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[2019] ZAKZPHC 39
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Bright Idea Projects 66 (Pty) Ltd t/a All Fuels v Crompton Street Motors CC t/a Wallers Garage Service Station (1916/2018P) [2019] ZAKZPHC 39 (6 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO:
1916/2018P
In the matter between:
BRIGHT IDEA PROJECTS 66
(PTY) LTD T/A ALL FUELS
Applicant
and
CROMPTON STREET MOTORS CC
Respondent
T/A WALLERS GARAGE
SERVICE STATION
ORDER
(a)
The respondent is ordered to vacate the premises which it currently
occupies at 7 Main Road,
Hammarsdale.
(b)
The respondent is ordered to pay the costs of the application.
JUDGMENT
Delivered
on:
06
June 2019
Ploos
van Amstel J
[1]
This is an application for the ejectment of the first respondent from
business premises
at 7 Main Road, Hammarsdale, where it conducts the
business of a retail fuel service station. The applicant is the owner
of the
premises. Its case is that the lease agreement in respect of
the premises has expired and that the first respondent remains in
occupation against its will. The second respondent is Chevron South
Africa (Pty) Ltd, formerly known as Caltex Oil (SA) (Pty) Ltd.
It
played no part in these proceedings, save that it delivered a notice
of its intention to abide the outcome. For the sake of
brevity I will
refer to the first respondent as ‘the respondent’. Where
necessary, I shall refer to the second respondent
as ‘Chevron’
or ‘Caltex’, depending on the context.
[2]
In the light of the defences raised by the respondent it is necessary
to refer to
the agreements which governed the relationship between
the parties.
[3]
In February 2003, in terms of a written franchise agreement, Caltex
granted to the
respondent the right to operate a Caltex Service
Station on the premises, which were then owned by Caltex. The period
was five
years, with an option to renew for two further periods of
five years. Both options were exercised, and the third period expired
on 28 February 2018. The franchise agreement included a written lease
agreement, for the same period, which was annexed to the
franchise
agreement.
[4]
In terms of the franchise agreement Caltex supplied petroleum
products to the respondent
for onward sale to its retail customers at
the service station. Caltex changed its name to Chevron with effect
from 1 October 2005.
[5]
In December 2011 Chevron ceded and assigned its rights and
obligations in terms of
the franchise agreement to the applicant.
They also concluded a written Branded Marketer Agreement in terms of
which Chevron appointed
the applicant as wholesaler to promote and
sell Chevron products, and granted it the exclusive right and licence
to sell Chevron
petroleum products to the retail sector in the
KwaZulu-Natal South geographical area, which includes the Hammarsdale
area.
[6]
The applicant further acquired from Chevron the immovable property on
which the premises
are situated, including the tanks, machinery and
equipment thereon. The deed of transfer in respect of the immovable
property was
issued on 14 January 2013. The respondent was informed
of these developments in writing, and an appropriate addendum to the
franchise
agreement was signed.
[7]
The respondent continued to trade and the applicant supplied it with
petroleum products
in accordance with the franchise agreement.
[8]
On 25 August 2017 the applicant’s attorney wrote to the
respondent’s attorney
and recorded that the agreement between
the parties would terminate by effluxion of time on 28 February 2018.
He requested the
attorney to inform the respondent that the applicant
had decided not to grant any further extension of the agreement and
that the
respondent would be required to vacate the premises on or
before 28 February 2018. Mr Bester, the sole member of the
respondent,
says in the answering affidavit he was advised by the
respondent’s attorney not to respond to this letter as the
attorney
first wanted to look at the agreement between Chevron and
the applicant in order to see what the respondent’s rights and
obligations were.
[9]
A letter to much the same effect was again sent on 6 February 2018,
and the applicant’s
attorney requested an unequivocal written
undertaking from the respondent that it would vacate the premises on
28 February 2018.
The response from the respondent’s attorney
on 14 February 2018 was that he was in the process of drafting an
application
for arbitration and that the respondent would not be
vacating the premises on 28 February 2018.
[10]
The application was launched on 16 February 2018. As this was before
the expiry date of the lease,
the applicant sought a declaratory
order with regard to the termination of the lease on 28 February
2018, and an order directing
the respondent to vacate the premises by
that date. The respondent opposed the application and delivered a
conditional counter
application for an order directing the applicant
to provide the respondent with a new franchise agreement for
signature, and an
order declaring that the respondent is entitled to
conduct its business on the premises for a further period of five
years, commencing
on 1 March 2018.
[11]
The grounds on which the respondent opposed the application on the
papers are that it should
be stayed pending arbitration in terms of
s
12B
of the
Petroleum Products Act of 1977
, or in terms of clause 20
of the original franchise agreement; that the applicant has
undertaken to renew the franchise agreement
until 28 February 2023;
and that the applicant is seeking to enforce rights which it does not
enjoy or which are in conflict with
its contractual obligations
towards Chevron and the respondent, and the provisions of the
Petroleum Products Amendment Act of 2003
. As I will explain later,
the submissions in court on its behalf were a little different.
[12]
I deal firstly with the contention that the application should be
stayed pending arbitration.
Section 6 (1) of the Arbitration Act
[1]
provides that if any party to an arbitration agreement commences any
legal proceedings in any 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. Subsection (2) provides that 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.
[13]
The first basis on which the respondent contends that the proceedings
should be stayed is a proposed
arbitration in terms of
s 12B
of the
Petroleum Products Act. That
section provides that the Controller of
Petroleum Products may require parties to submit a matter to
arbitration where a licensed
retailer or a licensed wholesaler has
alleged an unfair or unreasonable contractual practice on the part of
the other. The alternative
basis for the stay is a proposed
arbitration in terms of clause 20 of the franchise agreement.
[14]
The respondent did not apply for a stay of the proceedings in the
manner prescribed in
section 6
(1). It should have done so after
delivery of notice of its intention to oppose the application, but
before it took any other steps
in the proceedings. Instead it
delivered a comprehensive answering affidavit in which its defence to
the application was dealt
with, and an application to stay the
proceedings was incorporated. Nothing was made of this procedure by
the applicant in argument.
[15]
Nevertheless, I have a discretion in terms of
section 6
(2) with
regard to a stay of the proceedings. In terms of the subsection I may
order a stay if I am satisfied that there is no
sufficient reason why
the dispute should not be referred to arbitration in accordance with
the agreement.
[2]
[16]
It seems to me that there is sufficient reason why the dispute before
me should not be referred
to arbitration. The matter has grown into
an opposed application consisting of more than 700 pages. It was
argued on the opposed
roll before me, both on the merits and on
whether or not the proceedings should be stayed pending arbitration.
[17]
The applicant launched the application in February 2018 and is
entitled to have the matter heard
without undue delay. The
respondent, as one often finds in ejectment proceedings, is in no
hurry. It did not bring an application
to stay the proceedings
immediately after its notice of intention to oppose, and elected to
deliver voluminous affidavits on the
merits of the matter, together
with an application for a stay.
[18]
I found it difficult to get to grips with counsel’s submissions
as to the nature of the
contractual practice which is said to be
unfair or unreasonable as contemplated in
s 12B
, and should go to
arbitration. As I understood the argument the conduct on the part of
the applicant which is said to be unfair
or unreasonable is its
refusal to extend the existing franchise and lease agreements, or
conclude new ones. I do not see how its
refusal to do so can be said
to be a ‘contractual practice’ which can be ‘corrected’
by an arbitrator as
contemplated in
s 12B.
[19]
In terms of
section 6
the court may be asked to stay the proceedings
if the matter before it is a matter which had been agreed will be
referred to arbitration.
The dispute in the application before me
concerns the law of contract. The issue that I have to decide is
whether the applicant
bound itself contractually to conclude a new
franchise agreement and lease. In doing so I must have regard to the
facts and the
law. The issues before me have nothing to do with an
unfair or unreasonable contractual practice as contemplated in
s
12B
[3]
.
[20]
The arbitration contemplated in clause 20 is about any dispute
between the parties ‘concerning
the agreement’. The
dispute before me does not concern the franchise agreement or the
lease. They have both expired
through the effluxion of
time. What is in issue on the papers before me is whether the
applicant undertook to conclude new agreements
after the expiry of
the existing ones. I do not consider that clause 20 is of application
here.
[21]
The respondent did not specify on the papers what issue it wishes to
be decided by arbitration
in terms of clause 20, nor did its counsel
do so in argument. Clause 20 was mentioned almost as an afterthought,
and counsel did
not elaborate on it. I should add that there is no
evidence on the papers that the respondent has initiated the
procedure in clause
20, namely calling for negotiation and then
mediation.
[22]
The merits of the matter were dealt with fully on the papers, and
argued before me. It will be
a waste of time and costs to stay the
proceedings at this stage, and will serve no purpose, other than to
allow the respondent
to extend its occupation of the premises.
[23]
Dealing now with the merits of the dispute before me, the respondent
says it is entitled to remain
on the premises on the basis of an
agreement between the parties that they would conclude a new
franchise agreement, substantially
on the same terms as Chevron’s
standard franchise agreement.
[24]
Mr Bester, who is the sole member of the respondent, says shortly
after the applicant became
the branded marketer for Chevron, at a
time when the franchise agreement had about six years to run, he
asked Aben Naidoo, who
was Chevron’s regional manager, what
would happen at the end of the franchise agreement. This was in the
presence of one
Mubeen, who was then the applicant’s chief
executive officer, and his assistant, Anwar Goolam. Naidoo told him
that nothing
would change and that the applicant would treat the
respondent as Chevron treats their retailers. He says both Mubeen and
Goolam
confirmed this.
[25]
About three years later Mr Bester heard that the applicant was not
intending to allow the renewal
of franchise agreements. He contacted
Goolam and asked him for a copy of the applicant’s franchise
agreement. Goolam sent
him a copy of the existing Chevron franchise
agreement. He emailed Goolam and said he needed the applicant’s
agreement and
not the Caltex agreement. Goolam replied as follows:
‘It is one and the same. Caltex have ceded the agreement
between you
and them to us. This is the same agreement that will
continue until terminated. Once terminated All Fuels will sign new
agreements.’
Bester says this satisfied him that the
respondent’s franchise agreement would be renewed at the end of
the franchise period.
[26]
On the basis of this meagre evidence the respondent contends that the
parties had concluded an
enforceable agreement in terms of which the
applicant was obliged to conclude a new franchise agreement with the
respondent on
terms consistent with the previous Chevron franchise
agreement. The contention is without merit. The evidence does not
establish
such an agreement. Goolam’s response seems to me to
say nothing more than that at the end of the period of the Caltex
agreement
the applicant would use its own agreement. It is noteworthy
that when the respondent received the letter of 25 August 2017 it did
not protest that there was an agreement in place regarding the
conclusion of a new franchise agreement on the expiry of the existing
one.
[27]
Counsel for the respondent submitted that even if the agreement
contended for was not proved,
then the applicant had an obligation to
follow a fair process in considering whether or not to conclude a new
agreement, which
included allowing the respondent to make
representations in this regard.
[4]
When I enquired from counsel what the source of such an obligation
was he submitted that the effect of
s 12B
was to introduce an implied
term to that effect. There is no substance in this submission. I see
no basis on which it can be said
that
s 12B
had anything to do with
the applicant’s right to decide who it wished to contract with,
on what basis and for how long.
[28]
In the alternative counsel submitted that the franchise agreement and
the lease contained a tacit
term which imposed such an obligation to
be fair and reasonable on the applicant. I see no basis for importing
such a term into
the agreement. There is simply no evidence from
which it can be inferred. Fairness is not a freestanding requirement
for the exercise
of a contractual right.
[5]
A tacit term is not to be imported into a contract on the basis that
it would be reasonable to do so. In
City
of Cape Town (CMC Administration) v Bourbon-Leftley
[6]
Brand JA said: ‘… A tacit term is based on an inference
of what both parties must or would necessarily have agreed
to, but
which, for some reason or other, remained unexpressed. Like all other
inferences, acceptance of the proposed tacit term
is entirely
dependent on the facts. But, as also appears from the cases referred
to, a tacit term is not easily inferred by the
courts. The reason for
this reluctance is closely linked to the postulate that the courts
can neither make contracts for people
nor supplement their agreements
merely because it appears reasonable or convenient to do so…
The court must be satisfied
that the parties would necessarily have
agreed upon such a term if it had been suggested to them at the
time.’
[29]
I also point out that clause 19.2 of the franchise agreement provides
that 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 the contract. It states that no amendment or other
modification of the contract
shall be valid or binding on a party
thereto unless reduced to writing and executed by both parties
thereto.
[30]
In a supplementary answering affidavit the respondent contends that
if I find that the agreement
to enter into a new franchise agreement
and lease is not enforceable in terms of the common law, then I
should find that the applicant’s
refusal to conclude such
agreements is contrary to the values enshrined in the Constitution
and public policy and deprives the
agreement of business efficacy. My
finding is that the evidence does not establish the agreement
contended for. One does not even
get to a consideration of whether
such an agreement would be enforceable in terms of the common law.
None of the constitutional
points raised in the papers were pursued
in argument before me.
[31]
I am not concerned in this matter with whether or not the applicant’s
refusal to conclude
a new franchise agreement with the respondent was
fair and reasonable. It is under no obligation to do so and has a
free choice
in the matter.
[32]
The respondent’s invitation that I should develop the common
law is out of place. Even
if it may be argued that where a party has
undertaken to negotiate a new contract or an extension of an existing
one, it has to
do so in good faith, the evidence before me does not
establish any such undertaking on the part of the applicant.
[33]
To sum up - the franchise agreement and the lease agreement expired
by effluxion of time. Over
the years the respondent exercised an
option to renew on two occasions, and was there for a total of
fifteen years. There is no
evidence on which one can find an
agreement, made
animo contrahendi
, in terms of which the
applicant bound itself to conclude a new agreement with the
respondent, or to follow a fair and reasonable
process in deciding
whether or not to do so.
[34]
The order that I make is as follows:
(a)
The respondent is ordered to vacate the premises which it currently
occupies at 7 Main Road,
Hammarsdale.
(b)
The respondent is ordered to pay the costs of the application.
Ploos van Amstel J
Appearances:
For
the Applicant
: D Ramdhani
Instructed
by
:
Norton Rose Fulbright South
Africa Inc.
:
C/o Venns Attorneys
:
Durban
For
the Respondent
:
D P Crampton
Instructed
by
:
Kobus Swart & Company
:
C/o Stowell & Company
:
Durban
Date
Judgment Reserved
:
31 May
2019
Date
of Judgment
: 06 June 2019
[1]
42 of 1965
[2]
In terms of s 40 of the Arbitration
Act the provisions of the Act shall apply to any arbitration under
any law, as if such law
were an arbitration agreement.
[3]
Of the
Petroleum Products Act.
[4
]
This is the subtle difference in the
argument to which I referred earlier.
[5]
[5]
Bredenkamp v Standard Bank of
South Africa Ltd
2010 (4)
SA 468 (SCA)
[6]
City of Cape Town (CMC
Administration) v Bourbon-Leftley
2006 (3) SA 488
(SCA) para 19.