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[2021] ZAKZPHC 12
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KZN Oils (Pty) Ltd v Nelta (Pty) Ltd t/a Keyway Motors (184/18P) [2021] ZAKZPHC 12; [2021] 2 All SA 478 (KZP) (12 February 2021)
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL DIVISION, PIETERMARITZBURG
CASE NO: 184/18P
In the matter between:
KZN OILS (PTY)
LTD
APPLICANT
and
NELTA (PTY) LTD t/a KEYWAY
MOTORS
RESPONDENT
ORDER
The
following order is issued:
Main
application
(a) The
respondent and anyone occupying through it are hereby ordered
to
vacate the premises situated at Portion 4 of Erf 731, Madadeni Road,
Newcastle, KwaZulu-Natal within 30 days of the date of
the grant of
this order;
(b)
respondent is directed to pay the costs of the main application.
The conditional counter-applicatio
n
(c)
The conditional counter-application is dismissed with costs.
JUDGMENT
HENRIQUES
J
Introduction
[1] This is an
opposed application for the ejectment of the respondent from
business
premises situated at Madadeni Road, Newcastle where it conducts the
business of a retail fuel service station. The respondent
opposes the
ejectment for the reasons set out in its conditional
counter-application.
[2] The
respondent has also instituted a conditional counter-application
in
which it seeks relief in the event of the court declining to dismiss
the main application or to stay the main application pending
arbitration in terms of section 12B of the Petroleum Products Act 120
of 1977 (‘the PPA’), and arbitration in terms
of clause
20 of the original franchise agreement.
[3]
The relief foreshadowed in the conditional counter-application is the
following, namely:
‘(a)
the
Applicant is directed to provide the Respondent for signature a
franchise agreement substantially the same as Chevron’s
standard franchise agreement.
(b)
an Order declaring that:-
(i)
The
Respondent is entitled the right to conduct the businesses currently
conducted on the premises of the KEYWAY MOTORS for a period
of five
years commencing on 1 March, 2018;
(ii)
the Respondent shall pay
the Applicant rent and all other fees due by a franchisee, calculated
on the basis of the standard Chevron
agreement referred to in (a)
above;
(c)
an Order directing the
Applicant to pay the Respondent’s costs on the scale as between
Attorney and client.’
The issues that require determination
[4]
In respect of the applicant’s case, the court is required
to
determine whether:
(a)
the applicant has proved that
it is the owner of the premises, and is
entitled to evict the respondent from the premises on the basis that
the lease and franchise
agreements have terminated by the effluxion
of time on 10 July 2016; and
(b)
it has been proven that the respondent is
occupying the premises
against its will.
[5]
In respect of the opposition raised, the court has to determine
whether
the respondent has discharged the onus to establish that it
has a right of continued occupation based on the following, namely:
(a)
that the application should be stayed pending the determination of an
arbitration in terms of section 12B of the PPA;
(b)
that the application should be stayed in terms of clause 20 of the
franchise agreement, which is the arbitration clause;
(c)
whether the respondent has been subjected to an unfair or
unreasonable contractual practices, which is linked to the issue in
paragraph (a) above;
(d)
whether the respondent’s constitutional rights have been
infringed;
(e)
whether this court has jurisdiction to issue an order of eviction in
light of the decision of the Constitutional Court in
The Business
Zone 1010 CC t/a Emmarentia Convenience Centre v Engen Petroleum Ltd
& others
[1]
(‘
Business Zone’
); and
(f)
whether the decisions in
Former Way Trade and Invest
[2]
and
Crompton Street Motors
[3]
are bad in law.
[6]
As the respondent has indicated that it takes no issue with the
common
cause facts as set out by the applicant, and given the issues
raised by the respondent, it is necessary to refer to the factual
background in order to place in context the issues which have to be
determined, and also to deal with the agreements which governed
the
relationship between the parties.
Common cause facts
[7] On 11 July
2001, Caltex Oil SA (Pty) Ltd (Caltex)
[4]
entered into a franchise and a lease agreement with the respondent.
In terms of such agreement, the respondent was entitled to
operate a
retail petrol station on the premises. The duration of such agreement
was for a period of 15 years with the agreement
to terminate on 10
July 2016.
[8] On 14
September 2011, the applicant and Chevron concluded a branded
marketer agreement and a sale agreement for the purchase of assets in
the northern area of KwaZulu-Natal, being the service station
and the
immovable property on which the premises are situated. In terms of
the branded marketer agreement, Chevron granted the
applicant the
exclusive right and licence to sell to the retail sector, petroleum
and lubricant products within a defined territorial
area which
included the area where the premises are situated. The agreement
defined the assets as property and equipment, with
property being
defined to mean the land and buildings. Consequently, in terms of the
sale agreement, the applicant is the owner
of the premises.
[9] On 5 April
2016, a representative of the applicant, one Anisa, attended
at the
respondent’s premises in Newcastle and advised the respondent
that the lease was not going to be renewed. Subsequently
on 6 April
2016, the respondent sent an email to the applicant, expressing its
surprise and disappointment that the lease agreement
would not be
renewed. The respondent appealed to the applicant to reconsider the
decision not to renew the lease, alternatively,
for time to ‘Get
our affairs in order’.
[10] On 10 July 2016, the lease
and franchise agreements terminated through the effluxion of
time. On
the expiry of the franchise and lease agreements, the respondent was
invited by the applicant to make commercial proposals
if it wished to
secure a new agreement and to continue with the business. At the
time, the applicant was under pressure from Chevron
and the
Department of Energy to ensure transformation of the energy sector, a
priority being the transformation of retail petroleum
sites.
[11] It was for this reason that
the respondent was invited to submit a Black Economic Empowerment
plan (BEE plan), which would meet the requirements of both Chevron
and the Department of Energy. Time frames were set in terms
of which
the respondent was placed on terms and given a month to revert with a
detailed business plan and to make proposals in
respect of a BEE
plan. Monday, 22 August 2016 was set as the date for submission of
the respondent’s final proposals. If
the respondent was
successful, a new agreement would be concluded during October 2016.
If the respondent was not successful, it
would be required to vacate
the premises.
[12] The respondent submitted a
proposal. After considering the proposal, the applicant’s
attorneys wrote to the respondent on 8 September 2016, notifying the
respondent that it would not conclude any new agreement with
the
respondent. It would seem that the reason was the failure by the
respondent to include a BEE plan in either its written proposal
or
verbal presentation made to the applicant on 29 August 2016.
[13] The respondent was required
to make arrangements to vacate the site by the end of October
2016.
To this end, and on 26 September 2016, the applicant’s
attorneys notified the Regional Energy Director - KZN: Department
of
Energy that it was not concluding a new lease with the respondent.
Prior to the rejection of the respondent’s proposal,
the
respondent had made a presentation to the applicant’s
representatives on 29 August 2016, in a panel interview, but did
not
present a BEE plan. In the letter of 26 September 2016, the Regional
Energy Director – KZN was notified that the applicant
had
concluded an operating lease agreement with an entity named Key West
Petroleum (Pty) Ltd.
[14] On 4 October 2016, the
respondent wrote to the Department of Energy, Pretoria, requesting
an
arbitration in terms of s 12B of the PPA. This request for
arbitration appears to have been refused.
[15] On 12 November 2016, the
respondent’s attorneys wrote a ‘without prejudice’
letter to the applicant’s attorneys containing a new proposal
relating to the purchase of the premises. The applicant’s
attorneys responded, indicating that the proposal was not acceptable
and the respondent was given notice to vacate the premises
by 31
March 2017. This was followed by a further ‘without prejudice’
letter dated 9 December 2016 from the respondent’s
attorneys
containing an offer to purchase the premises. This was responded to
on 11 January 2017 and the respondent was advised
that the offer was
not acceptable.
[16] The respondent was advised
to engage an expert to assist in formulating its proposals
and it was
suggested that it engage business brokers and property experts
specialising in valuing and putting together transactions
to acquire
service stations. The respondent’s attorneys responded in a
letter dated 18 January 2017, advising that the respondent
intended
taking up the suggestion and employing experts in the industry, and
requested certain documentation from the applicant
which was
provided.
[17] The applicant’s
attorneys wrote to the respondent’s attorneys on 23 January
2017, calling upon them to submit the amended offer. In addition, it
indicated that the respondent’s right to operate the
business
would terminate on 28 February 2017. Once again, on 21 February 2017,
a further letter was addressed to the respondent’s
attorneys
advising that the respondent’s tenure had expired and it
remained in occupation of the premises on a strictly month-to-month
basis. This was pending a decision to be made about the respondent’s
application for a new operating lease based on the experts
it had
engaged.
[18] On 28 February 2017, the
respondent’s attorneys made a further ‘without prejudice’
offer. In such offer, the respondent did not address the issue of the
BEE plan, and it appeared that the parties had obtained valuations,
which were markedly different. The respondent was informed on 29
March 2017 that the offer was not acceptable and there was no
basis
for the parties to engage in further negotiations. The respondent was
given notice to vacate the premises by no later than
30 April 2017.
[19] On 6 April 2017,
the respondent wrote to Chevron complaining about the applicant
and
suggesting that it had been unfairly treated, contrary to the manner
in which Chevron treated its retailers. A request was
made to Chevron
to intervene in the matter, which Chevron declined. On 3 May 2017,
the applicant advised the respondent directly
that it continued to
occupy the premises despite the right of occupation having terminated
and that its occupation of the premises
was unlawful.
[20] On 11 September 2017, a
round table meeting was convened at the offices of the applicant’s
attorneys. At such meeting, the applicant had made available to the
respondent, a report of its independent valuers relating to
the
valuation of the business and of the site. A letter was dispatched on
12 September 2017, recording that the respondent was
given a further
opportunity to reconsider its position against the report, as its
previous offers were not market related and had
not been accepted. It
was once again emphasised in such correspondence that it was
necessary for the applicant to show its commitment
to the
transformation of its retailer base and to allow previously
disadvantaged persons to bid for sites where tenure had expired.
The
respondent was once again requested to consider the transformation
policies of the Department of Energy as well as the enquiries
from
BEE entities which were interested in becoming involved in the
petroleum business.
[21] At the end of such meeting,
the respondent requested time to consider its position until
the end
of September 2017 which extension was agreed to by the applicant, it
emphasising that this was the last extension which
would be provided.
At the end of September 2017, no proposal was forthcoming from the
respondent. The respondent’s attorneys
requested various
further extensions which were granted until the end of October 2017.
Despite these extensions, no further proposal
was forthcoming from
the respondent and it remained in occupation of the premises.
[22] As a consequence of
non-compliance with the extensions and requests for further
proposals,
the applicant engaged its legal representatives to
institute the eviction application. The founding affidavit was
deposed to on
22 December 2017 and the application papers were issued
on 19 January 2018, although the notice of motion was signed on 11
January
2018. On 26 January 2018, the application papers were served
on the respondent’s attorneys of record and on 29 January 2018,
on the respondent directly. A notice of opposition was filed on 12
February 2018. The answering affidavit and counter-application
were
served on 26 March 2018 although the filing slip is dated 16 March
2018. On 23 March 2018, the respondent submitted a further
request
for arbitration in terms of section 12B of the PPA. Such referral was
granted on 3 July 2018, subsequent to the institution
of the eviction
application and the filing of the conditional counter-application and
the respondent’s answering affidavit.
Submissions of the parties
[23]
At the hearing of the matter, Mr Savvas, who appeared for the
respondent, adopted a somewhat
unusual approach. He sought a
directive from the court allowing the respondent to only make
submissions in respect of the point
of law raised, namely the
competency of the court to grant an eviction order once there was a
referral to arbitration in terms
of section 12B of the PPA. He
informed the court that this approach had been communicated to the
respondent and his instructing
attorney. He would not address the
court and make any submissions relating to the main application and
conditional counter-application
and the merits thereof as these would
have to be dealt with by the arbitrator.
[24]
His approach was based on his interpretation of
Business Zone,
which was that the jurisdiction of the high court was ousted once
there was a referral to arbitration, and that this court could
not
deal with any issues arising from the eviction proceedings. He
asserted that it was inappropriate to make any submissions relating
to the legal points raised in opposition, in a court which could not
determine the issues between the parties as the court did
not have
jurisdiction. He stressed however that he was not abandoning them,
but he wanted to record that he is ‘being super
cautious about
not prejudicing his client in what he considers to be an irregular
proceeding’ consequent upon the
Business Zone
decision,
and would not be drawn into any debate with the court regarding
these.
[25]
After considering this request, I refused to issue such a directive
as I was of the view
that the issues could not be separated, and that
in deciding whether to grant an eviction order one had to consider
all the defences
raised in the affidavits filed. I was left with no
alternative but to consider these issues based on the papers filed by
all the
parties, the heads of argument and the submissions of the
applicant’s counsel.
[26]
In summary, Mr Savvas submitted the following:
(a)
Once the respondent has elected to refer
a matter for arbitration in
terms of section 12B of the PPA and there has been such a referral by
the Controller, the high court’s
jurisdiction is ousted. This
is the effect of the judgment in
Business Zone
.
(b)
As a consequence, the high court should not
and cannot deal with the
rei vindicatio
as this would negate any order that an
arbitrator may issue in the section 12B arbitration proceedings.
(c)
The respondent was not required to bring
an application in terms of
section 6
of the
Arbitration Act 42 of 1965
, to stay the eviction
proceedings, as on a proper interpretation of
Business Zone,
the
Arbitration Act does
not apply.
(d)
Clause 20 of the franchise agreement provides
for resolution of
disputes between the parties, first by negotiation, failing which by
arbitration.
(e)
The decisions in
Former Way Trade and Invest
[5]
and
Crompton Street Motors
[6]
are bad in law and contrary to the principles set out in
Business
Zone,
and the precedential value of
Former Way Trade and
Invest
has been diminished as an application for reconsideration
of the refusal of leave to appeal was pending before the Supreme
Court
of Appeal.
[7]
[27]
Mr Van Niekerk SC, who appeared for the applicant, submitted the
following, namely:
(a)
The factual matrix is relevant to the determination
of the eviction
application. It reveals that the applicant did not deal with the
respondent in a high-handed manner once the lease
and franchise
agreements expired, and that the applicant was at pains for a period
in excess of 18 months, to conclude a new franchise
and lease
agreements with the respondent. Over such period, the applicant, on
several occasions, requested the respondent to provide
a business
plan in compliance with the BEE imperatives. As the parties were
unable to negotiate a new franchise and lease agreement,
due to
non-compliance with the applicants BEE imperatives, it was only then
that the applicant instituted the eviction proceedings.
Although
disputed by the respondent, the reasons for this were due to the
respondent’s non-compliance with the BEE imperatives
of the
applicant and the difference in the valuation of the property
provided by the various experts.
(b)
It is common cause that the respondent’s
right of occupation
terminated through the effluxion of time. Consequently, the franchise
agreement and lease agreement are no
longer extant. The respondent
consequently has no further right to occupy the premises.
(c)
The respondent has not submitted any authority
for the submission
that the jurisdiction of the high court has been ousted by
Business
Zone
. In fact, the high water mark of Mr Savvas submission is:
‘that is the unavoidable legal effect of the
Business Zone
decision.’ However, Mr Savvas has not been able to refer to
any authority which supports this.
(d)
The applicant submits that on a proper interpretation
of
Business
Zone
, the jurisdiction of the high court has not being ousted and
the
section 12B
referral runs parallel to high court proceedings in
the absence of a request for the stay thereof.
(e)
The respondent’s reliance on clause
20 of the franchise
agreement is misplaced and it ought to have applied for a stay of the
eviction proceedings in terms of
section 6
of the
Arbitration Act.
(f
)
The judgments of D Pillay J and
Ploos van Amstel J are on all fours
with the decision in this matter and consequently, the main
application must succeed as there
is no merit in the opposition and
the conditional counter-application falls to be dismissed with costs.
Analysis
[28]
I have considered the written and oral submissions of the parties. In
addition, I have
also had the benefit of considering the relevant
additional judgments delivered subsequent to the hearing. I am
indebted to the
parties for drawing same to my attention. I propose
to now deal with the issues for determination.
Is the applicant entitled to the
eviction order?
[29]
It is common cause that the applicant is the lawful owner of the
premises and that the
respondent is in occupation of the premises
against the will of the applicant. It is further common cause that
the lease and franchise
agreements terminated through the effluxion
of time on 10 July 2016.
[30]
Graham v Ridley
[8]
confirmed the common law position that all an applicant has to prove
to obtain an eviction order is that it is the lawful owner
of the
premises and that the respondent is in occupation of the premises
against its will. This was reinforced in
Chetty v Naidoo
[9]
where the court held the following:
‘
The owner, in instituting
a
rei vindicatio,
need, therefore, do
no more than allege and prove that he is the owner and that the
defendant is holding the
res
– the
onus
being on the
defendant to allege and establish any right to continue to hold
against the owner
. . .’.
[31] The respondent conceded that
its original right to occupy had terminated through the effluxion
of
time. Furthermore, the agreement concluded between the parties also
makes provision for the respondent to vacate the premises
on
termination of the agreement. Clause 11.1 of the franchise agreement
provides that:
‘
11.
Consequences of termination
11.1
upon the termination of this contract for whatever reason:
11.1.1 . . .
11.1.2 The franchisee and its
permitted assigns, heirs and executors will forthwith surrender
possession of the premises to the
franchisor. . . ‘
[32] Based on clause 11.1 of the
franchise agreement, the respondent had agreed that on termination
thereof, it would hand possession of the premises to the applicant
by, at the very latest, the end of 10 July 2016, thus vacating
the
premises. The respondent has not vacated the premises, and based on
the above,
Graham v Ridley
applies and the respondent is
required to prove the existence of a further right of occupation.
[10]
It is the respondent who bears the onus of proving a continued right
to occupy the premises and the basis therefore.
[33] I propose to deal with the
bases advanced by the respondent on which it alleges it has
a
continued right of occupation. One basis advanced by the respondent
was that it received an alleged assurance by Chevron that
at the end
of the franchise period, if the franchise agreement was not renewed,
the respondent would be entitled to sell the business,
as was
historically always the case, to the next retailer.
[11]
The applicant denies that any such assurance was given and indicates
that such assurance as alleged in the papers is vague, embarrassing
and unenforceable and in addition, is struck by the entire agreement
clause
[12]
as it was not reduced to writing in order to make it binding on the
parties.
[34]
Having regard to the answering affidavit, it is apparent that such
alleged assurance was
made prior to the termination of the franchise
agreement, and consequently the respondent’s reliance on the
assurance as
a basis for continuing to occupy the premises is
misguided. I agree that the details relating to the alleged terms of
such assurance
are vague and that based on the entire agreement
clause, as no agreement was reduced to writing, there is no binding
agreement
between the parties and no right of continued occupation.
The stay of the
eviction proceedings
[35]
The respondent in its papers avers that the eviction application
ought to be stayed pending
either arbitration in terms of clause 20
of the franchise agreement or pending the arbitration already
referred in terms of
section 12B
of the PPA. In addition, it alleges
that it need not have instituted an application to stay in terms of
section 6
of the
Arbitration Act as
the provisions of such Act do not
apply. This the respondent submits is as a section 12B referral
automatically stays these proceedings
and ousts the jurisdiction of
the high court.
[36]
In essence, the applicant submits that the eviction application
ought not to be stayed pending arbitration. The lease and franchise
agreements terminated through the effluxion of time on 10 July 2016,
and there is no agreement entitling the respondent to continue
to
occupy the premises or to invoke clause 20 of the franchise
agreement. This is what distinguishes the current matter from
Business Zone.
[37]
Secondly, the applicant submits that an arbitrator only has
jurisdiction to determine whether
an alleged contractual practice is
unfair or unreasonable. The PPA does not confer the arbitrator with
powers to make a contract
for the parties and to direct the applicant
to conclude either a franchise or lease agreement with the
respondent. The Constitutional
Court in
Beadica 231 CC &
others v Trustees for the time being of the Oregon Trust &
others
[13]
confirmed the decision in
Trustees, Oregon Trust & another v
Beadica 231 CC & others
[14]
to that effect.
[38]
It follows that the applicant does not agree with the respondent’s
submissions that
the effect of the section 12B referral is to
automatically stay the proceedings and oust the jurisdiction of the
court.
The
Arbitration Act
[39
] I propose to deal with the
applicability of the
Arbitration Act. Counsel
for the respondent
submitted that based on
Business Zone
, once there was a
referral to arbitration in terms of
section 12B
, these proceedings
were automatically suspended and thus an application to stay these
proceedings was unnecessary. He relied on
para 58 of
Business
Zone
[15]
in support of this contention which reads as follows:
‘. . .
Reliance
on the
section 12B
arbitration procedure can more accurately be
understood as arbitration is ordinarily in contract: it suspends the
institution of
court litigation.
’
[40]
Having regard to the applicable rules of interpretation,
[16]
in my view on a proper interpretation of
Business Zone
, a
referral in terms of
section 12B
would have suspended the institution
of litigation had same not commenced and had a party applied for a
stay of the proceedings.
However, in this matter the eviction
proceedings had already been instituted and the request for a
section
12B
referral was made simultaneously with the filing of the answering
affidavit. What was required of the respondent is to then apply
to
stay the proceedings immediately once it had filed an intention to
oppose. I say so, as what the respondent fails to consider
is the
reference in para 58 of
Business Zone
to footnote 33. This
footnote makes specific reference to
section 6
of the
Arbitration Act
and
the ‘general position’.
[41]
Section 6
of the
Arbitration Act reads
as follows:
‘
6 Stay of legal
proceedings where there is an arbitration agreement
(1)
If any party to an
arbitration agreement commences any legal proceedings in any court
(including any inferior court) against any
other party to the
agreement in respect of any matter agreed to be referred to
arbitration,
any party
to such legal proceedings may at any time after entering appearance
but before delivering any pleadings or taking any
other steps in the
proceedings, apply to that court for a stay of such proceedings.
(2)
If on any such
application the court is satisfied that there is no sufficient reason
why the dispute should not be referred to arbitration
in accordance
with the agreement, the court may make an order staying such
proceedings subject to such terms and conditions as
it may consider
just.’ (My emphasis.)
[42]
The section enjoins a party to apply for the stay of any legal
proceedings which have been
instituted pending finalisation thereof,
that is, pending the outcome of the
section 12B
arbitration. I do not
agree with the submission that a
section 12B
referral automatically
stays or suspends the eviction proceedings. I am fortified in this
view having well regard to the decision
of Ploos Van Amstel J in
Crompton Street Motors
which found that although the court has
a discretion to stay the proceedings, the facts of the matter did not
warrant the court
exercising such discretion, given that the
respondent in that matter did not immediately bring the application
to stay the proceedings
and filed extensive answering affidavits and
a counter-application.
[17]
Of further relevance which influenced the court against exercising
such discretion to stay the proceedings, was that the Controller
had
at the time of the matter being argued not made a decision to refer
the matter to arbitration in terms of
section 12B.
[43]
In addition, what the submissions of the respondent fail to consider
in suggesting that
the
Arbitration Act does
not apply, in my view,
are the provisions of
section 40
of the
Arbitration Act which
read as
follows:
‘
40
Application of this Act to arbitrations under special laws
This Act shall apply to every
arbitration under any law passed before or after the commencement of
this Act, as if the arbitration
were pursuant to an arbitration
agreement and as if that other law were an arbitration agreement:
Provided that if that other law
is an Act of Parliament, this Act
shall not apply to any such arbitration in so far as this Act is
excluded by or is inconsistent
with that other law or is inconsistent
with the regulations or procedure authorized or recognized by that
other law.’
[44]
A proper reading of the PPA does not contain a provision specifically
ousting the applicability
of the
Arbitration Act, and
had it been the
intention of the legislature for the
Arbitration Act not to
apply,
the PPA would have expressly said so.
[45]
At this juncture, I must point out that the distinguishing feature of
Business Zone
from this particular matter is that in
Business
Zone
, no action was instituted for the eviction of the
respondents, and the matter dealt with the cancellation of an
agreement. The
cancellation occurred after the referral to
arbitration.
[46]
In the current matter, one has a situation where the action was
instituted in January 2018
and the referral for arbitration occurred
subsequently in March 2018, and the referral was approved in July
2018. It is common
cause that the eviction application was instituted
after the lease and franchise agreements had terminated, prior to the
second
request for a referral in terms of
section 12B
, and after the
respondent had filed its answering affidavit and conditional
counter-application. Consequently, there was no referral
to
arbitration at the time when this action was instituted.
[47]
I consequently agree with the submission of Mr Van Niekerk that the
provisions of the
Arbitration Act certainly
apply to these
proceedings, and that the respondent was required to bring an
application for the stay of these proceedings in terms
of
section 6
of the
Arbitration Act, pending
the finalisation of the
section 12B
arbitration. There is no such application and consequently the
respondent is not entitled to a stay of the proceedings on the basis
that the
section 12B
referral automatically stays the eviction
proceedings.
The
section 12B
referral in terms of
the PPA
[48]
A further reason why I am of the view that the
section 12B
referral
does not stay the eviction proceedings in this matter, is based on
what has been referred to the arbitrator to determine,
and the powers
conferred on the arbitrator by that section.
[49]
Section 12B
of the PPA provides that a referral to arbitration can be
made by the Controller of Petroleum Products on request by a licensed
retailer who alleges an unfair or unreasonable contractual practice
by a licensed wholesaler.
[18]
The section does not appear to be pre-emptory and it appears that the
Controller has a discretion in this regard. Once a referral
has been
made, the Controller can submit the matter to arbitration and the
provisions of
sections 12B(2)
and (3) apply.
[50]
Section 12B(4)
enjoins an arbitrator to:
‘
(
a
)
. . . determine whether the alleged contractual practices concerned
are unfair or unreasonable and, if so, shall make such award
as he or
she deems necessary to correct such practice; and
(
b
) . . . determine
whether the allegations giving rise to the arbitration were frivolous
or capricious and, if so, shall make such
award as he or she deems
necessary to compensate any party affected by such allegations.’
[51]
Section 12B(5)
provides that any award made by the arbitrator is
final and binding on the parties and may at the arbitrator’s
discretion,
include an order as to costs against one or more of the
parties concerned. Neither the PPA, nor the regulations promulgated
under
the PPA define what a contractual practice is, or what is
deemed to be unfair or unreasonable. Consequently, an arbitrator will
decide this, depending on the facts of each case and how an
arbitrator is persuaded by the evidence presented by the parties.
[52]
In his submissions, Mr Savvas contended that any order for the
eviction of the respondent
from the property is diametrically opposed
to or at loggerheads with the
section 12B
referral of 3 July 2018. In
addition, he submits, relying on
Business Zone,
that the
jurisdiction of the high court is ousted once there has been a
referral.
[53] It is common cause that on
23 March 2018,
[19]
a request for arbitration in terms of
section 12B
of the PPA was
submitted by the respondent to the Controller. This was subsequent to
the lease and franchise agreements having
terminated though the
effluxion of time and after the institution of the eviction
proceedings. On 3 July 2018, the Controller approved
the request for
arbitration in terms of
section 12B
of the PPA.
[54]
Of relevance in this matter is what has been referred to the
arbitrator. This is contained
in annexure ‘AH25’,
[20]
specifically, paragraph 5 of the letter of referral dated 3 July
2018, which reads as follows:
‘
5.
The request to refer the matter to arbitration is approved for the
arbitrator to test, inter alia, the allegations made by the
Requestor
that KZN Oils has committed an unfair or unreasonable contractual
practice:
5.1
By not renewing the
Franchise Agreement when it was obliged to do so. The Requester
bolsters this averment by stating, among others,
that it (the
Requester) purchased the retail business (Keyway Motors) in 1993 for
a sum of R300 000 and the Requester has been
a Chevron dealer for
about 25 years and in accordance with the established practice, KZN
Oils is obliged to treat the Requester
fairly, reasonably and in good
faith by entering into new agreements or extending the existing
agreements as Chevron has been accustomed
to so doing with its
retailers. In amplification thereof, the Requester states that
Chevron had not been notified of the KZN Oils’
intention not to
renew or extend the franchise and lease agreements as provided for in
the agreements entered into between Chevron
and KZN Oils.
5.2
By not allowing the
Requester to sell its business even where the Franchise period has
run out. The Requester augments its averment
by stating that Chevron
had in the case of Bulwer Park Service Station and Main Road Motors,
Pinetown allowed them to sell their
retail businesses. The Requester
avers further that this is a blatant attempt by KZN Oils to acquire
the Requester’s retail
business potentially in contravention of
section 2A(5)(a) of the Act, which conduct is also inimical to the
provisions of section
25 of the Constitution of the Republic of South
Africa, 1996 as it amounts to arbitrary deprivation of property,
namely retail
business and goodwill.
5.3
By short delivering
petroleum products over a period of time. Over the whole period, so
aver the Requester, they have made meter-less
delivery trucks or
trucks with dysfunctional meters and even in some circumstances after
they have had deliveries, they are expected
to use their dipsticks to
work out what the delivery volume is. In this respect, the total loss
experienced by the Requester during
the period January 2016 up to
January 2018 is R391, 755.52 and the Requester wishes to recover this
amount to KZN Oils.
5.4
By unjustifiably
increasing the rental for both Keyway Motors and Park Motors far
beyond the allowed 9% per annum increase as stipulated
in the rental
worksheet contained in the Franchise Agreement. Despite this and the
fact that the forecourt rental is no longer
part of the rent to be
paid by the Retailer as this component was replaced by the Regulatory
Accounting System Pricing Mechanism
(‘RAS’), invoices
were received for Keyway Motors for March 2018 for an amount of
R100,390.00 instead of the usual
amount of R12,907.00 and the rental
invoice for Park Motors also represented an increase from R12,844.00
to R53,400.01.
5.5
By requiring the
Requester to pay KZN Oils a Brand Fee or Goodwill Royalty which is
contrary to the Agreement as the goodwill vests
in Chevron. The
Requester avers further, inter alia, that it is common cause in the
fuel industry that the value of the business
accrues to the retailer
whereas the intellectual property / Brand Goodwill accrue to the
Wholesaler. The retailer realizes its
business value when it sells
the business
.’
[55]
What is noteworthy about the referral is that it does not relate to
the termination of
the franchise agreement and lease agreement
insofar as the right of occupation is concerned. It does not ask the
arbitrator to
deal with the
rei vindicatio
nor does it deal
with the applicant’s ownership of the property. Consequently,
the eviction is not a referral before the arbitrator.
The arbitrator
is not required to deal with this aspect in the section 12B referral.
[56]
At the hearing of the matter, I raised with Mr Savvas, depending on
the court’s interpretation
of
Business Zone,
if it did
not agree with the submissions that the jurisdiction of the high
court was ousted, whether an order for the eviction would
be a bar to
the section 12B proceedings. His submission in this regard was that
the effect of the high court’s order for
the eviction of the
respondent would be to negate any order which an arbitrator could
make. I disagree.
[57]
The arbitrator, in terms of section 12B, as well as in terms of the
referral, is required
to determine whether the applicant engaged in
any unfair and unreasonable contractual practices in relation to the
respondent.
The referral is clear: the arbitrator is not required to
deal with any eviction proceedings nor with the applicant’s
rights
of ownership of the property. In any event, I do not believe
that in the face of the authorities on this aspect an arbitrator
would,
on the facts of this matter, especially in circumstances where
the right of occupation has terminated, be empowered to revisit the
aspect of the eviction but more importantly, make any order denying
the applicant its common law right to eviction.
[58]
I am not required to deal with whether or not its failure to
negotiate and conclude a new
franchise agreement and/or whether its
failure to pay the respondent any amount of compensation in respect
of the goodwill of the
business constitute unfair or unreasonable
business practices, and I need not say anything more in relation to
this despite it
being raised on the papers. That falls squarely
within the terms of the referral before the arbitrator.
[59]
I venture to add that I do not believe that the powers of the
arbitrator extend
to making a new contract for the parties and
directing the applicant to conclude either a franchise or lease
agreement with the
respondent. The applicant’s counsel’s
reliance on the respective judgments in
Beadica
is clear
authority for this conclusion.
[60]
During the course of argument, I was referred to two decisions in
this division, one of
them being that of
Former Way Trade and
Invest,
[21]
a judgment by D Pillay J. Among the issues she was required to
decide, was whether eviction proceedings ought to be stayed pending
the outcome of section 12B arbitration proceedings in terms of the
PPA. D Pillay J was of the view that
Business Zone
was the
first judgment dealing with the interpretation of section 12B to
establish legal certainty in a large and regulated sector
of the
economy. This was to give recognition to the unequal bargaining power
in the petroleum industry between franchisee and franchisor.
[61] She took the view that the
powers conferred on an arbitrator in terms of section 12B(4)
of the
PPA, are limited. Consequently,
‘
Whether an arbitrator's
powers go beyond declaring a practice to be unfair or unreasonable,
to creating new contracts for the parties,
is doubtful in view of the
constitutional right to individual freedom to contract; after all,
the courts have no powers to create
contracts for parties; nor can
they refuse to give effect to agreements if, in the opinion of the
court, they are unfair or unreasonable’.
[22]
(Footnotes omitted.)
[62]
She confirmed that section 12B(4) of the PPA deals with the
substantive powers of the arbitrator
and are limited as to the relief
which an arbitrator can grant. At para 37 of her judgment, D Pillay J
concluded that arbitration
under section 12B does not automatically
suspend litigation that,
‘
What s 12B arbitration is
not, is a stratagem to delay litigation, or to have two bites at the
cherry. The finality of arbitration
awards and the risk of punitive
costs awards aim to discourage abuse of arbitration.’
[23]
(Footnote omitted.)
[63]
In considering
Future Phambili Petroleum (Pty) Ltd v Chamdor
Service Station CC,
[24]
she found such decision to be distinguishable. The eviction in
Phambili
emanated from disputes between the parties which
could not be separated from the issues referred to arbitration. In
addition, the
parties in that case were bound by an agreement to
refer disputes to arbitration and consequently were not prejudiced by
the stay
of proceedings to give effect to section 12B. D Pillay J was
of the view that the facts in
Former Way Trade and Invest
were
distinguishable from that in
Phambili
and absent a request to
the arbitrator to pronounce on the applicant’s rights of
ownership of the premises and to evict the
respondent who occupied
against the applicant’s will, no finding will emanate from the
arbitration relating to the eviction
proceedings before court.
Consequently, nothing prevented her from dealing with the eviction
application.
[64] In
Phambili,
the
issue which the court was required to adjudicate on was whether the
application for the eviction of the respondent from the
premises
ought to be stayed pending the finalisation of the disputes at
arbitration. Among the specific contractual provisions
which had been agreed
between the parties was the
applicability of
section 6
of the
Arbitration Act. In
Phambili
,
the agreement was still extant and there was no attempt by the
parties to resolve the disputes in terms of clause 20 of the
agreement.
The application for the eviction in
Phambili
of the
respondent was instituted without invoking the provisions of clause
20.
[65] The court took the view that
the issue of the eviction could not be separated from the
disputes
which the respondent had requested should be referred to arbitration.
Because the eviction application was launched whilst
the agreement
was still in force, the issues in the eviction proceedings could not
be separated from those referred for arbitration.
Consequently,
because clause 20 of the agreement made provision for disputes to be
resolved through negotiation or arbitration,
a stay of eviction
proceedings was warranted pending the invocation of clause 20 of the
agreement. The court, in considering
Business Zone,
was of the
view that there was value in allowing a party to resolve a dispute
through arbitration rather than court proceedings.
[66]
I align myself with the findings of D Pillay J and the distinguishing
facts of
Phambili.
Stay of proceedings based on clause 20
of the agreement
[67] As part of its defence to
the eviction proceedings, the respondent submits that clause
20 of
the franchise agreement
[25]
makes provision for the resolution of disputes between the parties,
and provides that disputes are to be resolved, firstly, by
negotiation
[26]
and failing that, arbitration.
[27]
Clause 20.6 specifically allows a party to apply for a stay of
proceedings pending resolution of the dispute by means of arbitration
in the event of either legal proceedings or eviction proceedings
being instituted and the respondent filing a notice of intention
to
oppose.
[68]
The preamble to clause 20 which is clause 20.1 reads as follows:
‘
Should any dispute arise
between the parties concerning this agreement, the dispute shall be
resolved in terms of the procedures
set out in this clause’.
[69]
Essentially the provisions of clause 20.1 set the tone for the
invocation of the remainder
of the provisions involving the
resolution of disputes in clause 20. I am of the view that the
respondent is not entitled to a
stay of the eviction proceedings on
this basis. Firstly, it seeks to invoke the provisions in the
answering affidavit and after
the filing of the answering affidavit
and counter-application. It is common cause that there is no dispute
between the parties
concerning the franchise agreement. There is no
clause in the franchise agreement which provides for arbitration on
any of the
grounds advanced by the respondent. Consequently, clause
20 does not apply to the proceedings.
[70]
I am fortified in this view, having regard to the decision of Ploos
van Amstel J in
Crompton Street Motors
in which he
specifically found that the arbitration contemplated in clause 20
could only be invoked in relation to a dispute between
the parties
‘concerning the agreement’.
[28]
As in this particular matter, what is an issue and which certainly
forms part of the
section 12B
referral is whether or not the
applicant undertook to conclude new agreements after the effluxion of
time.
[71]
The respondent has not referred any dispute to arbitration in terms
of clause 20 of the
agreement and accepts that both the franchise and
lease agreements have terminated. Consequently, it cannot invoke
clause 20 of
the franchise agreement at this stage of the
proceedings, more so in light of the fact that it did not do so,
prior to filing its
answering affidavit and conditional counter claim
nor are there any allegations in the answering affidavit that it
invoked clause
20 either by calling for negotiation or for mediation.
The ousting of the high
court’s jurisdiction and the decision in Business Zone
[72]
Among the issues I was required to determine is whether or not the
section 12B
arbitration ousts the jurisdiction of the high court. I
was referred to various paragraphs in the
Business Zone
judgment
of the Constitutional Court by the respondent in support of this
contention. In considering this issue I also had regard
to the
additional written submissions which the parties filed.
The decision in Business Zone
[73] I have carefully considered
this judgement and I am of the view that the facts in
Business
Zone
are distinguishable from the current matter.
Business
Zone
dealt with the review of decisions by the Controller and the
Minister of Minerals and Energy not to refer an alleged unfair or
contractual
practice to arbitration in terms of
section 12B
of the
PPA, the unfair and unreasonable practice alleged to be a single
cancellation.
[74]
In my view, the
section 12B
arbitration process does not oust the
jurisdiction of the high court nor does it constitute a bar to
eviction proceedings. Each
matter must be decided on its own set of
facts. The effect of
Business Zone
is that arbitration
proceedings are a parallel process to already instituted proceedings.
In some instances, a stay of proceedings
may be warranted. However,
the referral cannot as a blanket rule stay legal or eviction
proceedings, nor have the effect of ousting
the jurisdiction of the
court. An applicant must bring an application to stay the eviction
proceedings for reasons already dealt
with earlier on in this
judgment.
[75]
I do not regard
Business Zone
as ousting the jurisdiction of
the high court and I must add that during the course of his
submissions, Mr Savvas was not able to
refer me to any legal
authority which said this, either in his written heads or with
reference to the judgment itself.
[76]
The court in
Business Zone
was required to consider the proper
interpretation of
section 12B
of the PPA. Having regard to what is
recorded at paragraph 45 of the judgment, the court was at pains to
point out that the enactment
of
section 12B
entitled an aggrieved
party to request the Controller to refer a dispute to arbitration
rather than resolving the dispute through
litigation. The court, in
my view, also appears to agree that a fairness and equity standard
ought to apply in the negotiation
of contracts, specifically in the
petroleum industry. The court remarked that one of the purposes
behind the PPA was to transform
the petroleum industry but to also
‘provide for appeals and arbitrations’.
[29]
[77]
At paragraph 58, the court remarked as follows:
‘
Section 12B
arbitration
presents an
additional
route
for licensed
retailers and wholesalers alike to have their disputes adjudicated
quicker within rules and processes of their own
design.’ (My
emphasis, and footnote omitted.)
And
further in the same paragraph, the court held the following:
‘
Reliance on the
section
12B
arbitration procedure can more accurately be understood as
arbitration is ordinarily in contract: it suspends the institution of
court litigation.’
[78]
The court was at pains to point out that the threshold which forms
the basis, upon which
a Controller exercises their discretion to
refer the matter to arbitration, is an extremely low one:
‘
All
that is required is that the request for a referral must contain an
allegation of an unfair or unreasonable contractual practice,
which
the Controller in turn refers to arbitration
.’
[30]
[79]
There is nowhere in the judgment nor was I referred to any passage in
the judgment, which
indicates that once a referral to arbitration has
been made, the jurisdiction of this court is ousted. In my view, what
the Constitutional
Court had in mind was that in the event of a
referral being made, after the institution of legal proceedings, the
proper procedure
to follow is to request a stay of proceedings
pending the outcome of the arbitration, which is the most logical
interpretation
that can apply to the dictum of this judgment.
[80]
Had the Constitutional Court intended to oust the jurisdiction of the
high court, it would
have no doubt pertinently said so.
[81]
The crux of the issue in
Business Zone
concerned the proper
interpretation of
section 12B.
The Constitutional Court, in dealing
with the proper interpretation of
section 12B
of the PPA held the
following at para 46 of the judgment:
‘
When
interpreting a statutory provision the point of departure is that the
words employed must be construed in accordance with their
ordinary
grammatical meaning provided an absurdity does not result. The
jurisprudence is clear that this is subject to the requirement
that
statutory provisions must be interpreted purposively and be properly
contextualised’.
[82]
At para 55 of the judgment, the court attempted to address the
concern raised by the Supreme
Court of Appeal that the failure to
define the jurisdiction of an arbitrator would result in anomalous
consequences and held as
follows:
‘
Section
12B of the Act holds no pretence to giving effect to a particular
constitutional right nor can it, by any stretch of the
imagination,
be seen as establishing a separate adjudicative hierarchy’.
[83]
Further, at para 57 the court held the following:
‘
The purpose of the Act is
not only to transform the petroleum industry but "to provide for
appeals and arbitrations".
Section 12B introduces an equitable
standard in the framework of the statutory arbitration mechanism
under section 12B. If the
same adjudicative standard can be relied on
in section 12B arbitration proceedings and court litigation alike,
would that detract
from the purpose of the Act to provide for
arbitrations? I think not’.
[84]
At para 58 the court goes on to hold as follows:
‘
Section 12B arbitration
presents an additional route for licensed retailers and wholesalers
alike to have their disputes adjudicated
quicker within rules and
processes of their own design. Section 12B offers a statutory
guarantee of a mechanism that has become
ubiquitous in contract,
which may otherwise not exist possibly due to the unequal bargaining
position retailers
vis
a vis
wholesalers
find themselves in. Reliance on the section 12B arbitration procedure
can more accurately be understood as arbitration
is ordinarily in
contract: it suspends the institution of court litigation. In turn
the section 12B arbitral mechanism is insulated
from becoming a mere
preliminary, strategic step to court litigation in that section 12B
(5) speaks to the finality of such an
award.’ (Footnotes
omitted.)
[85]
At para 59 the following was further stated:
‘
The purpose of the
Amendment Act "to provide for appeals and arbitrations"
through section 12B cannot be overlooked. The
inherent value of
section 12B enabling a party to resolve a dispute through arbitration
rather than court proceedings must be recognised.
Arbitration offers
an expedient, specialised and procedurally flexible forum to resolve
disputes’.
[86]
For the provisions of section 12B to apply, the Controller does not
have to be satisfied
that there is an underlying contract which still
exists between the parties. This was endorsed in
Business Zone
at
para 64.
[87]
In
Business Zone,
the first cancellation by Engen had taken
place after Business Zone had referred a request for arbitration to
the Controller. In
my view, the decision in
Business Zone
is
distinguishable on the facts from the current matter and a section
12B referral does not have the effect of ousting the jurisdiction
of
the court to deal with the eviction application. One of the features
of the current matter which distinguishes it from
Business Zone
is
the fact that the Controller of Petroleum Products has appointed an
arbitrator, Advocate Maleka, in respect of the section 12B
arbitration.
[88]
I am fortified in this view, having regard to the decisions of D
Pillay J and Ploos Van
Amstel J, as well as the Supreme Court of
Appeal in
Former Way Trade & Invest (Pty) Ltd v Bright Idea
Projects 66 (Pty) Ltd
[31]
delivered on 1 October 2020. The full court of the SCA, in a
reconsideration of its refusal of leave to appeal, issued an order
confirming the previous order of the court, dismissing the
application for leave to appeal and directing the applicant to pay
the costs of such application for reconsideration. This judgment
accordingly confirmed the findings in the judgment of D Pillay
J.
[89]
The application for reconsideration of the order refusing leave to
appeal concerned the
judgment of D Pillay J
[32]
in which she granted an eviction order after the expiry of a
franchise agreement, having found that no new franchise agreement
had
been concluded, and refused a stay of the eviction proceedings
pending arbitration. Leave to appeal had been refused by the
high
court, as well as by the Supreme Court of Appeal on petition. The
applicant then applied for a reconsideration of the refusal
of leave
to appeal in terms of
section 17(2)
(f)
of the
Superior Courts
Act 10 of 2013
. In his judgment, Goosen AJA writing for the full
court found that the PPA, specifically
section 12B
, did not contain
any provision which ousted the high court’s jurisdiction.
[90]
At para 32 he held as follows:
‘
The Act contains no
provision which, in unequivocal terms, ousts the jurisdiction of a
court of law. Whether it does indeed oust
the court’s
jurisdiction is therefore a matter of construction and
interpretation. In deciding whether the legislative provision
ousts
the court’s jurisdiction, all circumstances must be considered
to determine whether the necessary implication arises
that its
jurisdiction is either wholly or partially excluded.’ (Footnote
omitted.)
[91]
In interpreting the effect of
Business Zone
, and whether the
ratio of the judgment was that the resolution of disputes by way of
arbitration applied exclusively, he held the
following at para 35:
‘
That
finding is not itself relevant to the present case, but the
Constitutional Court's view of what constitutes a contractual
practice for the purpose of the Act is important. It made it clear
that although the arbitrator in an arbitration under s 12B applies
a
standard informed by fairness and reasonableness, which foreshadows
the possibility that they may invalidate conduct that strictly
speaking is permitted by the contract, their jurisdiction does not
extend to making a contract for the parties other than the one
they
actually concluded. This emerges from the following passage in the
judgment:
“
.
. . the arbitrator’s remedial powers can go no further than
correcting the contractual practice in question. The interests
of
third parties are protected in the section 12B arbitration process,
the subject matter of which is limited to a “contractual
practice”. This presumes that remedying the dispute lies
squarely within the contractual rights and obligations of the parties
to the contract.”’
.
[92] What was emphasized by the
SCA in para 36 of the judgment was that the Constitutional
Court
confirmed the fact that the arbitrator can only exercise powers in
terms of the contract between the parties.
[93]
Then further at para 37, the court held the following:
‘
Counsel’s reliance
on the judgment was based on the Constitutional Court’s
treatment of the introduction of a normative
equitable standard in
arbitral proceedings under s 12B of the Act. The reliance was
misplaced. The Constitutional Court dealt with
the notional
‘conflict’ between court adjudication of disputes and
arbitral dispute resolution based on an equitable
standard with
reference to an assessment of similar developments under the
Labour
Relations Act 66 of 1995
and
Rental Housing Act 50 of 1999
. The
Constitutional Court concluded that no such conflict arises since
there is no reason why a normative equitable standard should
not also
apply to court adjudication.’ (Footnote omitted.)
[94] The court at para 38 also
found that this conclusion by the Constitutional Court ‘militates
against a finding that arbitration proceedings [in terms of] s 12B of
the Act serve as an exclusive forum for the adjudication
of disputes
arising between wholesalers and retailers of petroleum products’.
It relied on this conclusion that arbitral
proceedings do not
constitute an exclusive mechanism for dispute resolution with the
reference to the passage in
Business Zone
at para 58 which
reads as follows: ‘
Section
12B arbitration presents an additional route for licensed retailers
and wholesalers alike to have their disputes adjudicated
quicker
within rules and processes of their own design. Section 12B offers a
statutory guarantee of a mechanism that has become
ubiquitous in
contract, which may otherwise not exist possibly due to the unequal
bargaining position retailers
vis
a vis
wholesalers
find themselves in. Reliance on the section 12B arbitration procedure
can more accurately be understood as arbitration
is ordinarily in
contract: it suspends the institution of court litigation. In turn
the section 12B arbitral mechanism is insulated
from becoming a mere
preliminary, strategic step to court litigation in that section 12B
(5) speaks to the finality of such an
award.’
[95]
The Supreme Court of Appeal also found that the submission by counsel
for Former Way that
arbitration suspends the institution of court
litigation, which then also pointed to an ousting of the jurisdiction
of the court,
was unsound specifically in light of the reference in
the judgment of Mhlanta J to
s 6
of the
Arbitration Act. The
SCA
concluded that what Mhlanta J had in mind, was that a party may seek
a stay of litigation pending arbitration, and not an automatic
stay
of litigation in favour of arbitration under
section 12B.
Here the
court relied specifically on para 56 of
Business Zone
where
the Constitutional Court held the following:
‘
Forum-shopping between
these two different systems of law applied in different institutions
will disappear. Instead, what remains
is only the choice of
arbitration rather than adjudication in the courts, a procedure well
known to our law.’
[96]
At para 40 of the judgment, the SCA concluded that there were
‘
. . . no circumstances
which warrant a finding that a referral to arbitration under s 12B of
the Act ousts the court’s jurisdiction
to adjudicate a dispute.
Where . . referral to arbitration occurred after the commencement of
the litigation it fell within the
discretion of a court below to stay
proceedings pending the arbitration’.
[97] In the result, the
respondent does not have a right of continued occupation on this
basis
either.
The Constitutional Challenge
[98] The respondent avers that
its constitutional rights have been infringed. Having regard
to the
answering affidavit, the respondent contents itself with vague,
ambiguous, generalised and unfocused contentions to support
the
alleged breach of its constitutional rights. As a consequence, in my
view, I agree with the submission of the applicant that
these
assertions are untenable and unsustainable, both in law and fact.
[99]
Having regard to
Mohamed’s Leisure Holdings (Pty) Ltd v
Southern Sun Hotel Interests (Pty) Ltd
,
[33]
which dealt with the similar contentions as advanced by the
respondent, indicated the following:
(a)
‘It was impermissible for the high
court to develop the common
law of contract by infusing the spirit of ubuntu and good faith so as
to invalidate the term or clause
in question’;
[34]
(b)
It would be untenable to relax the maxim
pacta sunt servanda
in
this particular matter as it would result in the court making an
agreement for the parties which was contrary to the SCA decision
and
dictum in
Oregon Trust v Beadica
231 CC;
[35]
(c)
Even though a term in a contract operates
unfairly or harshly, this
does not by itself lead to the conclusion that it would offend the
values of the Constitution or that
it would be against public
policy.
[36]
[100]
In any event, if one has regard to the relief which the respondent
seeks in the counter-application, what
in effect the relief
effectively boils down to is the respondent requiring the court to
make a contract for the parties which is
impermissible.
[101]
What was envisaged by the parties would be that a new franchise
agreement would be concluded, and despite
several attempts, no new
franchise agreement was ever signed by the parties. This is
self-evident from the referral to arbitration
in which the respondent
contends that the applicant has engaged in an unfair and unreasonable
practice, in that it has failed to
provide a new written franchise
agreement for signature.
[102]
The effect of the decision of the SCA in
Beadica 231 CC
, is
that the court found that there was ‘no consideration of public
policy permits the making of contracts for parties by
a court’
,
[37]
and to permit a respondent to occupy the leased premises for a
further period of five years, was tantamount to a court making a
new
contract for the parties which was impermissible. In my view, this is
precisely what the respondent contends for, if one has
regard to the
counter-application.
The Judgments of D Pillay J, Ploos
van Amstel J and Bezuidenhout J
[103]
Among the submissions of the respondent was the diminished
precedential value of the decisions in this division
of the three
judgments of my colleagues mentioned in this judgment, the submission
being that I was not bound by the findings in
these judgments as they
are wrong. All three judgements emanate from this division, and in
terms of the principle of
stare decisis
I am bound by them
unless they are wrongly decided or distinguishable in some other way.
I have had regard to all three of these
decisions and I am of the
view that they were, given the facts of each matter, correctly
decided and there is no basis to depart
from them.
The respondent’s conditional
counter-application
[104]
The applicant submits that the judgments of D Pillay, J and Ploos van
Amstel, J are fatal to the respondent’s
case, I agree. The
defences and relief claimed in the conditional counter-application
raised by the respondent in the current matter
were similarly raised
and relied upon in
Former Way Trade and Invest
and
Crompton
Street Motors
. In both these matters, the respondents raised
identical conditional counter- applications. On 10 July 2018, D
Pillay J delivered
her judgment in
Bright Idea Projects 66 (Pty)
Ltd v Former Way Trade and Invest (Pty) Ltd
,
[38]
in which she issued an eviction order and dismissed Former Way’s
conditional counter-application. Similarly, on 6 June 2019,
Ploos van
Amstel J delivered his judgment in
Bright Idea Projects 66 (Pty)
Ltd t/a All Fuels v Crompton Street Motors CC t/a Wallers
Garage
,
[39]
in
which he also granted an eviction order and dismissed the conditional
counter-application.
[105] I
was also referred to a decision of Bezuidenhout J of 15 June
2020,
[40]
involving an application for the eviction of a retailer in which the
respondent in that matter similarly instituted a conditional
counter-application in the event of the eviction application being
dismissed. Bezuidenhout J found that
Business Zone
was
distinguishable on the facts of the matter and granted an order
inter
alia
for eviction.
[106]
Bezuidenhout J, in his judgment was referred to the directions from
the Constitutional Court dated 29 May
2020.
[41]
In his judgment, Bezuidenhout J elected to follow the judgments of
Former Way Trade and Invest
of D Pillay J and
Crompton
Street Motors
per Ploos Van Amstel J. All three of these
judgments, all emanating from the KwaZulu-Natal High Court, found
that
Business Zone
is distinguishable and that an arbitration
in terms of section 12B of the PPA does not suspend pending
litigation in the high court.
[107] In the matter
which served before Ploos van Amstel J, the applicant sought the
eviction of the respondent
by way of a declaratory order that the
lease agreement terminated on 28 February 2018 through effluxion of
time. The respondent
opposed the application on the basis that the
proceedings be stayed pending arbitration in terms of section 12B of
the PPA, alternatively
in terms of clause 20 of the original
franchise agreement on the basis that the applicant had undertaken to
renew the franchise
agreement for a further five year period. The
respondent also delivered a conditional counter-application in which
it sought an
order directing the applicant to provide it with a new
franchise agreement and an order declaring that it was entitled to
conduct
business on the premises for a further five year period.
[108] In
his judgment, in dealing with the stay of the eviction proceedings
pending arbitration, Ploos van Amstel
J referred to the provisions of
section 6
of the
Arbitration Act and
was of the view that the
application to stay the proceedings should have been brought after
the delivery of the notice of intention
to oppose but prior to taking
any further steps in the proceedings, and it would not have to
deliver a comprehensive answering
affidavit. He took the view that he
ought not to exercise the discretion in terms of
section 6(2)
of the
Arbitration Act, as
there was no sufficient reason for the dispute to
be referred to arbitration.
[109]
The dispute before him was one which concerned the law of contract
and whether or not the applicant bound
itself contractually to
conclude a new franchise and lease agreement. He took the view that
those issues had nothing to do with
an unfair or unreasonable
contractual practice as envisaged in
section 12B
of the PPA. In
addition, in relation to the stay pending an arbitration in terms of
clause 20 of the agreement, he found that there
was no evidence on
the papers that the respondent had initiated a procedure in clause 20
by calling for negotiation and then mediation.
In addition, the
wording of clause 20 contemplated a dispute between the parties
concerning the agreement. As both the franchise
agreement and lease
agreement had expired through the effluxion of time, clause 20 was of
no application.
[110] D
Pillay J found that the decision of
Business Zone
was
distinguishable from the matter she was dealing with on several
fronts. She is correct in finding that the Constitutional Court
interpreted the provisions of
section 12B
of the PPA, in the context
of an application to review the decision of the Controller and the
Minister of Mineral and Energy not
to refer an alleged unfair or
unreasonable contractual practice to arbitration.
Business Zone
identified three claims for unfair or unreasonable contractual
practices, stipulated in the request for the referral to arbitration.
None of the claims in the referral involved the ejectment or a
failure to establish a renewal agreement. The Constitutional Court
also did not order a stay of the litigation in the high court.
[111]
Pillay J found that a referral in terms of
section 12B
of the PPA did
not automatically suspend litigation and that an agreement to refer a
matter for arbitration entitles a party to
apply to court for a stay
of such litigation. In addition, in dealing with the alternative
request for a stay, relying on clause
20 of the franchise agreement
which provided for negotiation and mediation in the event of any
dispute arising between the parties
concerning the agreement, she
took the view that the agreement referred to was a franchise
agreement and consequently dismissed
the application for a stay on
such ground.
[112] On 11 October 2020, I was provided with
correspondence and two further cases which the parties brought
to the
attention of the registrar assigned to me on 9 October 2020. These
were two recent decisions, the first, a judgment handed
down by Ploos
van Amstel J in the Durban High Court on 30 September 2020 in the
matter between
KZN Oils (Pty) Ltd vs Frenserve CC t/a John Ross
Service Station
[42]
and the judgment in an application for reconsideration of the refusal
of leave to appeal in terms of
s 17(2)
(f)
of the
Superior
Courts Act, delivered
on 1 October 2020 in the Supreme Court of
Appeal.
[43]
[113]
Frenserve
concerned an application for the eviction of the
respondent from premises based on the effluxion of the lease
agreement. The respondent,
apart from opposing the eviction
application, sought a stay of the proceedings pending the outcome of
the arbitration referred
in terms of
section 12B
of the PPA by the
Controller of Petroleum Products dated 12 March 2020. One of the
issues in the referral concerned the refusal
by the applicant to
renew and/or extend the agreement.
[114]
It is common cause in that matter that the application for the
eviction was issued on 8 March 2018 and a
referral to the Controller
of Petroleum Products occurred on 5 May 2018. The counter-application
which contained the stay of the
eviction application was filed on 10
May 2018. It is common cause that the Controller of Petroleum
Products did not respond to
the referral and consequently, an appeal
was lodged with the Minister on 28 February 2020. The referral to
arbitration was communicated
to the parties by the Controller of
Petroleum Products on 12 March 2020.
[115]
In his judgment, Ploos van Amstel J alluded to
Business Zone
in
which the Constitutional Court referred to the equitable standard
that
section 12B
imposes. He was of the view that given the
arbitrator’s powers in terms of
s 12B(4)
(a)
of the PPA
to make an award to correct the unfair or unreasonable practice, he
should not in advance of the arbitration, infringe
on the powers of
the arbitrator.
[116]
Accordingly, he issued an order staying the eviction application
pending the final determination of the
arbitration referred in terms
of
section 12B
of the PPA and reserve the aspect of costs.
[117]
This decision is not in conflict with the order which he issued in
the matter of
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v
Crompton Street Motors CC t/a Wallers Garage Service Station,
[44]
in which he granted an eviction order. In such decision, although
there had been a request for a referral, at the time of the matter
serving before him the Controller had not made a decision to refer
the matter for arbitration. In my view the facts in
Frenserve
are
distinguishable from
Crompton Street Motors
.
[118]
For the reasons already dealt with in this judgment, the defences
advanced by the respondent are unsustainable
and not tenable.
Consequently, it has not discharged the onus to show it has a right
of continued occupation. For reasons alluded
to in this judgment,
similarly the conditional counter-application too must fail.
[119]
Consequently, in my view, the applicant is entitled to an order for
the eviction of the respondent.
Costs
[120] It is trite that the aspect of costs falls
within the jurisdiction of this court. At the hearing, Mr Van
Niekerk
did not persist in seeking a punitive costs order and was content
with a party and party costs order.
Concluding Remarks
[121]
This matter was argued on 13 September 2019 and delivery of the
judgment has been delayed due to a number
of factors. At the time of
the hearing, I was advised that a petition was pending before the
Supreme Court of Appeal in respect
of the judgment of Ploos Van
Amstel J in
Crompton Street Motors.
It was subsequently also
brought to my attention in October 2019, that the petition to the SCA
had been dismissed. In addition,
I was also made aware that a
petition was likewise pending against D Pillay J’s decision in
Former Way Trade and Invest
and the application for
reconsideration against the refusal of leave to appeal by the SCA. In
addition, since October 2019, I have
been without permanent
secretarial support which was brought to the attention of the Judge
President of the division and court
management.
[122]
The Covid-19 pandemic intervened and the lockdown imposed in March
2020 placed a moratorium on evictions.
As the country moved from
Alert level 5 to 4, in the interim in May 2020, I was advised of the
directives of the Constitutional
Court in the matter of
Crompton
Street Motors
dated 29 May 2020. These directions concerned an
application for leave to appeal which is pending before the
Constitutional Court,
the Supreme Court of Appeal having refused
leave to appeal.
[123]
These directions refer the parties to
Business Zone
and they
are invited to file written submissions as to whether
Crompton
Street Motors
is distinguishable from
Business Zone,
and
on what basis ‘the alleged unfair or unreasonable contractual
practice should not be referred to arbitration?’ The
directions
read as follows:
‘
1.
This Court in
Business
Zone 1010 CC t/a Emmarentia Convenience Centre vs Engen Petroleum
Limited and Others
[2017]
ZACC 2
, 2017 (6) BCLR (773) CC (
Business
Zone)
held:
(a)
A single act outside the
actual terms of the contract (in that case cancellation) could fall
within the ambit of “an allegation
of an unfair or unreasonable
contractual practice”, which unlocked the arbitration
jurisdiction of the Controller.
(b)
The determination of
fairness and unreasonableness under the Petroleum Products Act 120 of
1977 (PPA) imposes an equitable standard
“that overrides the
terms of their contract to ensure that fairness and reasonableness
prevail”.
(c)
The Statutory Arbitration
process was obligatory and should get precedence “the inherent
value of section 12 B enabling a
party to resolve a dispute through
arbitration rather court proceedings must be recognised”.
2.
The applicant and the
respondent are invited to file written submissions on the following
questions:
(a)
Is this case
distinguishable from
Business
Zone?
If so, provide
details and extent thereof;
(b)
On what basis should the
alleged unfair or unreasonable contract practice not be referred to
arbitration under the ambit of section
12 B of the PPA?’
[124]
Pursuant to receiving such correspondence and documents, the parties
were invited, in the interests of justice,
to submit any further
written representations that they wished to and both parties did so
on 26 June 2020. Among the documents
submitted was the judgment by
Bezuidenhout J in
KZN Oils (Pty) Ltd
v
KZN Motors (Pty) Ltd
supra
delivered on 15 June
2020 in the Pietermaritzburg High Court.
[125]
The decision in the application for reconsideration of the SCA
decision to refuse leave to appeal was delivered
on 1 October
2020.
[45]
On 9 October 2020 I was made aware of such judgment as well of a
further judgment delivered on 30 September 2020 by Ploos Van Amstel
J
in the matter of
KZN Oils (Pty) Ltd v Frenserve CC t/a John Ross
Service Station
.
[46]
[126]
In the interim, the regulations in terms of the adjusted lockdown
alert level 3 have been imposed and are
currently in place.
Essentially my understanding of such regulations are that they do not
prevent a landlord from instituting proceedings
for an eviction and a
court has a discretion to grant an order of eviction if it is just
and equitable to do so.
[127] In
Anchorprops 31 (Pty) Ltd & another v Levin
[47]
the court held that, ‘the requirements of justice and equity
contemplated in regulation 19 overlap with the requirements
of
justice and equity under section 4(7), (8) and (9) of the PIE Act’.
I am of the view that having regard to the wording
of regulation 37
of the Disaster Management Act regulations
[48]
which incorporates the amendments of 1 February 2021, that these do
not apply to commercial entities. The wording of the regulation
refers to ‘A person may not be evicted from his or her land or
home or have his or her place of residence demolished’
.
The
factors referred to in regulation 37(2) in addition, refer in the
main to a person’s residence.
[128]
I am of the considered view that it is just and equitable for an
eviction order to be granted in this matter.
The lease and franchise
agreement ended through the effluxion of time in 2016. Despite this,
the applicant engaged with the respondent
in an attempt to negotiate
a new agreement. It was only when these attempts, which lasted a
period in excess of 12 months, had
failed that it instituted these
application proceedings.
[129]
The matter has already been referred for arbitration in terms of
section 12B of the PPA. The respondent
is not without an alternate
remedy. It is thus just and equitable for the applicant to be granted
the relief it seeks.
Order
[130] Consequently, the following order is issued:
Main application
(a)
The respondent and anyone occupying through
it are hereby ordered to
vacate the premises situated at Portion 4 of Erf 731, Madadeni Road,
Newcastle, KwaZulu-Natal within 30
days of the date of the grant of
this order;
(b)
The respondent is directed to pay the costs
of the main application.
The conditional counter-application
(c)
The conditional counter-application is
dismissed with costs.
HENRIQUES J
CASE INFORMATION
APPEARANCES
Counsel for the
Applicant
:
Advocate G.O. Van Niekerk SC
Heads of argument drafted
by
:
Advocate G.O. Van Niekerk SC
and D Ramdhani
Instructed
by
:
Shepstone and Wylie 24 Richefond Circle
Ridgeside
Office Park Umhlanga Rocks
Tel: (031) 575 7000
Ref: A F Donnelly/nm/KZNO1.45
Email:nmoodley@wylie.co.za
Locally Represented
by
:
Shepstone
& Wylie
1
st
Floor, ABSA Building
15 Chatterton Road Pietermaritzburg
Tel: (033) 355 1780
Ref: Josette Manuel
Email:
jmanuel@wylie.co.za
Counsel
for the Respondent
:
Advocate B.G. Savvas
Instructed by
: Kobus
Swart & Company
Respondent’s
Attorneys 227
Mathews Meyiwa Road
Morningside
Durban
Email:kobus@swartlaw.co.za
Locally Represented by
: Stowell
& Company 295 Pietermaritz Street
Pietermaritzburg
Tel: (033) 845 0500
Email:
zeldas@stowell.co.za
Ref: PL FIRMAN/KSW/0056/zs
Date of
Hearing
: 13
September 2019
Further written
submissions
: 22 June
2020
Date of Judgment in
SCA
: 1
October 2020
Date of
Judgment
: 12
February 2021
This judgment was handed
down electronically by circulation to the parties’
representatives by email and release to SAFLII.
The date and time for
hand down is deemed to be 09h30 on 12 February 2021.
[1]
The Business Zone 1010 CC t/a Emmarentia Convenience Centre v
Engen Petroleum Ltd & others
2017 (6) BCLR 773 (CC).
[2]
Bright Idea Projects 66 (Pty) Ltd v Former Way Trade and Invest
(Pty) Ltd
2018 (6) SA 86 (KZP)
[3]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39.
[4]
[4]
Caltex subsequently changed its name to Chevron South Africa (Pty)
Ltd and then to Zastron.
[5]
Bright Idea Projects (Pty) Ltd v Former Way Trade and Invest
(Pty) Ltd
2018 (6) SA 86 (KZP
[6]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39.
[7]
[7]
At the time of penning this judgment, the Constitutional Court will
consider an appeal in respect of the judgment of Ploos Van
Amstel J
in
Crompton Street Motors
[8]
[8]
Graham v Ridley
1931 TPD 476.
[9]
Chetty v Naidoo
1974 (3) SA 13
(A) at 20A-E.
[10]
This approach was applied in
Chevron South Africa
(Pty) Limited & another v Kiribati Traders CC
[2016]
ZAGPJHC 342 paras 22 and 23.
[11]
Volume 3, page 202 para 27 of the indexed papers, which reads as
follows: ‘. . . I was always assured by Chevron
representatives
and management that if, at the end of the franchise
period, the franchise agreement was not renewed, I would be entitled
to sell
the business off as was historically always the case, to the
next retailer. . . ’
[12]
Clause 19.2 of the franchise agreement reads as follows:
‘The contract constitutes the
entire agreement between the parties who acknowledge that there are
no other oral or written
understandings or agreements between them
relating to the subject matter of this contract. No amendment or
other modification
of this contract shall be valid or binding on a
party hereto unless reduced to writing and executed by both parties
hereto’.
[13]
Beadica 231 CC & others v Trustees for the Time Being of the
Oregon Trust & others
[2020] ZACC 13
; 2020 (5) 247 (CC
[14]
[14]
Trustees, Oregon Trust & another v Beadica 231 CC &
others
[2019] ZASCA 29; 2019 (4) SA 517 (SCA).
[15]
[15]
The Business Zone 1010 CC t/a Emmarentia Convenience Centre v
Engen Petroleum Ltd & others
2017 (6) BCLR 773 (CC).
[16]
Natal Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA);
Bothma-Batho Transport (Edms) Bpk v S Bothma &
Seun Transport (Edms) Bpk
[2013] ZASCA 176; 2014 (2) SA 494
(SCA).
[17]
[17]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39
paras 14-17.
[18]
Section 12B(1).
[19]
Annexure ‘AH2’, volume 3, pages 243-265 of the indexed
papers.
[20]
[20]
Volume 5, pages 496-497 of the indexed papers
[21]
Bright Idea Projects (Pty) Ltd v Former Way Trade and Invest
(Pty) Ltd
2018 (6) SA 86 (KZP).
[22]
[22]
Ibid para 32.
[23]
Ibid para 37.
[24]
[24]
Future Phambili Petroleum (Pty) Ltd v Chamdor Service Station CC
[2017] ZAGPPHC 1206
[25]
[25]
Annexure B, volume 1, pages 22-86 of the indexed papers.
[26]
Clause 20.2.
[27]
Clause 20.3.
[28]
[28]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39
para 20.
[29]
[29]
Business Zone 1010 CC t/a Emmarentia Convenience Centre v Engen
Petroleum Ltd & others
2017 (6) BCLR 773
(CC) para 57.
[30]
Business Zone
para 64.
[31]
Former Way Trade & Invest (Pty) Ltd v Bright Idea Projects 66
(Pty) Ltd
[2020] ZASCA 118.
[32]
[32]
Bright Idea Projects 66 (Pty) Ltd v Former Way Trade and Invest
(Pty) Ltd
2018 (6) SA 86 (KZP).
[33]
33
Mohamed’s
Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests (Pty) Ltd
2018 (2) SA 314 (SCA).
[34]
Ibid para 30.
[35]
Ibid para 32.
[36]
[36]
Ibid para 30.
[37]
Trustees, Oregon Trust & another v Beadica 231 CC &
others
[2019] ZASCA 29
;
2019 (4) SA 517
(SCA) para 42.
[38]
Bright Idea Projects 66 (Pty) Ltd v Former Way Trade and Invest
(Pty) Ltd
2018 (6) SA 86 (KZP).
[39]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39.
[40]
KZN Oils (Pty) Ltd v KZN Motors (Pty) Ltd
(KZP) unreported
case no 7444/19P.
[41]
[41]
These directions are discussed later on in my judgment.
[42]
KZN Oils (Pty) Ltd v Frenserve CC t/a John Ross Service Station
(KZD) unreported case no D2658/2018, delivered on 30 September
2020
[43]
Former Way Trade & Invest (Pty) Ltd v Bright Idea Projects 66
(Pty) Ltd
[2020] ZASCA 118.
[44]
Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street
Motors CC t/a Wallers Garage Service Station
[2019] ZAKZPHC 39.
[45]
[45]
Former Way Trade & Invest (Pty) Ltd v Bright Idea Projects 66
(Pty) Ltd
[2020] ZASCA 118.
[46]
KZN Oils (Pty) Ltd v Frenserve CC t/a John Ross Service Station
(KZD) unreported case no case no D2658/2018 delivered on 30
September 2020.
[47]
Anchorprops 31 (Pty) Ltd & another v Levin
[2020] ZAGPJHC
183 para 4.
[48]
Disaster Management Act: Regulations issued in terms of section 27
(2) of the Act, GN R480, GG 43258, 29 April 2020 (as amended).