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[2020] ZALMPPHC 2
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Engen Petroleum Limited v Rissik Street One Stop CC t/a Rissik Street Engen and Another (1583/2019) [2020] ZALMPPHC 2 (12 February 2020)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
LIMPOPO DIVISION,
POLOKWANE
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED
CASE
NUMBER: 1583/2019
12/2/2020
In
the matter between:
ENGEN
PETROLEUM LIMITED
APPLICANT
And
RISSIK
STREET ONE STOP CC t/a
RISSIK
STREET ENGEN
FIRST RESPONDENT
KNOESEN
WILLEM JOHANNES
SECOND RESPONDENT
JUDGEMENT
KGANYAGO
J
[1]
The applicant has leased the premises from the landowner in terms of
a notarial deed
of lease. The applicant in turn sublet the premises
to the first respondent who sought to conduct the business of
operating an
Engen service station, and the second respondent is its
operator. The first respondent took occupation of the premises during
1998
and since then it has been operating Engen Service Station for
its own account. It took occupation in terms of an operating lease.
Both the applicant and the first respondent’s occupation of the
premises is dependent on there being a valid and binding
notarial
deed of lease in place.
[2]
The operating lease was for a fixed term period. The operating lease
has been renewed
on several occasions since 1998 for a further fixed
term period. The decision to extend the operating lease was in the
discretion
of the applicant. However, in the event the applicant
elected not to offer the first respondent a further renewal of the
lease,
together with the right to operate an Engen branded fuel
filing and service station from the premises, the applicant was
required
to notify the first respondent at least 12 months in
advance.
[3]
The notarial lease as well as the operating lease was to come to an
end on the 30
th
June 2018. The land owner demanded R3
million payment from the applicant as a condition to renew the
notarial lease which the applicant
agreed to pay. As a result of that
the notarial lease was extended. In turn the applicant sought to
recover the R3 million paid
to the landlord from the respondents by
requesting the respondents to pay that amount as a condition of
renewing the operating
lease. The parties could not reach an
agreement in relation to the payment of R3 million. As a result of
the failure to reach the
agreement, on the 2
nd
October
2017 the applicant notified the first respondent of its decision not
to renew the operating lease beyond its termination
date of the 30
th
June 2018 alternatively 31
st
October 2018. The applicant
further advised the second respondent of its entitlement to source a
buyer for the business of the
first respondent.
[4]
The first respondent introduced a potential buyer to the applicant on
the 25
th
May 2018. The applicant did not consider the
application of the potential buyer as according to it the application
lacked compliance.
The second respondent did not present the
applicant with any further potential buyers during the 12 months
notice period.
[5]
On the 26
th
July 2018, the first respondent approached the Controller of
Petroleum Products in terms of section 12B of the Petroleum Products
Act
[1]
(“the PPA”).
The referral was for arbitration in relation to alleged unfair and
/or unreasonable contractual practise
committed by the applicant.
[6]
Whilst waiting for a decision by the Controller, on the 17
th
January 2019 the second respondent introduced the second potential
buyer of the business to the applicant. The applicant did not
consider that application of the second potential buyer as it
considered the operating lease to have terminated on the 31
st
October 2018 through effluxion of time.
[7]
On the 22
nd
January 2019, the applicant gave the first respondent with a written
notice to vacate the premises. The first respondent refused
to vacate
the premises. That resulted in the applicant launching an eviction
application against the respondents. The respondents
are opposing the
applicant’s application and have brought a counterclaim seeking
a stay of the proceedings pending a decision
by the Controller.
[8]
The applicant’s counsel has submitted that the first respondent
is not genuinely
opposing the application to eject and that it also
has no desire to remain in occupation of the premises. Instead the
first respondent
harbours under the impression that it is entitled to
be afforded an opportunity to sell the business and in so doing
extract some
value therefrom. It is the applicant’s contention
that it is under no obligation, contractually or otherwise, to allow
for
the unlawful occupation of the respondents to continue in order
to provide the second respondent with a further opportunity to sell
the business. According to the applicant, the operating lease has
terminated, and the first respondent’s continued occupation
of
the premises is unlawful.
[9]
The respondents on the other hand submit that the proceeding in this
matter be stayed
pending a referral for arbitration which would
include the conclusion of that arbitration. It is the respondent’s
contention
that the arbitration stands separate from any other
process, and that section 12B of the PPA is simply a consideration in
terms
of a legislated measure that has been implemented for a very
specific purpose to address the imbalances in the relationship
between
retailers and wholesalers in the petroleum industry. The
respondents further submit that an arbitrator is empowered to make
interim
orders to the dispute. One of such interim order is that the
first respondent remains in operation on the same terms and
conditions.
[10]
What the court is basically called upon to determine, is whether to
stay the eviction proceedings
pending a determination by the
Controller of Petroleum Products of the applicant’s referral of
a dispute in terms of section
12B of the PPA, and if the proceedings
are stayed, whether to interdict the applicant from taking any steps
that will adversely
affect the operations of the first respondent
pending the arbitration in terms of the PPA and certain relief
claimed in terms of
the Consumer Protection Act
[2]
.
Should the respondents’ counterclaim be refused, I must
determine whether the respondents should be evicted or not.
[11]
Section 12B of the PPA reads as follows:
“
(1)
The Controller of Petroleum Products may on request by a licensed
retailer alleging an unfair
or unreasonable contractual practice by a
licensed wholesaler, or
vice
versa
,
require, by notice in writing to the parties concerned, that the
parties submit the matter to arbitration.
(2)
An arbitration contemplated in subsection (1) shall be heard -
(a)
by an arbitrator chosen by the parties concerned; and
(b)
in accordance with the rules agreed between the parties.
(3)
If the parties fail to reach an agreement regarding the arbitrator,
or the applicable
rules, within 14 days of receipt of the notice
contemplated in subsection (1) -
(a)
the Controller of Petroleum Products must upon notification of such
failure, appoint
a suitable person to act as arbitrator; and
(b)
the arbitrator must determine the applicable rules.
(4)
An arbitrator contemplated in subsection (2) or (3) –
(a)
shall 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)
shall 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;
(5)
Any award made by an arbitrator contemplated in this section shall be
final and binding
upon the parties concerned and may, at the
arbitrator's discretion, include an order as to costs to be borne by
one or more of
the parties concerned."
[12]
The applicant has notified the first respondent on the 2
nd
October 2018 that it will not renew the operating lease agreement
beyond its termination date being the 30
th
June 2018.
However, it was a material term of the operating lease agreement that
the first respondent must be notified of at least
12 months in
advance should the applicant elect not to renew the operating lease
for a further fixed period. In this instance the
12 months period
would have ended on the 31
st
October 2018.
[13]
During the notice period the existing operating lease agreement
remains valid and the parties
are still bound by the terms of that
agreement. The notice period does not suspend the operation of the
existing operating lease
agreement. The licensed retailer who is of
the view that an alleged an unfair or unreasonable contractual
practice has been committed
by a licensed wholesaler or vice versa
may request the Controller of Petroleum Products to submit the matter
for arbitration.
[14]
The first respondent from the moment it was given the notice that the
operating lease will not
be renewed, seems to have been content in
vacating the premises at the end of the notice period. The second
respondent was advised
that it was entitled source a buyer for the
business of the first respondent. The buyer was subject to the
approval of the applicant.
The second respondent introduced a
potential buyer to the applicant for consideration. The applicant
found that the buyer did not
meet its requirements and did not
approve.
[15]
The respondents have been operating the same business for the past 20
years. During that period
they have improved and built the goodwill
of the business to be where it is. The cruelty of a lease is that
when one leaves at
the end of the term of lease he/she leaves with
nothing. In this case the respondents were given an opportunity to
salvage something
out of the business which they have operated for
the past 20 years by sourcing a buyer which they did, but the
potential buyer
did not meet the applicant’s requirements.
[16]
The approval of the buyer is solely at the discretion of the
applicant. The applicant is under
no duty to give the respondents
reasons for its refusal to approve the potential buyer. That seems to
be a one sided relationship
between the applicant and the
respondents. The state of affairs only favours the applicant. The
introduction of PPA seems to address
the imbalances that may occur as
the aggrieved party’s remedy is to invoke the provisions of
section 12B of PPA. The respondents
have invoked the provisions of
section 12B before the operating lease had expired, and were
therefore justified in doing so.
[17]
In
Business
Zone 1010 CC t/a Emmarencia Convenience Center v Engen Petroleum
Limited and Others
[3]
Mhlantla
J said:
“
[57] 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.
[58] 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.
”
[18]
It is not in dispute that the notice period given to the respondents
has expired on the 31
st
October 2018. Under normal
circumstances, the respondents were supposed to vacate the premises
by the 31
st
October 2018. However, there is a pending
dispute which the respondents have requested the Controller of
Petroleum Products to
request the parties to refer their dispute for
arbitration. That process has not yet been exhausted. At the time the
notice period
expired, there was still a live dispute which was still
pending.
[19]
The applicant submitted that the referral of the dispute to the
Controller by the respondent
does not bar it proceeding with the
eviction application since the operating lease terminated on the 31
st
October 2018 through effluxion of time. The applicant contended that
the granting of the eviction order will have no bearing on
the powers
of the arbitrator in respect of issues referred for arbitration, in
that the second respondent does not seek reinstatement
of the
operating lease, but an opportunity to sell the business.
[20]
I do not agree with the applicant’s contention. Firstly this
will defeat the purpose and
spirit of section 12B which introduces
arbitrations. Arbitration are much quicker and less costs effective.
Secondly in terms of
section 12(B) (2) the parties determine the
rules of arbitration and they are at liberty to include any dispute
which in the case
at hand may include eviction. Thirdly, once the
respondents are evicted their sources of income will be diminished
which will place
them in a weaker position to finance the pending
litigation. Fourthly as held in
The Business Zone 1010 CC
arbitration procedure suspend the institution of court
litigation.
[21]
In terms of section 12B (4) (a) an arbitrator has the powers to make
such award as he or she
deems necessary to correct such practice. The
terms of reference of the arbitration has not yet been determined.
The respondents
are still at liberty to seek reinstatement of the
operating licence and the arbitrator will be empowered to order that.
In
The Business Zone 1010 CC
supra,
it was held that
regardless of the second cancellation, the arbitrator may have power
to grant relief for the intervening period.
In the case at hand even
though the notice period has expired on the 31
st
October
2018, that does not preclude the arbitrator to make an award as
he/she deems necessary to correct such alleged unfair and/or
unreasonable contractual practice, which may include reinstatement of
the operating lease agreement.
[22]
Since the process of referring the matter for arbitration has been
started, in my view, it should
be given an opportunity to run its
course. Section 12B (5) provides that an award made by an arbitrator
is final and binding. If
the other party is dissatisfied with the
outcome of the arbitrator’s award there are still other
remedies available to him/her.
In my view, there is nothing
preventing the parties to refer all the disputes emanating from the
operating lease agreement for
arbitration in terms of section 12B
which will be much quicker and less costs effective. It will
therefore be in the interest of
justice if the proceedings are stayed
pending the outcome of the referral by the respondents of the alleged
unfair and/or unreasonable
contractual practice to the Controller for
determination whether the parties submit the matter for arbitration.
[23]
In the result I make the following order:
23.1 That
the current proceedings are stayed pending the decision by the
Controller on referral by the respondents
in terms section 12B of the
PPA;
23.2 The
applicant is interdicted from taking any steps that will adversely
affect the operations of the respondents
pending the final outcome of
the process referred to the Controller.
23.3 The applicant to pay
the respondents costs on party and party scale.
MF. KGANYAGO J
JUDGE OF HIGH
COURT OF SOUTH AFRICA, LIMPOPO DIVISION, POLOKWANE
APPEARANCE:
COUNSEL FOR APPLICANT:
ADV S AUCAMP
INSTRUCTED BY
:
MATHOPO MOSHIMANE
MULANGAPHUMA
INC
T/A DM5 INCOPORATED
COUNSEL FOR
RESPONDENTS: ADV LR ADAMS
INSTRUCTED BY
:
SETON AMITH AND ASSOCIATES
DATE OF HEARING
: 02 DECEMBER 2019
DATE OF JUDGEMENT
12
TH
FEBRUARY 2020
[1]
Act 58 of 2003
[2]
Act 68 of 2008.
[3]
[2017] ZACC 2
at para 57 and 58