
notices of cancellation of the proposed hearing.
[59]
I am however not persuaded that,
objectively considered, the conduct of the respondents in requesting
that the hearing be convened
with procedural fairness manifested
their unequivocal intention or election to cancel the agreement to
attend a hearing convened
by the Guild, or heralded their
non-performance. In fact, it would have made little sense for them to
do so, given the constraints
of their membership of the Guild and the
severe adverse impact their refusal to attend the hearing would have
on their businesses.
More significantly, in the absence of a
competent act of cancellation by the respondents, the 'aggrieved'
appellants could not
have acquired the legal right to terminate the
agreement.
[60]
However, even if the appellants
subjectively believed or perceived that the respondents were
cancelling their participation
in
the hearing, their belated insistence that the exercise of their
right to cancel the agreement and the cancellation itself was

communicated to the respondents in the termination notices is
untenable. The
Datacolor
judgment
does not suggest that the communication of cancellation, in whatever
form, should be at the discretion of the aggrieved
party. In order to
complete the repudiation, the cancellation must be communicated to
the repudiator. In this instance, the notices
of termination of
membership were delivered to the respondents
after
the Guild held the hearing on 15
October 2019 and decided to terminate their membership, having
deliberated on the evidence and
representations made at the hearing
without the participation or knowledge of the respondents.
Consequently, the termination notices
could not constitute either the exercise of the appellants' right to
terminate the agreement
to hold the hearing, or the proper
communication of their decision to cancel the agreement in completion
of the repudiation.
[61]
Even more importantly, the very reliance
on this repudiation flies in the face of the appellants'
protestations and denials of an
agreement to convene a hearing. It
would appear that a realisation of this anomaly has caused the
appellants' belated attempt to
broaden the alleged repudiation to
encompass the membership agreements.
I
however remain unpersuaded, like the court a quo, that the appellants
proved
repudiation
or
that
their
termination
notices
of
17
October
2019
are
unassailable. In the premises, I am unable to fault the conclusion by
the court a quo that the termination notices of 17 October
2019 were
neither lawful nor valid and had to be set aside.
The
second termination notice - 19 March 2020
[62]
The
appellants
persist
that
should
this
Court
find
that
the
conduct
of
the
respondents prior to the termination decision of October 2019 did not
constitute a repudiation of any agreement, their conduct
during these
proceedings was a clear repudiation of the membership agreements,
which in itself justified the Guild issuing the
second termination
notices on 19 March 2020.
[63]
In the second set of notices, the Guild
recorded its stance that the respondents' memberships of the Guild
had been validly terminated,
but if for any reason it were to be
found that such membership had not been validly terminated, then such
letter served as a notice
by the directors of the Guild in terms of
clause 4.10(2)(a)(ii) of the MOI, terminating the respondents'
membership. Such notice
therefore would result in the recipients ipso
facto ceasing to be members of the Guild upon the expiry of one month
after receipt
by them of the notice. The appellants submit that the
second notice was independently
valid
in that the Guild was not required to have any reason to give notice
nor to afford any opportunity for a hearing.
[64]
Firstly, if the second notices were
independently valid and did not require reasons, then the submissions
on the repudiation of
the membership agreements by the conduct of the
respondents in these proceedings, which apply to the 2020 notices,
are superfluous.
Secondly, when Mr Venter conveyed SPAR's undertaking
to hold a hearing in his letter dated 10 April 2019, he recorded that
'The
termination is in terms of the clauses 4.10(1), 4.10(2), 4.10(3)
and 4.10(4) of the MOI.'
As
reasoned by Barnard AJ, the agreement to hold a hearing, which
encompassed termination in terms of the clause 4.10(2)(a)(ii),

effectively precluded the basis relied on by the appellants for the
validity of the second notice.
[65]
I nevertheless consider
it necessary to deal briefly with the
submissions
of
Mr
Subel
on
the interpretation of clause
4.10(2)(a)(ii). It is common cause that clause 4.10 of the MOI
creates an obligation to allow retailer
members an opportunity to
make representations, which is independent and separate from the
agreement
to
convene a hearing. The relevant provisions of clause 4.10 of the MOI
provide:
'4.10
Termination of Retailer Membership
1.
The directors or a regional committee
shall be entitled to terminate the membership of a retailer member by
written notice to such
retailer member provided that such member
shall have been given a reasonable opportunity to make
representations to such directors
or regional committee, if:
(b)
he commits any breach of the provisions of this Memorandum of
Incorporation or SPAR membership or any rules, regulations
or
obligations imposed on him in terms of this Memorandum of
Incorporation or if such member in the reasonable estimation of the

directors has accepted stolen goods, whether knowingly or otherwise;
or
2.
A retailer member shall ipso facto cease
to be a member:
(a)
upon the
expiry of either-
(ii)
one month after the date upon which the
directors have given to him written notice of their intention to
terminate his
membership;
or
[66]
To
my mind, a plain reading of clause 4.1O does not require or suggest
or permit an excision of clause 4.10(2)(a)(ii) from a reading
of the
entire clause in sequence. Clause 4.10(2)(a)(ii) is consistent and
coherent when read after clause 4.10(1), as it provides
that the
membership of the relevant retailer member will ipso facto cease upon
expiration of the period of one month after the
delivery of the
notice of termination issued by the Guild, pursuant to the decision
it has taken to terminate membership in accordance
with 4.10(1). The
'ipso facto' referred to, that is the 'act' or 'fact' relied on, at
which the termination becomes effective,
is the expiration of the
notice period, and not the act of issuing the notice. I am
consequently
not
persuaded
that
the term 'ipso facto' suggests an independent right to terminate.
Although 'fairness is not a freestanding requirement for
the exercise
of a contractual right',
[20]
the
notice period also incorporates a degree of fairness as the affected
member will have to take measures to alleviate the consequences
of
the termination, which accords with the purported intention of the
Guild to apply the rules of natural justice and follow fair
procedure
in the resolution of disputes.
[67]
The conduct of the directors of the
Guild in holding a hearing at which they received representations,
albeit not from the respondents,
and then delivering the notices of
termination to the retailer members -
as
set out in clause 4.10(1) and 4.10(2)(a)(ii), indicates that this was
indeed their understanding of the process of termination
as required
by the MOI. Therefore, even without the detailed analysis offered by
the respondents, I am inclined to agree with their
interpretation
rather than the contrived interpretation favoured by the appellants,
as did Barnard AJ. The second notices to terminate,
which the appellants contend required no
reason,
also
appears to be an afterthought,
when
considered
in
the light of the litany of complaints
about the serious transgressions by the
respondents, in particular Chris, for over a year before SPAR
resolved to convene a hearing.
If the termination without affording
the respondents an opportunity to make representations under clause
4.10(2)(a)(ii) of the
MOI was competent, valid and available to the
appellants, they could have simply have resorted to it earlier.
Instead, the appellants
took what they thought was the appropriate
recourse in the form of the 'compromise' and attempted to exclude
Chris in the manner
set out in the letter from Mr Venter dated 3
December 2018. Then they subsequently retracted this proposal and
resolved to have
a hearing. Their conduct is therefore at odds with
their assertion of the independent validity of the second notices of
termination
issued in March 2020. It is also relevant, as emphasised
by Mr
Symon,
that
there has been no response
to
the request for the resolution pursuant to which the 2020 termination
notices were issued. I am accordingly not persuaded that
Barnard AJ
was wrong in concluding that the second termination notices were also
invalid and unlawful, and should like the first
notices, be set
aside.
[68]
When Mr
Trengrove
SC
presented his argument on the
variation of the credit facilities and the applicability of the maxim
arbitrio boni viri
raised
by the respondents, he submitted that the principles he expounded,
which established the appellants' right to unilaterally
vary the
credit facilities afforded to the respondents, were also applicable
to the appellants ·contractual right under
the MOI to
terminate the membership of the respondents. However, pursuant to the
conclusions I have reached on the interpretation
of clauses 4.10(1)
and 4.10(2)(a)(ii), it is not necessary to consider Mr
Trengrove's
argument
vis
a
vis
the termination notices.
SPAR's
unilateral variation of the credit facilities and limitation of drop­
shipment supplies
[69]
Two forms of credit were made available
by SPAR to the respondents as retailer members of the Guild. Clause 5
of the credit agreement
entered into by the parties provides:
'Credit
facilities are granted by the seller to the applicant, at the
seller's discretion, and the seller may, without notice, at
any time
vary or terminate such facilities.'
Both
the reduction in the period for repayment and the limitation on
maximum value of drop-shipment goods purchased from suppliers
were
variations of the respondents' credit terms effected by the
appellants under clause 5 after the termination notices were issued.

Barnard AJ recognised that clause 5 expressly permits SPAR to amend
the credit terms, but found that SPAR's conduct in doing so
was
unreasonable.
[70)
The appellants contended that even if their appeal against the
termination decision fails, the orders of Barnard AJ on the
credit
and drop-shipment terms may nevertheless be set aside on appeal,
because SPAR's decision to amend the terms of credit is
independent
of the validity of the termination decision. They argued that:
(a)
clause 5 of the credit agreement
provides that the credit and drop shipment terms are stipulated
"at
the seller's discretion, and the seller may, without notice, at any
time vary or terminate such facilities."
Therefore, in amending the credit
terms afforded to the respondents, SPAR exercised its contractual
discretion;
(b)
Barnard
AJ erred in finding that SPAR's decisions to reduce the credit terms
from 19 days to
7
days
and the drop-shipment
terms
from 30 days to 7 days were not taken
arbitrio
boni viri
-
i.e.
acting reasonably and exercising reasonable judgment
[21]
because the
arbitrio
standard
is not applicable in this context; and
(c)
however, even if the appeal court holds
that that Barnard AJ correctly held the
arbitrio
standard to be applicable, the
objective, uncontesteQ facts do not support the finding that SPAR
acted outside the tenet of
arbitrio
boni viri.
SPAR came to a legitimate
and reasonable decision, taken in a private contractual setting, and
after a substantial period of engagement
with the respondents, that
it could not continue to do business with the respondents on the
existing terms, and that the relationship
of trust between the two
entities had broken down irretrievably. SPAR's decision to change the
credit terms was based on the financial
statements provided by the
respondents at court coupled with the fact that SPAR had issued
notices of termination, which meant
that the credit terms had to be
restricted to the period of the termination. In addition, there were
labour compliance orders against
the respondents in excess of R13
million in relation to eight stores for a period of five months.
There was a further legitimate
concern that compliance orders would
also be issued against the remaining stores and for longer periods.
This affected the creditworthiness
of the respondents and aggravated
the risk to SPAR if it continued to do business with them. SPAR's
decisions to reduce the credit
are also consistent with the Guild's
obligation to act in the best interests of all its members, and the
SPAR Group's accountability
to its shareholders.
[71]
Mr
Trengrove,
who argued this issue on behalf of
the appellants, submitted that the wording of clause 5 makes it clear
that the credit terms were
offered entirely at the discretion of the
appellants; the clause deals with future transactions and did not
convey any undertaking
to provide credit for the future; it excluded
the
audi alteram partem
rule
and permitted the termination of the credit facilities at any time.
He submitted that consequently, the respondents' reliance
on the
arbitrio
standard
to sustain
their
objection to
the appellants' decision to amend the
credit
facilities
and their contention that that any contractual discretion should be
exercised in good faith and reasonably, was incorrect.
[72]
Mr
Trengrove
referred
to
NBS
Boland Bank Ltd v One Berg River Drive
CC
and
Others;
Deeb
and
Another
v
Absa
Bank
Ltd;
Friedman
v
Standard
Bank
Of
SA
Ltd
[22]
as
authority for his submission that a clause which permitted the
appellants to determine the prestation of the counterparty to
a
contract, was not inimical to the general principles of contract or
invalid. He emphasised that the
arbitrio
standard
was only capable of a very restricted application as it did not apply
to all exercise of contractual discretion; specifically,
it did not
apply to the decision by the appellants taken in accordance
with
their clear and unfettered discretion under clause 5. He also
submitted that the authorities were clear that for termination
in
matters of contract, there was no need to go beyond the giving of
notice nor was good reason required for the exercise of contractual

discretion.
[23]
[73]
In conclusion Mr
Trengrove
submitted that if this court were to
find that the
arbitrio
standard
was required for the amendments imposed by the appellants, then the
hostile standoff between the parties, the risk of having
no or
inadequate security for the credit advanced to the respondents
because of the intended termination, and the liquidity shortages

evinced in the financial statements furnished by the respondents
provide the necessary context.
In
the aforesaid circumstances, although SPAR was entitled to cancel the
credit facilities, it acted reasonably in only limiting
the
facilities.
[74]
In
his
response
Mr
Symon
persisted
that
the
finding
of
the
court
a
quo
that
clause 5 of the credit agreement did allow SPAR to amend the credit
terms, but not without good reason, was in line with case
law which
provides that where a party has a unilateral discretion under a
contract, it should be exercised
arbitrio
boni viri.
[24]
Therefore
the decision to amend taken for an ulterior or improper
purpose
or without good reason or such a contractual provision may fail for
being contrary to public policy, as found by the Supreme
Court
of Appeal in
NBS
Boland
Bank.
[75]
Responding to Mr
Trengrove's
submissions that the respondents'
reliance on the
arbitrio
standard
was misplaced, Mr
Symon
pointed
out, correctly in my view, that clause 5 should not be construed
literally or narrowly, but considered within the context
of the
reciprocal nature of the contractual relationship between the
parties. As retailer members of a trading group, the respondents
are
bound to purchase their stock from SPAR and are therefore obliged to
accept SPAR's credit terms in order to operate their businesses.
He
argued, with merit, that the advancing of goods on credit is not a
future contract that is subject to a decision by SPAR, on
each
occasion, whether to enter into such agreement or not. It is an
ongoing relationship and part of a larger whole, which is

acknowledged in the appellants' statement
that the credit agreement is part of an
'ongoing commercial relationship' between the parties. I am also in
agreement with his proposition
that SPAR's discretion must be
exercised reasonably and honestly because of the reciprocal nature of
the trading model, as I am
unable to find cogent authority for the
submission that SPAR's discretion under clause 5 of the credit
agreement should be exercised
unfettered in the following cases.
[76]
In
NBS
Boland Bank,
the
mortgagors, who were aggrieved by the increase in the interest rate
determined unilaterally by the mortgagee, attacked only
the validity
of the relevant clause. Although Van Heerden DCJ concluded that 'a
stipulation conferring upon a contractual party
the right to
determine a prestation is unobjectionable'
[25]
he
also emphasised that:
'[25]
All this does not mean that an exercise of such a contractual
discretion is necessarily unassailable. It may be voidable at
the
instance of the other party. It is, I think, a rule of our common law
that
unless
a
contractual discretionary power was clearly
intended to be completely
unfettered,
an exercise
of such a discretion must be made
arbitrio bono viri...
[29]
... At the risk of repetition, I should
again say that the clause is perfectly valid, but that an exercise of
the power conferred
upon the mortgagor may be objectionable.' (My
emphasis.)
[77]
In the light of the appellants' argument
that the wording of clause 5 of the credit agreement indicates that
their power to amend
the terms of credit was unfettered, it is
relevant to note that the learned judge held further that:
'[30]
...It is conceivable, albeit unlikely, that a stipulation may be so
worded that an absolute discretion to fix a prestation
is conferred
on one of the parties. Here again it is unnecessary to express a view
as to whether such a stipulation will be invalid
as being in conflict
with public policy, or whether the fixing of the prestation may only
be assailed when it is done in bad faith.
[32]
I revert to a stipulation which confers on one of the parties the
power to fix the purchase price or rental, as the case may
be. In the
light of what has already been said there does not appear to be any
logical rationale for drawing a distinction, in
the context under
consideration, between such a stipulation and other similar
stipulations conferring on a party to a contract
a discretion to
determine a prestation. The exercise of the power to determine the
price or rental would after all be open to attack
on the same grounds
as in the case of utilisation of other types of discretionary
stipulations...'
[78]
In
Erasmus
and Others v Senwes Ltd and Others,
[26]
Du
Plessis J similarly held that Senwes' power to amend its own
obligation to subsidise medical scheme premiums was unobjectionable.

Unlike the argument by the appellants in this appeal, it was not
argued that Senwes' power to amend was clearly intended to be

unfettered. The learned judge therefore considered whether that power
to amend was subject to an objective standard, and having
noted the
rule of common law stated by the Supreme Court of Appeal in
NBS
Boland Bank
as
to when a contractual discretionary power must be exercised
arbitrio
boni viri,
he
proceeded to determine whether, in law, Senwes' power to amend was
fettered. He held that:
'There
is
no
reason
to
limit
the
rule
(that
discretionary
contractual
powers
must
be exercised
arbitrio
boni viri)
to instances where the
power vests in the promissee. In fact, if regard is had thereto that
all contracts are subject to the principle
of good faith, and that
parties should as far as possible be held to their contracts, there
is good reason to apply the rule also
to
cases where the power is given to the
promissor. Moreover, the SCA has applied the rule to
the case of a mortgagee
who was given very wide powers
in terms of a notarial bond to take over
and run
the
business of the mortgagor and thus to
determine
the manner in
which it was to exercise its own
contractual rights
(Jug/al NO and
Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division
2004 (5) SA 248
(SCA)
at para [26]). I hold that Senwes is
bound to exercise its
right
to amend the terms of the contract
arbitrio
bona viri...
In
the
Jug/al
case
(at para [26]) the SCA also held that an obligation to act
arbitrio
boni viri
obliges
the person to "act reasonably
and
to exercise a reasonable discretion". Applied to the present
case, Senwes must exercise its power to amend the contract

reasonably.'
[27]
(Footnotes
omitted.)
[79]
In the premises, I am unable to fault
Barnard AJ's finding that the
arbitrio
standard was applicable to SPAR's
amendment to the terms of credit enjoyed by the respondents. Barnard
AJ then proceeded to determine
whether the decision to amend was
taken by SPAR reasonably, honestly and in good faith in the context
of the ex parte perfection
applications. He found that the timing of
the reduction in the credit available to the respondents indicated
that having failed
in the perfection applications and being unable to
take control of the respondents' business operations, the appellants
were attempting
to achieve the same end as the termination notices
through alternative means.
[80]
Mr
Trengrove
pointed out correctly that in
paragraphs 9 and 10 of his drop­ shipment judgment, Barnard AJ
had erred by trying to create or
derive a right to buy merchandise
from what was actually a definition of
'seller' under the Standard Terms of Sale. Nevertheless, his error
does not disturb the validity
of his finding that SPAR's exercise of
its right to vary or limit the drop-shipment
supplies in terms of clause 5 of the
credit agreement, also had to be subject to the
arbitrio
standard. In respect of the context
in which the limitation was imposed, Barnard AJ found that the
limitation of supplies which
the respondents required in their stores
was part of SPAR's plan to sabotage the respondents' business and to
ensure termination
of their membership. He therefore concluded from
the context in which the variation to the terms of credit and the
limitation to
the drop-shipment
supplies
were effected, that SPAR
did
not do so reasonably or in good faith, and the variations were
consequently invalid.
[81]
Mr
Symon
emphasised
that
the
context
and
timing of the decision
to
vary the terms of
credit is crucial
in
evaluating
the lawfulness
of such
a
decision,
because
it
informs whether or not the decision was made bona fide and was
reasonable. He contended that the underhanded conduct of the
appellants in attempting to perfect the notarial bonds ex parte
without full disclosure and the aggressive and unreasonable manner
in
which control of some of the respondents' stores was assumed, which
followed upon the Guild's unlawful decision to terminate
their membership, were part of SPAR's
strategy to take over the respondents' businesses. When those
attempts failed, the appellants
resorted to reducing the credit
afforded the respondents
and
the drop-shipment supplies.
[82]
Mr
Symon
countered the appellant's allegation
of serious financial risk to SPAR by pointing out that the security
was not at risk because
the
notarial bonds remained in place, though not perfected. He added that
the reliance on the Group financial statements to allege
that the
respondents were in a precarious financial position which rendered
future credit risky was baseless and misleading, as
the respondents
had set out in detail in their reply, and they had always met their
financial obligations
to
SPAR. He pointed out that SPAR's reliance on risk is undermined
further by the fact that while it limited the drop-shipment
purchases, SPAR did not limit its warehouse
goods which it supplied to retailer
members.
[83]
I find Mr
Symon's
argument compelling, especially
because SPAR's fears of
the
effect of their termination on the respondents' credit worthiness
were no longer well founded once it was determined that the

termination, which triggered the perfection of the notarial bonds,
was invalid.
In
the premises, there is no reason to interfere with the orders issued
by Barnard AJ in respect of the variation of the credit
facilities
and the drop-shipment application.
[84]
In
the
light
of
my
findings,
it
is
not
necessary
to
consider
the
further
issues raised by the parties, including
those arising from competition law.
Costs
[85]
Costs must follow the result. The
respondents have requested costs of three counsel. Both parties
employed several senior and junior
counsel. Given the nature and
significance of the matter to the parties, it was reasonable
to do so.
Order
[86]
The following order shall issue:
The
appeal against the orders of Barnard AJ issued on 17 July 2020 in
Case Number 8280/19P and Case Number 9215/19P is dismissed
with
costs, such costs to include costs of all senior and junior counsel,
where so employed.
MoodleyJ
Radebe
J
Bezuidenhout
J
APPEARANCES
Date
of hearing

15 October 2021
Date
of delivery

7 July 2022
For
Appellants
A Subel SC; W Trengrove SC; S Pudifin-Jones; S
Mdletshe
Instructed
by
GARLICKE &BOUSFIELD INC
7
Torvale Cresent
La
Lucia Ridge Office Estate
La
Lucia Ridge
Umhlanga
4051
Tel:
031 - 570 5300/5408
Email:
howard.stephenson@gb.co.za
Ref: H Stephenson
C/0
TATHAM WILKES INC
200
Hoosen Haffejee Street
Pietermaritzburg
3201
Tel:033-345
3501
Email:
nigel@tathamwilkes.co.za
and
michele@tathamwilkes.co.za
Ref:
N Tatham/Michele/06G0386/19
For
Respondents
:
S Symon SC;
P Rood SC;
D Watson SC;
A Gotz SC;
T
Marolen
Instructed
by                       FLUXMANS

INC
30
Jellicoe Avenue
Rosebank
Johannesburg
2196
Private
Bag x41, Saxonwold
Tel:
011 -
328
1700
Email:sshoot@fluxmans.com
and
jshafir@fluxmans.com
Ref:
Mr S Shoot/J Shafir/cs/141054
C/O
AUSTEN SMITH ATTORNEYS
Walmsley
House
91
Pietermaritz Street
Pietermaritzburg
3201
Tel:
033 392 0500
Email:
callumsmythe@austensmith.co.za
and
ranitha@austensmith.co.za
[1]
In the drop-shipment application the first respondent was the SPAR
Group, the second respondent was SPAR SA and the third respondent

was the SPAR Guild. The fourteenth to seventeenth respondents in the
termination application were not parties to the drop-shipment

application
[2]
Paragraph 70 of the court a quo judgment in case number 8280/19P
[3]
The SPAR Guild
[4]
The SPAR Group
[5]
SPAR SA
[6]
Paragraph 17 of the court a qua judgment in case number 9215/19P.
[7]
Ibid para 21
[8]
Par 292 of the FA. The Appellants refer to 23 October 2019 in their
HoA
[9]
These terms are recorded in clause 5 of the standard terms and
condition. In para 28 of his judgment, Barnard AJ records '30
days'
and the Appellants also refer to '30 days· in their heads of
argument.
[10]
Appellants heads of argument para 160
[11]
Appellants heads of argument paras 161-162.
[12]
AB and Another v Pridwin Preparatory School and Others (38670/2016)
[2017] ZAGPJHC 186 (3 July 2017).
[13]
Ibid paras 96-97 and the authorities referred to therein. This
aspect of the judgment was confirmed on appeal by the Supreme
Court
of Appeal in AB and Another v Pridwin Preparatory School and Others
2019 (1) SA 327
(SCA).
[14]
Pridwin [2017] para 97
[15]
Appeal Record Vol 1 at 62-63.
[16]
Doody v Secretary of State for the Home Department and Other Appeals
[1993] 3 All ER 92
(HL), quoted with approval in Minister of Health
and Another NO v New Clicks South Africa (Pty) Ltd and Others
(Treatment Action
Campaign and Another as Amici Curiae)
2006 (2) SA
311
(CC) para 152 and Baio Star Fishing (Pty) Ltd v Minister of
Environmental Affairs and Tourism and Others
[2004] ZACC 15
;
2004 (4) SA 490
(CC)
para 45.
[17]
Datacolor International (Pty) Ltd v lntamarket (Pty) Ltd
[2000] ZASCA 82
;
2001 (2) SA
284
(SCA).
[18]
Ibid para 33
[19]
Appellants heads of argument para 155
[20]
Bredenkamp and Others v Standard Bank of South Africa Ltd
2010 (4)
SA 468
(SCA) para 53
[21]
Jug/al NO and Another v Shoprite Checkers (Pty) Ltd f/a OK Franchise
Division
2004 (5) SA 248
(SCA) para 26.
[22]
NBS Boland Bank Ltd v One Berg River Drive CC and Others; Deeb and
Another v Absa Bank Ltd; Friedman v Standard Bank of SA Ltd
1999 (4)
SA 928 (SCA).
[23]
South African Maritime Safety Authority v McKenzie
2010 (3) SA 601
(SCA) paras 55-58; Old Mutual Limited and Others v Moyo and Another
[2020) 2 All SA 261 (GJ).
[24]
Jug/al para 26.
[25]
NBS Boland Bank para 24
[26]
Erasmus and Others v Senwes Ltd and Others 2006 (3) SA 529 (T).
[27]
Ibid at 538B-F.