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[2015] ZAKZDHC 27
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Pick n Pay Retailers (Pty) Ltd v Pine Valley Supermarket (Pty) Ltd (8209/2014) [2015] ZAKZDHC 27 (20 March 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
Case
No: 8209/2014
In
the matter between
PICK
ʼn PAY RETAILERS (PTY)
LTD
...........................................................................
Applicant
and
PINE VALLEY
SUPERMARKET (PTY)
LTD
............................................................
Respondent
JUDGMENT
Delivered
on: 20 March 2015
MOODLEY
J
[1] The applicant
seeks an order permitting it to perfect its security under and in
terms of a general notarial bond registered
in favour of the
respondent, and to exercise its rights as contemplated therein.
[2] Pursuant to an
urgent application launched by the applicant, interim relief was
granted on 22 July 2014 by way of a consent
order in terms of which,
pending the final determination of the application, the applicant
through its duly authorised representative,
was authorised and
empowered to take certain steps of intervention in the operation of
the respondent’s business.
[3] The remainder of
the relief sought was to be determined by the court before which the
application was to be argued. The respondent
was granted leave to
file a supplementary affidavit in respect of its submissions on
whether any provision of the
Competition Act No 89 of 1998
and
Consumer Protection Act No 68 of 2008
finds application to
and/or in any way impacts on or affects any of the terms of the
agreements entered into between the parties,
the provisions of the
Notarial Bond granted in favour of the applicant and/or any of the
applicant’s practices that affect
the respondent as franchisee.
The application was adjourned to the opposed motion roll on the 31
October 2014 and the costs occasioned
by the adjournment were
reserved.
[4] The applicant
now seeks final relief as set out in paragraphs 2 and 3 of the Notice
of Motion and costs of the application on
22 July 2014.
[5] The application
for final relief and the costs aforesaid are opposed by the
respondent.
The
Applicant’s submissions
[6] The applicant’s
case is premised on the following grounds:
(i)
the
respondent has failed to effect payment as stipulated in the
Franchise Agreement (FA) entered into by the parties at Johannesburg
on 30 September 2009
[1]
;
(ii)
the Notarial General Bond No. BN18068/69 (the bond) which was
registered as security for the respondent’s indebtedness
to the
applicant, has become executable as against the respondent because:
a)
the
respondent has by its own admission
[2]
,
failed to effect payments due by it to the applicant as and when the
payments fell due; and
b)
the
applicant reasonably believes that its interests are being imperilled
as contemplated in the Franchise Agreement
[3]
by a director and shareholder of the respondent, Gerhardus Francois
Maritz (Maritz), who has admitted that he has defrauded the
respondent and committed certain ‘irregularities’
[4]
;
The
applicant is therefore entitled to exercise its rights as set out in
clauses 6.1.1
to
6.1.11 of the bond.
[5]
(iii)
Further, as the respondent breached its obligations in terms of
clauses 17.4 and 19.4 of the Franchise Agreement, the amount
due in
terms of the Payment Variation Agreement (PVA) entered into
subsequently by the parties has become due and payable in terms
of
the acceleration clause
[6]
and
the applicant is owed an amount in excess of R8 million, including
the amount owed in terms of the Payment Variation Agreement.
(iv)
The
Consumer Protection Act (CPA
) does not apply to the Franchise
Agreement, as submitted by the respondent, because the Franchise
Agreement is a pre-existing agreement
as defined in Schedule 2 of the
Consumer Protection Act
[7
]
as it
was entered into before the general effective date of the Act (CPA),
which is 23 October 2010.
[8]
(v)
The applicant is not in breach of
Section 5(1)
of the
Competition Act
(CA
) nor does the Franchise Agreement contravene
Section 5(2)
thereof.
[9]
There are
substantial benefits which accrue to and are enjoyed by the
respondent in terms of the Franchise Agreement.
The respondent, on
the other hand, has failed to discharge its
onus
to prove the
existence of an agreement which has substantially prevented or
lessened competition in the market, the market in which
the
competition is undermined, and that the agreement has effectively
caused a substantial prevention or erosion of the competition.
The
Franchise Agreement does not contain an express prohibition relating
to minimum resale prices nor does the applicant prescribe
a practice
of minimum resale price maintenance.
The respondent has
therefore failed to prove either an element of coercion, or that a
‘
de facto
’ minimum resale price maintenance
exists.
(vi)
The provisions of the Notarial bond are neither unfair nor
unreasonable, as confirmed by the Supreme Court of Appeal in
Juglal
NO & Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise
Division
.
[10]
(vii)
After Lopes J, who was seized of the urgent application, indicated
that perfection applications are by their nature
urgent,
the parties arrived at an interim consent order. The applicant was
therefore substantially successful and is entitled to
the costs
incurred on 22 July 2014; alternatively the applicant is entitled to
the aforesaid costs as the application was urgent
and premised on
substantive grounds.
The
Respondent’s submissions
[7] The respondent
has advanced the following arguments to sustain its resistance to the
relief sought :
(i)
In its founding affidavit, the applicant
relies on the failure of the respondent to pay amounts due under the
Franchise Agreement
within the 28 day time period stipulated in
clause 17.4 and to comply with Clause 8.2.5 of the bond viz the
failure by the respondent
to pay timeously amounts due on 24 June
2014, 1 July 2014 and 8 July 2014. However the debts on which the
applicant relies were
paid off approximately 2 weeks after they fell
due.
(ii)
As
the overdue amounts relied on are no longer outstanding, the
applicant cannot seek an order declaring the bond executable on
the
basis that the payments were overdue when the application was
brought
[11]
; nor should the
applicant be permitted to rely on the provisions of clause 6.1 of the
bond for marginally late payments.
(iii)
As the applicant relies on a breach of the
Franchise Agreement by the respondent, the applicant’s case
ought to have been
predicated on clause 8.2.8 of the bond. The
applicant however relies on clauses 8.2.5, which duplicates clause
8.2.8, and 8.2.7.
A cause of action advanced on the basis of clause
8.2.7 is ‘impermissible’ and falls to be disregarded.
(iv)
The
respondent would be subjected to undue hardship should the applicant
take over its business. The relief sought is drastic, unreasonable
and an abuse of the applicant’s contractual powers and runs
contrary to the principles of good faith, fairness etc emphasized
by
the Constitutional Court.
[12]
(v)
The amount of R7 231 199.99
referred to by the applicant as having fallen due under the Payment
Variation Agreement as
a result of the respondent’s breach, was
in terms of that agreement to be paid off in 169 monthly tranches
with effect from
3 April 2014 until 27 June 2017. The historical debt
under the Franchise Agreement has been novated, and it is common
cause that
the respondent has met its weekly payments under the
Payment Variation Agreement.
(vi)
Although the Payment Variation Agreement
provides that a breach by the respondent of clause 17.4 of the
Franchise Agreement renders
the whole sum owing under the Payment
Variation Agreement immediately due and payable, the applicant cannot
rely on that breach
to declare the bond executable.
(vii)
The irregularities committed by Maritz are
an internal matter between the respondent and Maritz, have not
occasioned the applicant
loss, and irrelevant to the application. The
amount in issue has been debited against Maritz’s loan account
with the respondent.
(viii)
The enforcement of the notarial bond would
be unfair, unreasonable, unduly oppressive and
contra
bonos mores
, particularly as the
position of the respondent is attributable to a franchise agreement
which is contrary to the
Consumer Protection Act.
(ix
)
The Franchise Agreement as varied on 30
November 2012 and by the Payment Variation Agreement, falls within
the parameters of the
Consumer Protection Act which
came into effect
on 31 March 2011; alternatively, the Franchise Agreement as amended
subsequent to the
Consumer Protection Act, is
in conflict with the
provisions of the Act (CPA), which renders its implementation and
enforcement
contra bonos mores
.
(x)
The Franchise Agreement and its
implementation by the applicant infringe
Section 5(1)
and
5
(2) of the
Competition Act through
the purchasing restrictions and applicant’s
fixing of the franchisee’s prices respectively, which is
effectively,
de facto
resale
price maintenance.
In
terms of
Section 65(2)
of the
Competition Act, this
court does not
have the jurisdiction to consider an issue concerning conduct that is
prohibited in terms of the
Competition Act, as
the issue is not the
subject of an order of the Competition Tribunal. Therefore the issue
should be referred to the Tribunal and
the application stayed until
the Tribunal rules, unless this application is dismissed.
(xi)
The interim relief falls to be discharged
and the application dismissed with costs, including the costs of the
hearing on 22 July
2014, as the urgency was unwarranted, the
applicant approached the court on unreasonably short notice to the
respondent and the
relief sought would have been tendered if sought
from the respondent.
Issues that
require determination
[8]
The issues that require determination are whether:
(i)
the applicant is entitled to perfect its
security in terms of the provisions of the bond pursuant to the
respondent’s breach
of the terms of the bond and the Franchise
Agreement;
(ii)
the Franchise Agreement contravenes the
provisions of the
Consumer Protection Act No. 68 of 2008
and in
particular
sections 13(1)
and
48
thereof;
(iii)
the Franchise Agreement contravenes the
provisions of the
Competition Act No. 89 of 1998
and in
particular sections 5(1) and 5(2) thereof; and
(iv)
the applicant or respondent is liable for
the costs that were incurred on 22 July 2014.
The
incidence of the
onus
of proof
[9]
(i) The applicant bears the
onus
to prove that it is entitled
to perfect its security in terms of the provisions of the Notarial
Bond.
(ii)
The respondent bears the
onus
to prove its allegations that the Franchise Agreement as amended
contravenes the provisions of sections:
a) 13(1) and 48 of
the
Consumer Protection Act; and
b)
5(1) and (2) of the
Competition Act.
Summary
of
Facts
[10] It is common
cause that:-
(i)
On 30 September 2009 the applicant and
respondent concluded a written franchise agreement (“the
agreement”) which was
signed by the respondent on 16 September
2009, and the effective date of which was 1 October 2009.
(ii)
The respondent executed a notarial general
bond in favour of the applicant on 17 September 2009, which was
registered on 1 October
2009 in the Deeds Registry, Pietermaritzburg,
under number BN 18068/09.
(iii)
On 8 July 2011 the applicant and respondent
concluded a written addendum to the franchise agreement, effective
from 1 March 2011.
(iv)
On 30 November 2012 the applicant and
respondent concluded a Liquor Store Addendum Agreement.
(v)
As at 3 April 2014, the respondent was in
arrears with its payments in terms of the FA in the sum of
R7 721 200.33.
On 22 May 2014 the
applicant and respondent concluded a Payment Variation Agreement,
which was signed by the respondent on 7 May
2014.
(vi)
24 June 2014 – the amount of
R265 287.73 (balance of amount owed for week 21) fell due.
(vii)
1 July 2014 - The respondent failed to pay
an amount of R1 294 799.39 (owed for week 22).
(viii)
2 July 2014 - The applicant addressed a
letter to the respondent in accordance with the provisions of clause
40 of the Agreement
affording the respondent 48 hours’ notice
to remedy its breach of non-payment of the arrears in the total
amount of R1 560 087.12
comprised by R265 287.73 (due
on 24 June 2014) and R1 294 799.39 (due on 1 July 2014).
(ix)
2 to 4 July 2014 - The respondent paid the
amount of R367 811.80 to the applicant leaving a balance of
R1 192 275.62.
(x)
4 July 2014 - The applicant handed a letter
of demand to the respondent demanding immediate payment of the
balance of R1 192 275.62.
(xi)
The applicant conducted an investigation of
the respondent’s business and established that Maritz had
committed certain irregularities
and had defrauded the respondent by
obtaining fictitious invoices from the applicant’s suppliers,
who on receipt of payment
on the invoices, handed the money to
Maritz.
On
4 July 2014 Maritz was confronted by the applicant’s
representatives about his fraudulent conduct, and admitted to
defrauding
the respondent.
(xii)
5 July 2014 - A meeting was held between
the applicant and the respondent’s representatives discussing
the increasing debt
to the applicant.
(xiii)
7 July 2014 - Respondent offered to sell
its business to applicant for R11.5 million; applicant did not
respond.
(xiv)
8 July 2014 - A further payment of
R1 056 048.43 (owed for week 23) became due and
owing to the applicant
which the respondent was unable to pay.
(xv)
9 July 2014 - The applicant addressed a
letter of demand to the respondent giving the respondent 48 hours to
remedy its breach of
non-payment in the total amount of R1 594 758.65
comprised by R 538 710.22 due on 1 July 2014 and R1 056 048.43
due on 8 July 2014.
(xvi)
14 July 2014 - Applicant launched application as a
matter of urgency, and set it down for 22 July 2014.
(xvii)
4 July
to 15 July 2014 - Respondent paid the amount of R1 294 799.39
due on 1 July with payments on 4 July, 5 July,
7 July, 8 July,
9 July, 11 July, 14 July and 15 July 2014.
[13]
(xviii)
15 July to 22 July 2014 - Respondent the
paid amount of R1 056 048.43 due on 8 July 2014.
Is
the Applicant entitled to perfect its security in terms of the
provisions of the Notarial Bond?
[11]
The applicant relies on the breach of the following clauses in the
Franchise Agreement (as amended by the addendum thereto):
‘
17.
SUPPLY BY THE FRANCHISOR ON BEHALF OF THE FINANCIER
17.4
If the period of credit granted by a supplier to the franchisor in
respect of any of the products and/or check-out packaging
which has
been purchased by the franchisee from the franchisor in terms of this
clause 17 is:-
17.4.1
shorter than the period allowed, in terms of clause 17.3, for
payment by the franchisee to the franchisor; or
17.4.2
reduced at any time during the currency of this agreement,
then
the franchisor shall be entitled, at its election, to notify the
franchisee in writing of such shorter period or reduction,
as the
case may be, and the period allowed for payment in terms of clause
17.3, shall, if the franchisor notifies the franchisee
in writing to
that effect, be reduced in respect of the products and/or check-out
packaging concerned, by a number of days equal
to the difference
between such shorter period or reduced period, as the case may be,
and the period allowed for payment in terms
of clause 17.3’
[14]
‘
19.
SUPPLY NOMINATED OR APPROVED SUPPLIERS
19.4
Subject to the provisions of clause 19.5, all amounts (including VAT
thereon, if any) owing by the franchisee to the financier
in respect
of such purchases of products and/or check-out packaging in terms of
clause 19.3, shall be paid by the franchisee to
the financier,
without deduction or set-off, on the 28
th
(twenty-eighth) calendar day after the cut-off date stipulated in the
relevant end of week statement in which such amounts are
reflected,
provided that such aforementioned 28
th
(twenty-eighth) calendar day is a Saturday or Sunday, such payment
shall be made on the immediately succeeding Monday. In the event
that
such succeeding Monday is not a business day, payment shall be made
on the first business day thereafter.’
[15]
[12]
The respondent resists the application on the ground that the
applicant cannot legitimately seek to perfect its security because
all arrears or outstanding amounts as set out in the founding
affidavit were paid and that the relief sought is
contra bonos
mores.
[13]
But it is common cause that payments were not effected by the
respondent in accordance with the aforesaid clauses and therefore
the
Payment Variation Agreement was entered into, to assist the
respondent to liquidate the arrears concurrently with the payments
under the Franchise Agreement. The Payment Variation Agreement
provided for the repayment of the arrear indebtedness in the sum
of
R7 721 200.33
(seven million seven hundred and twenty one thousand two hundred rand
and thirty three cents) as at 3 April
2014, in 169 instalments
subject to the terms and conditions set out in clause 3 thereof,
[16]
the relevant clauses of which provide:
‘
3.4
As from 8 April 2014 and for the duration of this Payment Variation
Agreement all other payments due and payable by the Franchisee
to the
Franchisor shall be paid strictly in accordance with the terms and
conditions contemplated in clause 17.4 and clause 19.4
of the Main
Agreement.
3.5
The instalment payments referred to in clause 3.3 above shall be made
over and above and in addition to the normal weekly payments
to be
made as per the weekly statement due.
3.6……….
3.7
………
..
3.8
Should any instalment due in terms hereof not be made on due date:
3.8.1
interest shall be charged on the late payment in accordance with
provision of clause 10 of the Main Agreement;
3.8.2
the Franchisor may regard the balance of the Debt owing in terms
hereof as due and payable immediately and shall be entitled
to set
off the Debt or any part thereof against any payments due by the
Franchisee to the Franchisor for whatever reason. The Franchisor
may
also issue summons on the remaining balance of the Debt in any
competent court without notice or demand to the Franchisee.
3.9
In the event the Franchisee breaches the terms and conditions in
clauses 17.4 and 19.4 of the Main Agreement after signature
of this
Payment Variation Agreement, and/or in the event of the liquidation
of the Franchisee and/or if the Franchisee commits
an act of
insolvency, the Debt shall become due and payable immediately.
……..’
[17]
[14]
According to the applicant’s letter of demand dated 9 July
2014, the total amount owing was R1 594 758.65 comprised
by
R 538 710.22 due on 1 July 2014 and R1 056 048.43 due
on 8 July 2014.
[15]
Although th
e respondent did make payments in
respect of its indebtedness to the applicant after the application
was launched, on its own version
the respondent had fallen into
arrears and was in breach of its obligations in terms of the
Franchise Agreement on that date:
the payment due on 24 June
2014 was paid on 4 July 2014; the amount due on 1 July was paid off
over 2 weeks and settled on 15 July
2014; and the sum due on 8 July
2014, was paid off in 3 instalments - on 15, 16 and 22 July 2014, the
last date being the date
when this matter was before Lopes J.
[16]
However in its answering affidavit the respondent alleges, contrary
to the aforegoing facts, that it has complied fully
and
timeously with its obligations in terms of the Payment
Variation Agreement
[18]
, but
admits ‘at worst’ that it is in arrears with its payments
to the applicant for stock which amounts to R4.4m to
R4.8m per month.
But after setting out the payments effected between 4 -15 July 2014,
it admits that ‘whilst the Respondent
may
sometimes
be late
(
my
emphasis)
with payments, it makes payments on a regular (often daily) basis
until the invoices have been paid in full very shortly
after
(
my
emphasis)
they were due.
[19]
[17]
It is therefore apparent that the respondent was in breach of its
obligations in terms of both the Franchise Agreement and
the Payment
Variation Agreement, and had not remedied the breach by the time the
application for urgent relief was launched.
[18]
Further, contrary to the assertion by Mr Farlam that the main debt
was novated by the Payment Variation Agreement, that agreement
specifically provides:
‘
4
NO NOVATION OF NOTARIAL BOND
The
parties record that the conclusion of this Payment Variation
Agreement does not and will not constitute a novation or a waiver
of
the rights of the Franchisor relating to the general notarial
mortgage bond (“Notarial Bond”) granted to in terms
of
clause 24, read together with annexure “F” of the Main
Agreement, whether or not this Payment Variation Agreement
is
concluded –
4.1
after the perfection of the Notarial Bond by the Franchisor; or
4.2
at a time when the Franchisor has not made an application to perfect
the Notarial Bond.’
[20]
[19]
Further, the extent of the variation of the Franchise Agreement
contemplated by the Payment Variation Agreement is specifically
stated as follows:
‘
5
SAVINGS CLAUSE
Save
as specifically or by necessary implication modified in or
inconsistent with the provisions of this Payment Variation Agreement,
the Main Agreement shall continue in full force and effect and no
variation hereof shall be of any force or effect unless it is
reduced
to writing and signed by both parties.’
[21]
[20]
Therefore, in my view, the respondent’s assertions are
misplaced as it fails to acknowledge the fact that the respondent
was
in breach of both the Franchise Agreement and the Payment Variation
Agreement, the effect of the breach on the acceleration
clause, and
that the novation of the bond and the debt under the Franchise
Agreement was specifically excluded in the Payment Variation
Agreement, as the terms and conditions in respect of the main debt
and the arrear debt, except as specifically varied in respect
of the
repayment of the arrear debt only, were maintained in the Payment
Variation Agreement.
[21]
Consequently the respondent was in breach of its obligations, as
contended by the applicant. But does this breach render the
bond
executable?
[22]
The applicant has submitted that the bond has become executable
because the respondent has failed to effect payments due by
it
timeously, and its interests are being imperilled by Maritz who has
defrauded the respondent and committed other ‘irregularities’,
and that the applicant is therefore entitled to exercise its rights
as set out in clauses 6.1.1 to 6.1.11 of the bond.
It
is common cause that the bond was registered as security for the
respondent’s obligations to the applicant until all the
obligations were fully discharged.
[22]
[23]
The bond provides as follows :
‘
8
Notwithstanding anything to the contrary herein contained, this bond
will become executable against the MORTGAGOR if -
8.1………
8.2
8.2.1
the MORTGAGOR commits any breach of any of the terms and conditions
of this bond;
8.2.5
the MORTGAGOR shall fail to pay any amount due to the CREDITOR
promptly on due date therefor;
8.2.7
the CREDITOR reasonably believes that its interests are being
imperilled by any action of the MORTGAGOR or any of its officers
or
servants or creditors;
8.2.8
The MORTGAGOR breaches any of the terms and conditions of the
Franchise Agreement concluded between the MORTGAGOR and
CREDITOR.’
[23]
[24]
The respondent’s contention on the applicant’s reliance
on clauses 8.2.5 and 8.2.8 is that the applicant’s
case ought
to have been predicated on clause 8.2.8 of the bond, but as it then
admits that clause 8.2.5 duplicates 8.2.8, this
is a non-issue that
deserved no mention.
[25]
The respondent’s second objection is that a cause of action
advanced on the basis of clause 8.2.7 is ‘impermissible’
and falls to be disregarded because the irregularities committed by
Maritz are ‘an internal matter between the respondent
and
Maritz, have not occasioned the applicant loss, and irrelevant to the
application. The amount in issue has been debited against
Maritz’s
loan account with the respondent.’
[26]
Under the Franchise Agreement the following rights and duties are
imposed on the Respondent:
‘
Conduct
of the business
15.1
The franchisee shall at all times during the currency of the
agreement:-
………
.
15.1.11
not, and ensure that none of its employees, officers, agents or
representatives, perpetrate or commit, whether directly
or
indirectly, any fraud or fraudulent misrepresentation in respect of
or pertaining to the business or the conducting thereof
or any aspect
thereof.’
[24]
[27]
Maritz’s admission of his fraud is a contravention of the
aforesaid clause and in my view cannot be excluded under either
clauses 8.2.7 and 8.2.8 of the bond. The fact that Maritz may have
paid the money back by debiting it against his loan account,
is in my
view, not a resolution which renders the applicant’s reliance
on clause 8.2.7 ‘unreasonable’ or ‘impermissible’.
The respondent was in arrears for a substantial amount as reflected
in the Payment Variation Agreement and unable to meet its payments
under the Franchise Agreement, and yet monies were being diverted by
Maritz for his own benefit. This conduct, in my view, was
adverse to
and imperilled the applicant’s interest, as it placed the
recovery of monies due to it by the respondent at risk.
The
provisions of the General Notarial Bond
[28]
Relying on
Juglal
NO & Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise
Division
[25]
the
respondent has contended that in seeking to take over the business of
the respondent, the applicant is acting unreasonably,
abusing its
contractual powers, and inflicting undue hardship on the respondent.
[29]
In response, relying on the similarity of the provisions which the
Supreme Court of Appeal held was not oppressive or
contra bonos
mores
in
Juglal NO
and the notarial bond under scrutiny,
Mr Smith has submitted that the provisions of the bond are neither
unfair nor unreasonable
nor oppressive to the respondent.
[30]
In
Juglal NO
,
Heher JA
held that the contractual
provisions will be held to be contrary to public policy only:
‘
if
there
is a probability that unconscionable, immoral or illegal conduct
will result from the
implementation
(my
emphasis) of the provisions according to their tenor. (It may be that
the cumulative effect of implementation of provisions
not
individually objectionable may disclose such a tendency.) If,
however, a contractual provision is capable of implementation
in a
manner that is against public policy but the tenor of the provision
is neutral then the offending tendency is absent.’
[26]
[31]
Although Heher JA held that:
‘
[19]
The franchise agreement was premised on an ongoing relationship of
debtor and creditor’,
[27]
he
held further that:
‘
[14]
To
regard the case as simply one of a creditor exacting security in
return for lending money to his debtor, ……is a
gross
over-simplification. The relationship between the parties was
complex and the bond was an important element in its regulation.’
[28]
[32]
In respect of the rights of the franchisor in the event of default by
the franchisee, and the relationship between the franchise
agreement
and the bond, Heher JA stated:
‘
[23]
The agreement manifested a clear intention that should the appellant
default or the business fail the respondent would have
the right to
keep the lease of the premises alive (clause 12.10.1), take over
operation of the store and continue the business
at the same location
(clauses 12.10.2 and 12.10.3), with the obvious, albeit unstated,
purpose of affording the respondent
an opportunity of finding a new
franchisee who would be able to take over an existing business. On
termination of the franchise
agreement the appellant would be
excluded from any further involvement at the location, in
the business or in a competing
business (clauses 17.4 and 17.6).
[24]
A comparison of the terms of the agreement with the conditions of the
bond, particularly clause 14, demonstrates the complementary
effect
of the latter. The thread which connects the two is the importance of
maintaining the business as a going concern in a single
location
irrespective of the success or failure of the appellant's
enterprise.’
[29]
[33]
On the allegation that the provisions of the bond were unfairly
oppressive,
Heher JA
stated:
‘
[26]
While
the taking over of a business as a going concern to secure a debt is
a fairly drastic step which can, if abused, inflict hardship
on a
debtor, the context of the contractual powers in the bond under
consideration renders the provision and exercise of the
power
commercially intelligible and combines adequate protection of the
(largely perishable) security with realisation of it in
a manner
calculated to achieve a realistic price (which would certainly be a
lesser prospect were the creditor tied to a forced
sale). Moreover,
as counsel for the respondent pointed out, in exercising the
discretionary powers inherent in operating and
selling the business
and the assets the respondent is obliged to act reasonably and to
exercise reasonable judgment (
arbitrio
boni viri
):
NBS
Boland Bank Ltd v One Berg River Drive CC and Others; Deeb and
Another v ABSA Bank Ltd; Friedman v Standard Bank of SA Ltd
1999
(4) SA 928
(SCA)
([1999]
4 B All SA 183) at 937A - F (SA). Moreover, the effect of clause
14.2.2 is that the mortgagee acts to all intents and purposes
as the
agent of the mortgagor in exercising its powers and subject to the
duties in law that flow from that relationship.’
[30]
[34]
Clause 14.2.2 referred to
supra
is similar to clause 6.1.3 of
the bond herein. Therefore not only are the provisions relied on by
the applicant ‘commercially
intelligible’ and achieve a
balance between the security of the applicant and realization of the
security at a realistic
price, the same obligations to act reasonably
and to exercise reasonable judgment attach to the applicant. The
reliance by the
respondent on the aforesaid judgment to resist the
relief sought on the grounds of unfairness, prejudice and undue
hardship, is
therefore in my view misplaced.
[35]
Heher JA
also pointed out that the clauses in the bond which
empower the
mortgagee to take and retain at the
expense of the mortgagor possession of the business and/or the assets
of the mortgagor hypothecated
as security for any amounts owing to
the mortgagee in terms of the bond and to conduct the
business of the mortgagor
in name and for the account and risk of the
mortgagor, and entitle the mortgagee to sell and dispose of the
business and/or the
hypothecated assets, must be read subject to the
clause which provided that :
‘
[27]…..
As soon as the default or imperilment which gave rise to the
enforcement of the rights they provide has been overcome
the
causa
for the retention of the business would fall away and the respondent
would be obliged to restore the business to the appellant
(if it has
not already been lawfully sold or the franchise agreement
cancelled). If the respondent were to seek improperly
to manipulate
the powers to draw out its hold on the business the appellant would
have its remedies. Of course the likely concomitant
of a sale of the
business is a cancellation of the franchise agreement which is the
trigger for the assignment or transfer of the
lease, the closure of
the store and the cessation of trading at the location. These
are all consequences which the respondent
is entitled to bring into
operation under the franchise agreement. They are not under attack.
That they exist independently of
the bond, illustrates once again
that the supposedly unhappy results of the exercise of the powers
under the bond are in reality
no more radical than the appellant
has willingly and, commercially speaking, fairly exposed itself
to without complaint
under the contract.’
[31]
[36]
As stated above, similar provisions are contained in clauses 6 and 8
of the bond, which reinforce the terms of the Franchise
Agreement.
Consequently I am satisfied that the implementation of the provisions
of the bond by the applicant is not unreasonable,
unjust or
oppressive.
[37]
Relying further on
Juglal
supra
[32]
the respondent
contends that as it was not in arrears with its payment as a date of
the application and sum appropriated by Maritz
had been debited to
his loan account, no
causa
existed for the relief sought by the applicant. However the
respondent fails to recognize that the acceleration clauses in the
bond, the Franchise Agreement and the Payment Variation Agreement
have been triggered by its breach to effect payments timeously.
It
therefore it cannot claim to be unfairly prejudiced by the agreements
or the bond, to which it has ‘willingly and, commercially
speaking, fairly exposed itself to, without complaint.’
[33]
[38]
Further, I am not persuaded that the respondent’s contention
that the applicant is seeking to exact an unrealistic standard
of
near perfection from the respondent who is burdened by the terms of
the agreements and bond, when clearly the Payment Variation
Agreement
was a consequence not of a single breach, but a series of breaches by
the respondent.
[34]
In
any event the respondent has admitted that from about 2010 it has
‘had difficulties in making timeous and full payments
to the
Applicant’
[35]
.
[39]
In my view the respondent is also being disingenuous in suggesting
that the applicant is opportunistic in failing to consider
favourably
the offers to purchase the respondent’s business as the sale of
the business prior to the fifth anniversary of
the opening date or
the effective date (whichever date is the later)
[36]
is prohibited by Clause 25.1 of the Franchise Agreement. The fifth
anniversary of the opening date is 19 November 2014. The offers
referred to by the respondent predate this anniversary date.
[40]
From the aforegoing considerations, I am satisfied that the bond has
been rendered executable on the grounds relied on by the
applicant.
The respondent is in breach of its contractual obligations and cannot
rely on a contention that contractual relief
sought is pernicious and unconstitutional. In my view,
this is
not a matter in which the factual matrix obliges me to develop the
common law or strike out the contractual clauses complained
of by the
respondent as unconstitutional or declare the enforcement of the bond
contra bonos mores
.
[41]
In the premises I am satisfied that the applicant that the applicant
has discharged its
onus
on this issue and is entitled to the
relief sought under the provisions of the bond, unless there is merit
in the remaining defences
raised by the respondent.
Does
the
Consumer Protection Act apply
to the Franchise Agreement?
[42]
The date of commencement of the
Consumer Protection Act
is
31
March 2011, unless otherwise indicated. The general effective date
and a pre-existing agreement are defined in Item 1 of Schedule
2 to
the Act:
‘
general
effective date’
means the date
on which the provisions mentioned in item 2(2) took effect;
‘
pre-existing
agreement’
means an agreement
that was made before the general effective date;’
Under
the provisions of
Item 2
which sets out the incremental effect
of the
Consumer Protection Act
>,
Item 2(2)
reads:
‘
Subject
to sub-item (3), and items 4 and 5, any provision of this Act not
contemplated in sub-item (1) takes effect on the date
that is 18
months after the date on which this Act was signed by the President.’
[43]
The effective date calculated at 18 months after date of assent viz
24 April 2009, is 23 October 2010.
As
Item 3
provides that:
‘
Application
of Act to pre-existing transactions and agreements.
—
(1) Except to the extent
expressly set out in this item, this Act does not apply to—
(a)
………….
(b)
any transaction concluded, or agreement entered into, before the
general effective date; or…….’
and
the Franchise Agreement was signed on 30 September 2009, the
Franchise Agreement is therefore a pre-existing agreement in terms
of
the
Consumer Protection Act.
[44
]
I am in agreement with the submission of Mr Smith that the provisions
of
Sections 13
and
48
of the
Consumer Protection Act
upon
which the respondent relies, do not apply to a pre-existing
agreement as the sections are not included in the table of applicable
sections under
Item 3(2),
and consequently the Franchise
Agreement does not fall within the ambit of the Act
.
[45]
However the Addendum to the Franchise Agreement was signed on 8 July
2011 although effective from 1 March 2011, the Liquor
Store Addendum
signed on 30 November 2012 and the Payment Variation Agreement was
concluded on 22 May 2014, and therefore these
contracts were
concluded after the general effective date of the
Consumer Protection
Act.
[46
]
The respondent contends that the Franchise Agreement was effectively
varied by the aforesaid agreements and therefore falls within
the
parameters of the
Consumer Protection Act; alternatively
, the
agreement as amended subsequent to the promulgation of the
Consumer
Protection Act, is
in conflict with the provisions of the Act, which
renders its implementation and enforcement
contra
bonos mores
.
[37]
[47]
I therefore turn to a consideration to each of the aforesaid
agreements concluded subsequent to the general effective date
of the
Consumer Protection Act.
Addendum
to the Franchise Agreement dated 8 July 2011
The reasons for and
the objective of the Addendum are stated in clause 2:
‘
2
BACKGROUND
2.1
Since the execution of the Main Agreement, the following occurrences
have had a material effect on the provisions of the Main
Agreement:
2.1.1
certain material practices relevant to the Main Agreement being
amended in practice through the mutual conduct of the franchisor
and
franchisee;
2.1.2
certain changes in legislation applicable to the Main Agreement being
effected; and
2.1.3
the financier under the Main Agreement falling away as a party to the
Main Agreement due to the internal restructuring and
consolidation of
group operations by the Pick n Pay group of companies.
2.2
The parties therefore wish to record, by way of this Addendum, the
variations and additional terms and conditions which they
have agreed
as a result of the circumstances referred to in 2.1 above.’
[38]
[48] The Addendum
also provides that:
‘
4
Savings Clause
Save
to the extent specifically or by necessary implication modified in or
inconsistent with the provisions of this Addendum, all
the terms and
conditions of the Main Agreement shall
mutatis
mutandis
continue in full force and effect.’
[39]
[49]
The applicant contends that the main agreement was amended with
effect from 1 March 2011, (notwithstanding its date of execution)
[40]
only in respect of variations arising from:
(i)
necessary consequential cross-referencing
changes;
(ii)
change in branding;
(iii)
the financier falling away as party;
(iv)
the repeal of Regional Services Councils
legislation;
(v)
the varied definition of “gross
turnover”; and
(vi)
the actual practice relating to payment
dates
[50]
The first submission by the respondent is that extensive amendments
were made to clause 17 of the Addendum which draw it within
the scope
and ambit of the
Consumer Protection Act.
>
[51]
Clause 17 falls specifically within the variations relating to the
deletion of the financier as a party to the Franchise Agreement,
consequent to the internal restructuring and consolidation of group
operations, as reflected in paragraph 2.1.3 of the addendum
as quoted
supra, and does not affect or amend the rights and obligations of the
parties to the Franchise Agreement otherwise.
[52]
However I am unable to find, as contended by Mr Farlam, that the
amendments to clause 17 effectively bring the Franchise Agreement
within the scope and ambit of the
Consumer Protection Act. I
am, to the contrary, satisfied that while the variations to clause 17
are in accordance with the requirements necessitated by the
factors
expressed in clause 2.1.3, the amendments do not serve to change the
status of the Franchise Agreement from ‘a pre-existing
agreement’ as defined in Schedule 2 of the
Consumer Protection
Act to
‘a franchise agreement’ as defined in
Section 1
of
that Act, nor does the amended Franchise Agreement constitute ‘a
new franchise agreement or a franchise agreement renewed
after the
general effective date’ as provided for in
Section 2(4)
of the
Regulations to the
Consumer Protection Act.
[41
]
[53]
Further, as the Paragraph 17.4 as set out in the Addendum replaces
paragraph 17.4 in the Franchise Agreement, the complaint
of the
respondent in respect of this clause has already been dealt with
earlier in this judgment.
Liquor
Store Addendum
[54]
The Franchise Agreement provides for the interpretation of ‘business’
in clause 1.2.4 as:
‘
the
business of a retail supermarket offering the products for sale to
members of the general public, to be conducted by the franchisee
only
from the premises and always in accordance with the provisions of
this agreement and by having access to and utilising the
intellectual
property, including the System, the trading trade mark and the
name;’
[42]
[56]
In the Liquor Store Addendum the interpretation of ‘business’
is amended as follows:
‘
4.
VARIATION OF FRANCHISE AGREEMENT
4.1
The definition of “business” as contained in clause 1.2.4
of the Franchise Agreement shall be amended to read as
follows:
“
business”
means business of a retail supermarket
and liquor store
(my emphasis) offering the products for sale to members of the
general public, to be conducted by the franchisee only from the
premises and always in accordance with the provisions of this
agreement and by having access to and utilising the intellectual
property, including the System, the trading trade mark and the name.
and
accordingly all terms and conditions in the Franchise Agreement shall
apply mutatis mutandis in respect of the Liquor Store.’
[43]
[57]
Further the ‘
SAVING CLAUSE
’ provides:
‘
Save
to the extent specifically or by necessary implication modified in or
inconsistent with the provisions of the Liquor Store
Addendum
Agreement, all the terms and conditions of the Franchise Agreement
shall
mutatis
mutandis
continue in full force and effect.’
[44]
[58]
The Liquor Store Addendum therefore effectively only extends the
ambit of the business conducted by the respondent, as set
out in
clause 1.2.4 of the Franchise Agreement to include the operation and
premises of the liquor store with which the respondent
intended to
expand its business and the consequences flowing from the inclusion
of such an operation in the franchise, albeit from
separate premises.
[59]
Consequently I am unable to find any merit in the contention that the
effect of the Liquor Store Addendum, although concluded
on 30
November 2012, is to bring the Franchise Agreement within the scope
of the
Consumer Protection Act.
Payment
Variation Agreement
[60]
The Payment Variation Agreement refers to a Franchise Agreement
entered into on 25 January 2006 as the Main Agreement. It is
common
cause that the only Franchise Agreement entered into by the parties
is the Franchise Agreement entered into on 30 September
2009 and that
the Payment Variation Agreement varied the Franchise Agreement in
respect of the arrear payment due by the respondent
in terms of the
Franchise Agreement. Neither party placed the date in dispute, but
that the date 25 January 2006 is an error is
borne out by the
references in the Payment Variation Agreement to ‘clauses 17.4
and 19.4 of the Main Agreement’
[45]
and ‘general notarial mortgage bond (Notarial Bond) granted to
it in terms of clause 24 read together with annexure ‘F’
of the Main Agreement’.
[46]
[61]
I have therefore accepted that ‘the Main Agreement’
referred to in the Payment Variation Agreement, is the Franchise
Agreement between the parties dated 30 September 2009.
[62]
Clause 2 of the Payment Variation Agreement provides that:
‘
2.1
The Main Agreement contains certain terms and conditions which the
parties have agreed to vary as a result of changed circumstances
and
in order to reflect more correctly the intention of the parties.
2.2
The Franchisee has failed to pay amounts due in terms of clauses 17.4
and 19.4 of the Main Agreement, which amounts are outstanding,
due
and payable as at the 3
rd
April 2014.
2.3
The Franchisor is prepared to accept repayment of the outstanding
amounts of the normal practice of the Main Agreement by amending
the
terms and conditions of the Main Agreement with effect from the 3
rd
April 2014 as follows:’
[47]
[63]
The Terms and Conditions relating to the repayment in the Payment
Variation Agreement
[48]
stipulate that the payments due in terms of the Franchise Agreement
‘be paid strictly in accordance with the terms and conditions
contemplated in clause 17.4 and clause 19.4 of the Main
Agreement’.
[49]
[64]
Similarly the Savings Clause in the Payment Variation Agreement
protects the integrity of the Franchise Agreement as it provides:
‘
Save
as specifically or by necessary implication modified in or
inconsistent with the provisions of this Payment Variation Agreement
the Main Agreement shall continue in full force and effect and no
variation hereof shall be of any force or effect unless it is
reduced
to writing and signed by both parties.’
[50]
[65]
Therefore in my view, the Payment Variation Agreement did not effect
or contemplate any variations or changes to the Franchise
Agreement,
which modified it to the extent that the Franchise Agreement was
brought within the scope of the
Consumer Protection Act, either
as a
new or renewed agreement, as advanced by the respondent. I am
accordingly satisfied that the reliance of the respondent on
the date
on which the Payment Variation Agreement was concluded and the effect
of the contents thereof to bring the Franchise Agreement
within the
ambit of the
Consumer Protection Act, is
misplaced. The Payment
Variation Agreement provides specifically for the repayment of the
arrears due by the respondent and stipulates
that the Franchise
Agreement remains in full force and effect, and the clauses in
relation to payments in terms thereof remain
effective. Further
Clause 4 of the Payment Variation Agreement stipulates that the
Payment Variation Agreement does not constitute
a novation of the
notarial bond.
[51]
[66]
Consequently, neither the original Franchise Agreement nor the
Franchise Agreement as amended by the Addendum, the Liquor Store
Addendum and the Payment Variation Agreement, constitute agreements
which fall within the scope of the
Consumer Protection Act. I
am
therefore satisfied that the respondent has failed to discharge its
onus
on this issue as there is no merit in the respondent’s
contention that the Franchise Agreement falls within the parameters
of the
Consumer Protection Act or
that the Franchise Agreement as
amended, is in conflict with the provisions of the Consumer
Protection Act, in particular
sections 13(1)
and
48
thereof.
[67]
I am also not persuaded that
Section 4(2)
of the
Consumer Protection
Act which
enjoins the courts to ‘develop the common law as
necessary to improve the realisation and enjoyment of consumer
rights’
and ‘promote the spirit and purposes of the Act’
are pertinent to or required by the facts of this matter.
Does
the Franchise Agreement contravene the provisions
sections 5(1)
and
5
(2) of the
Competition Act No. 89 of 1998
?
[68]
Section 5
provides that:
‘
5
Restrictive vertical practices prohibited
(1)
An agreement between parties in a vertical
relationship is prohibited if it has the effect of substantially
preventing or lessening
competition in a market, unless a party to
the agreement can prove that any technological, efficiency or other
pro-competitive,
gain resulting from that agreement outweighs that
effect.
(2)
The practice of minimum resale price
maintenance is prohibited.’
[69]
In terms of
Section 65(2)
of the
Competition Act this
court does not
have the jurisdiction to consider an issue concerning conduct that is
prohibited in terms of the
Competition Act when
that issue is raised
in civil proceedings, unless that issue has already been the subject
of an order of the Competition Tribunal.
[70]
However this court is obliged to refer that issue to the Tribunal
only if satisfied that the issue is not raised in a frivolous
or
vexatious manner and the resolution of that issue is required to
determine the final outcome of the application/action.
[52]
[71]
It is not in dispute that franchise agreement is a vertical
relationship and regulated under
Section 5
of the
Competition Act. It
is common cause that
the
onus
lies on the respondent to
prove that the Franchise Agreement
has the effect
of substantially preventing or lessening competition in the relevant
market and that the applicant effectively practises
minimum resale
price maintenance.
[72]
The respondent contends that the Franchise Agreement and its
implementation by the applicant infringe
Section 5(1)
and
5
(2) of the
Competition Act, through
the purchasing restrictions and applicant’s
effective fixing of the franchisee’s prices respectively. The
respondent
argues that it may be able to obtain similar advantages or
be in a more favourable position without the applicant’s
purchasing
restrictions, and that the applicant effectively has a
de
facto
system
of resale price maintenance.
[53]
[73]
It avers further that the franchise model adopted by the applicant
makes it difficult for small businesses including the respondent,
to
make full and timeous payments of substantial sums on a weekly basis,
which has caused franchises to fall into arrears with
payments, which
in turn has led to the conclusion of payment variation agreements
with the applicant. It alleges that as ‘most’
franchises
have concluded these variation agreements, the applicant is aware
that these are general difficulties experienced by
the franchise
businesses.
[74]
It is common cause that the applicant enters into payment variation
agreements to facilitate payment of arrears by its franchisees.
However the respondent has failed to provide a factual basis,
supporting documentation or confirmatory affidavits in respect of
its
averments that the financial difficulties are caused by the franchise
models utilised by the applicant or that ‘most’
franchisees find themselves in similar straits because of the
constraints imposed by the franchise agreements or that it may be
able to obtain similar advantages or be in a more favourable position
without the applicant’s purchasing restrictions.
[75]
The aforesaid unsupported averments are, in my view. insufficient to
discharge the
onus
on the respondent as it has failed,
inter
alia
, to define the relevant market, to show that the Franchise
Agreement has lessened or prevented competition in that market, and
that such lessening and prevention is substantial in compliance with
the requirements of
Section 5(1).
Consequently it is not incumbent
upon the applicant to prove any technological, efficiency or other
pro-competitive gain from the
Franchise Agreement.
[76]
Further, the respondent significantly admits that the Franchise
Agreement does not contain an express prohibition relating
to minimum
resale prices and that it is possible for the franchisees to
implement their own pricing systems by overriding the applicant’s
SAP system, albeit impractical and unviable, according to the
respondent.
[77]
The applicant avers that it merely sets up a recommended retail price
for its franchise stores and the franchisee can, at its
election,
increase the recommended retail price of a product by a maximum of 3%
or sell any number of products at a lower price.
[54]
[78]
The respondent, on the other hand, has not referred to any provision
in the Franchise Agreement which indicates that there
is uncertainty
as to the price at which the respondent may sell a product or which
imposes a direct or indirect penalty for not
selling at the
recommended price. Further despite the allegation of coercion, the
respondent cites no specific clause which sustains
the allegation nor
has the respondent established a factual basis which proves coercion
on the part of the applicant.
[79]
The respondent has therefore failed to discharge
onus
on it to prove that the applicant
effectively implements a
de facto
system of resale price maintenance.
[80]
Consequently I am satisfied that the complaint of
anti-competitiveness and the request for a referral to the
Competition Tribunal
is contrived, without merit and dilatory.
In
my view, the respondent seeks to obfuscate the crisp issue of whether
its failure to pay amounts in terms of the Franchise Agreement
and
Payment Variation Agreement timeously as stipulated in the aforesaid
agreements and its subsequent failure to remedy its breach
have
rendered the bond executable, which entitles the applicant to perfect
its security in terms of the provisions of the bond.
[81]
There is therefore no hurdle constituted by
Sections 5(1)
and
5
(2) of
the
Competition Act to
a determination of the merits of this
application by this court.
URGENCY
[82]
In my view the applicant properly relies on the conduct of Maritz and
the indebtedness of the respondent to justify the urgent
application.
On the respondent’s own version Maritz was dishonest and acted
in breach of the terms of both the Franchise
Agreement and the bond,
despite the fact that he may have subsequently rectified the
situation by paying back the monies he had
misappropriated when the
applicant confronted him. The applicant’s concern that its
interests were imperilled and jeopardized
by such fraudulent
misconduct was consequently reasonable and justified.
[83]
Further, despite its allegation that the applicant had ‘misdescribed’
its financial situation and its compliance
with its financial
obligations, on its own version the respondent had fallen into
arrears with its payments. As already held, the
acceleration clause
did consequently become effective and a substantial sum in excess of
R8m was due, owing and payable by the
respondent by 9 July 2014,
sustaining the applicant’s right to seek perfection of its
security under the bond. I am in agreement
with the reported remarks
of Lopes J that perfection applications are generally inherently
urgent and am satisfied that this application
was no different.
Consequently the applicant’s conduct in seeking to protect its
interest in the respondent by way of the
urgent application was
justified.
[84]
Furthermore the consent order taken by the parties on 22 July 2014
effectively placed the respondent’s business under
the
applicant’s control, and implemented a substantial portion of
the relief sought by the applicant to assert its right
to seek
perfection of its security. The applicant was therefore substantially
successful in its application.
[85]
I am therefore satisfied that the applicant is entitled to the
reserved costs of 22 July 2014.
Costs
[86]
There is no reason why costs should not follow the result. In terms
of clause 47.2 of the Franchise Agreement the applicant
is entitled
to costs on an attorney and own client scale. In my view an
appropriate order is costs on an attorney and client scale.
Order:
In
the result the following order do issue :
1. The applicant
through its duly authorised representative, alternatively the sheriff
of this Honourable Court is authorised and
empowered for the purpose
of perfecting its security in terms of Notarial General Bond with No.
BN 18068/09 to exercise the rights
as contemplated in clauses 6.1.1
to 6.1.11 of the Notarial General Bond,
inter alia
1.1 to claim and
recover from the respondent forthwith all and any sums for the time
being secured by this bond, whether then due
for payment or not;
and/or
1.2 for the purpose
of perfecting its security hereunder to enter upon the premises of
the respondent or any other place where any
of its assets are
situated, and to take possession of its assets; and/or
1.3 to conduct the
business of the respondent in the name, place and stead of the
respondent and to do all such things in respect
of or incidental to
the business as the respondent would itself have been able to do
including, but without limiting the generality
of the aforegoing –
1.3.1 to engage and
dismiss staff in its absolute discretion and on such terms as it may
determine;
1.3.2 to purchase
goods of every description provided that the applicant shall be
restricted to the normal course of the respondent’s
business;
1.3.3 to lock, and
change the locks on the premises of the respondent;
1.3.4 to receive,
uplift, open and keep in its custody post whether addressed to the
business or the respondent;
1.3.5 to operate on
any banking account conducted by the respondent;
1.3.6 to discharge
the debts of the respondent and other liabilities including its
liabilities to the applicant in terms hereof;
1.3.7 to sue and
recover from any debtor of the respondent all and any debts and
monies owing by such debtors on account of the
purchase price of any
goods;
1.3.8 to draw and
endorse cheques, bills of exchange, promissory notes and other
negotiable instruments; and/or
1.4 to discharge the
respondent’s liabilities to it in terms hereof by selling the
business of the respondent and any of its
assets either as a going
concern or piecemeal and whether as principal or agent as the
applicant in its absolute discretion determines,
by public auction
or, on reasonable notice to the respondent not exceeding 7 (seven)
days, by private treaty; and/or
1.5 to take over the
respondent’s business as a going concern or the respondent’s
assets as at a valuation placed thereon
by an independent chartered
accountant or other independent expert appointed by the applicant’s
auditors; and/or
1.6 to apply for and
procure the transfer of all licences, quotas, permits, registration
certificates and the like that may have
been issued to the
respondent; and/or
1.7 to sign or
subscribe on behalf of the respondent to all applications or
agreements for or transfer of licences, quotas, permits,
registration
certificates and the like which relate to the assets hereby
mortgaged; and/or
1.8 to sub-let, cede
and/or assign such rights and/or obligations in respect of any leases
or sub-leases of the premises of the
respondent; and/or
1.9 to do all such
other acts as may be necessary or desirable to record the sale,
disposal and/or transfer, as the case may be,
of any assets hereby
mortgaged; and/or
1.10 to employ such
other remedies and to take such other steps against the respondent as
are in law allowed.
2.
The respondent is directed to pay the costs of this application and
the reserved costs of the hearing on 22 July 2014 on an attorney
and
client scale.
______________
MOODLEY J
Date
of Hearing: 31 October 2014
Date
of Judgment: 20 March 2015
Counsel
for the applicant: Adv HJ Smith
Instructed
by: Cliffe Dekker Hoffmeyr Inc
1
Protea Daly Place
SANDOWN
c/o
Strauss Daly Inc
9
th
Floor
41
Richefond Circle
Ridgeside
Office Park
UMHLANGA
c/o
Lawrie Wright & Partners
345
Essenwood Road
Musgrave
DURBAN
Counsel
for the respondent: Adv PBJ Farlam
Instructed
by: Seton Smith & Roberts Inc
c/o
JH Nicolson, Stiller & Geshen
2
nd
Floor
Clifton
Place
19
Hurst Grove
Musgrave
DURBAN
[1]
FA para 8.16
[2]
Answering
affidavit para 22-24; and para 27
[3]
FA:
para 10.5.7, 10.5.7.5, 10.5.7.7
[4]
Answering
affidavit para 78
[5]
FA:
para 10.5
[6]
Annexure
FA6 clause 3.9
[7]
Read
with
S121
of the CPA
[8]
Schedule
2 Item 2(2) read with the definition of ‘general effective
date’ in Schedule 2 Item 1
[9]
No
89 of 1998
[10]
2004
(5) SA 248
(SCA) pages 257-260 para 11,13,15,19-21,26 & 27
[11]
Juglal
NO
para
26-27
[12]
Botha
v Rich NO
2014
(7) BCLR 741
(CC) at para 45-46; and
Everfresh
Market Virginia (Pty) Ltd v
Shoprite
Checkers (Pty) Ltd
2012 (1) SA 256
(CC) at para 22-24 & 71-72
[13]
Page 248 para 21.3 p 287
[14]
Vol
2 page 190
[15]
Vol
1 page 99
[16]
Vol 3 page 207-210
[17]
Vol 3 Clause 3.9 page 208
[18]
Vol 3 AA para 6.2-6.4 p 244; para 21.1 page 248
[19]
Vol 3 AA para 21.4 page 249
[20]
Vol 3 clause 4 page 210
[21]
Vol 3 clause 5 page 210
[22]
Vol 2 clause 24.3 page 105
’
24
SECURITY DOCUMENTS
24.3
As security for all and any of the franchisee’s obligations to
the franchisor in terms of, pursuant to, arising from
or under this
agreement, including but not limited to the franchisee’s
obligation to reimburse and indemnify the franchisor
in terms of
clause 24.2, the franchisee shall, at the franchisee’s cost,
furnish to the franchisor the security stipulated
in
Part 2
of
Annexure “F”, which security may be held by the
franchisor until all of the franchisee’s aforesaid obligations
have been duly, fully and finally discharged.’
[23]
Vol 2 pages 178-179
[24]
Vol 1 page 78
[25]
2004
(5) SA 248
(SCA) at para 26-27
[26]
Juglal
NO
supra para 12 page 258
[27]
Juglal
NO
supra
page 259F
[28]
Juglal
NO
supra
page 248 H-I
[29]
Juglal
NO
supra
page 260 A-D
[30]
Juglal
NO
supra
page 261B-F
[31]
Juglal
NO
supra
page 261G- 262A
[32]
Para
[26] and [27] pages 260-262 in particular [27 G-H]
[33]
Juglal
NO
page
262A
[34]
OK
Bazaars (1929) Ltd v Cash-In CC
[1993] ZASCA 204
;
1994
(2) SA 347
at 361C-D
[35]
AA
para 11 page 246
[36]
Schedule 1 of the FA:
19
November 2009 pages 135-136
[37]
Supplementary Answering affidavit para 21
[38]
Vol 2 page 185
[39]
Vol 1 page 195
[40]
Vol 2 page 185
[41]
‘A franchise agreement which is renewed after the general
effective date is a new franchise agreement for the purposes
of
sub-regulations (2) and (3)’.
[42]
Vol 1 page 52
[43]
Vol 2 page 200
[44]
Vol 3 page 201 clause 5
[45]
Vol 3 page 206 clause 2.3
[46]
Vol 3 page 216 clause 4 read with Vol 3 page 105 clause 24
[47]
Vol 3 Page 206
[48]
Vol 3 page 207 clause 3
[49]
Vol 3 page 207 clause 3.4
[50]
Vol
3 page 210 clause 5
[51]
Vol
3 page 210: ‘
4
NO NOVATION OF NOTARIAL BOND
The
parties record that the conclusion of this Payment Variation
Agreement does not and will not
constitute
a novation or a waiver of the rights of the Franchisor relating to
the general notarial
mortgage
bond (“Notarial Bond”) granted to in terms of clause 24,
read together with annexure “F” of
the
Main Agreement, whether or not this Payment Variation Agreement is
concluded –
4.1
after the perfection of the Notarial Bond by the Franchisor; or
4.2
at a time when the Franchisor has not made an application to perfect
the Notarial Bond.
[52]
65
Civil actions and jurisdiction
(1)………….
(2) If, in any
action in a
civil court
, a party raises an issue concerning
conduct that is prohibited in terms of
this Act
, that court
must not consider that issue on its merits, and-
(a)
if
the issue raised is one in respect of which the Competition Tribunal
or Competition Appeal Court has made
an order, the court must apply
the determination of the Tribunal or the Competition Appeal Court to
the issue; or
(b)
otherwise,
the court must refer that issue to the Tribunal to be considered on
its merits, if the court is satisfied
that-
(i) the
issue has not been raised in a frivolous or vexatious manner; and
(ii) the
resolution of that issue is required to determine the final outcome
of the action.
[53]
Vol 4 AA para 14-19 pages 342-347
[54]
Vol
4 Supp RA para 25-27 pages 369-370 and Vol 1 clause 15.3.8 of
the FA page 81