IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
CASE NO: 20350/2023
In the matter between:
ENGEN PETROLEUM LIMITED Applicant
and
SLICK OIL CC t/a CHELSEA VILLAGE CONVENIENCE Respondent
CENTRE
Coram: Bishop, AJ
Date s of Hearing: 15 October, 13 November and 9 December 2024
Date of Judgment: 24 February 2025
JUDGMENT
BISHOP, AJ
[1] An application for the payment of money arising from an acknowledgement of
debt was met with an application to stay those proceedings pending a referral to
arbitration.
[2] The Respondent (Slick Oil ) runs operates a service station in Wynberg under
an agreement w ith the Applicant (Engen ). That agreement allowed Engen to exploit
an “alternative profit opportunity” by introducing a Woolworths store on the premises.
[3] In mid-2022, Engen approached Slick Oil to exploit the alternative profit
opportunity. There was some engagement between the parties and Slick Oil
indicated it was not in a position to pay the contribution. Ultimately, Engen paid R3
106 538.57 to construct the Woolworths store, which Slick Oil agreed to repay when
it was able to do so. Slick Oil now c laims that it agreed to this arrangement under
duress, or based on a misrepresentation about the parties respective contractual
rights. But at the time, it accepted its liability.
[4] Following demands for repayment, on 27 September 2022 Slick Oil sent
Engen a document titled “Acknowledgement of Debt and Undertaking to Pay”. In the
document, Slick Oil offered to pay the outstanding amount in one sum by 28
February 2023. Slick Oil’s representative signed the document and sent it to Engen’s
representative, Noloyi sa Majekiso , by email.
[5] This is the document on which Engen relied for its original relief. The version it
attached to its founding affidavit was signed by Ms Majekiso also dated on 27
September 2022. Ms Majekiso also deposed to an affidavit confirming she had
signed it on that date. However, Slick Oil claimed it had never received the version
signed by Ms Majekiso.
[6] Slick Oil did not pay Engen by 28 February 2023 as it had offered to do. The
parties met about the failure. But Engen did not demand immediate payment.
[7] On 11 April 2023, Slick Oil wrote to Engen . The letter primarily dealt with a
failure to ensure the service station was stocked with fuel , in breach of the primary
agreement between the parties . But Mr Muller, the sole member of Slick Oil, also
stated: “I am doing everything in my power to facilitate the release of funds from my
investment so that I am able to fulfil my obligation in terms of the acknowledgment of
debt.” However, no further payments were made, nor did Engen demand payment.
[8] Instead, on 26 June 2023, Slick Oil sent a letter to Engen making a new offer
– to repay the amount owed in 36 instalments of R86 292.74. The letter also stated
that, as Engen had n ot accepted the previous offer it had made in the September
2022 Acknowledg ement of Debt , Slick Oil withdrew that offer .
[9] Engen did not accept this new offer. There were various further meetings
between the parties, and two further offers by Slick Oil, none of which Engen
accepted. Engen did not, however, insist on the full and im mediate repayment – it
merely insisted on better repayment terms than Slick Oil was offering.
[10] On 27 July 2023, Slick Oil made a fourth offer to repay in 30 instalments of
R120 006.46 per month. This offer, too, was n ot accepted. But between 7 August
2023 a nd 24 April 2024, Slick Oil made ten payments to Engen (five of R 125 000,
and five of R30 000). Engen accepted those payments.
[11] On 15 November 2023 Engen launched the present application. It is a simple
application. It claims that the original 27 September 2022 acknowledgment of debt
remains binding on Slick Oil, and that this is confirmed by the letter of 11 April 2023.
It claims payment of the R3 106 538.57 less the payments which had been made ,
plus interest .
[12] Slick Oil’s answer (which was late in coming) took a double -barrel approach.
First, it brought a counter -application to stay the determination of Engen’s application
until t he resolution of a request for arbitration it intended to submit to the Controller of
Petroleum Products under s 12B (1) of the Petroleum Products Act 120 of 1977 .
[13] Second, its primary defences to the main application were that: (a) there was
no valid ackno wledgement of debt as Engen had not communicated its acceptance
of his offer of 27 September 2022; and (b) there was no agreement with regard to
the contribution to constructing the Woolworths, and that it had entered the
agreement because of duress and mi srepresentations by Engen.
[14] The application and the counter -application were initially set down for 15
October 2024. The day before the hearing, Slick Oil applied for a postponement. It
had not yet delivered its replying affidavit in its counter -application , or its heads of
argument. I granted the postponement to 13 November 2024, but ordered Slick Oil to
pay the costs of the postponement on an attorney and client scale.
[15] On 13 November 2024, the parties’ counsel indicated to me in chambers that
the parties w ere attempting to settle the matter and sought a further postponement to
explore that possibility. I postponed the matter to 29 November 2024, but the parties
again sought more time, so the matter was postponed to 9 December 2024 . The
parties were unable t o settle their dispute, and I heard the matter on that date.
[16] I intend to deal with the counter -application first . It is in the nature of a special
plea, and logically it comes first. I t is about who should decide the merits of the
dispute between the parti es – this Court or an arbitrator. That issue requires
resolution before the merits.
[17] The Petroleum Products Act was enacted, in part to address “pervasive”
inequality in bargaining power in the industry between wholesalers and retailers.1
Retailers like Slick Oil generally have “fewer resources” and less bargaining power
than wholesalers like Engen.2 The Act seeks to equalize the ir positions.
[18] One of the mechanisms to give effect to that purpose is the statutory right
given to both retailers and wholesalers to refer disputes to arbitration. Section 12B(1)
provides: “ The Controller of Petroleum Products may on request by a licensed
retailer alleging an unfair or unreasonable contractual practice by a lice nsed
wholesaler, or vice versa , require, by notice in writing to the parties concerned, that
the parties submit the matter to arbitration. ”
1 Business Zone 1010 CC t/a Emmarentia Convenience Centre v Engen Petroleum Limited and
Others [2017] ZACC 2; 2017 (6) BCLR 773 (CC) at para 47.
2 Crompton Street Motors CC v Bright Idea Projects 66 (Pty) Ltd [2021] ZACC 24; 2021 (11) BCLR
1203 (CC); 2022 (1) SA 317 (CC)
[19] When it filed its answering affidavit, Slick Oil had not yet made a request to
the Controller of Petroleum Products to refer the dispute to arbitration. It belatedly
made the request on 12 November 2024, the day before the hearing. Slick Oil’s
counsel offered various explanations for the delay. They were given from the bar, not
in affidavit. I intend to disregard them. The request includes a statement of claim
which largely repeats the allegations in the answering affidavit – that Slick Oil did not
agree to the contribution, and that it had been forced to make it by misrepresentation
and duress.
[20] Section 12B(1) not only provides the procedural protection of a right to refer to
arbitration, it also alters the substantive relationship between the parties. In Business
Zone the Constitutional Court held that the provision imposes an “equitable
standard” for contractual relati ons in the petroleum industry that “overrides the terms
of thei r contract to ensure that fairness and reasonableness prevail.”3 Both courts
and arbitrators appointed under s 12B(1) must apply the same standard.4
[21] Fortunately, I need not apply that standard to resolve the counter -application .
Slick Oil does not directly rely on the substantive equitable standard established by
s 12B(1), but on its right to refer dispute to arbitration, and to stay pending litigation
until the arbitration is complete. As Mhlantla J explained the position : “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. ”5
[22] What triggers the right to apply for a stay is the Controller’s referral to
arbitration or at least a valid request that he makes a referral. The Controller ’s
“discretionary threshold” t o refuse a referral “is a low one”.6 The only jurisdictional
requirement is “an allegation by a retailer that a wholesaler, or vice versa, has
committed an unfair or an unreasonable contractual practice .”7 The Controller only
3 Business Zone (n 1) at para 48.
4 Ibid at para 56.
5 Ibid at para 58.
6 Ibid at para 60.
7 Ibid at para 61.
needs to be satisfied about the existence of an allegation, not its validity. Once he is,
the Controller “ should then refer the matter to arbitration. ”8
[23] When a party seeks to enforce the right to stay litigation pending a s 12B(1)
arbitration, it can either rely directly on s 6 (1) of the Arbitration Act,9 or it can demand
the stay as a special plea or by way of a counter -application.10 A court faced with a
request to stay pending the outcome of a s 12B(1) request will apply a similar
standard to that applied under s 6(2) of the Arbitration Act – it “must find that there
are compell ing reasons to refuse the stay ”.11 In making that assessment, it must
consider “the purpose of section 12B and all its numerous benefits for retailers and
wholesalers. ”12
[24] Slick Oil has, belatedly, made a request to the Controller to refer a dispute to
arbitration. As far as I am aware, the Controller has not yet made a decision. Without
wanting to prejudge the Controller’s decision, it appears to me that the referral meets
the very low threshold to requir e the referral – an allegation of “an unfair or
unreasonable contractual practice by a licensed wholesaler ”. Engen did not suggest
otherwise.
[25] The question then is whether there are any “compelling reasons” not to stay
these court proceedings until the outc ome of the referral and, if it is referred, the
arbitration. I see none.
[26] Engen’s counsel contended – somewhat half -heartedly – that there were
reasons not to stay the litigation. He argued that the referral – and the stay to ensure
it is resolved – was simply an attempt to avoid the inevitable. I prefer not to express
an opinion on that. Whatever I think about the merits of the current application (and I
have intentionally said nothi ng about my views), the arbitrator should make her own
assessment, which will include an assessment of whether any of the contractual
practices are “unfair or unreasonable”. I cannot say without knowing what evidence
8 Ibid.
9 Crompton Street (n 2) at para 31.
10 Ibid at paras 32 -4.
11 Ibid at para 43.
12 Ibid.
will ultimately serve before the arbitr ator, what Slick Oil prospects of success might
be.
[27] Engen also argued that part of the relief Slick Oil seeks in the arbitration – the
extension of its lease for five years – is incompetent. That may be . But Slick Oil
seeks a range of other relief as well with which Engen raises no principled objection.
[28] Are there any other reasons? It is obviously frustrating for Engen that the
request for referral came so late – just a day before the hearing. There was no
acceptable explanation for the delay. I intend to f actor that into my award on costs.
But I do not think it is a reason to refuse the stay. Slick Oil indicated in its counter
application, t he request has now been made, and that triggers the entitlement to
seek a stay.
[29] Accordingly, I conclude that Slick Oil is entitled to a stay of the main
application. That stay must be until the Controller makes a decision on its request
and, if he refers it to arbitration, until the completion of that arbitration.
[30] That leaves the issue of costs . Ordinarily, Slick Oil woul d be entitled to its
costs in the counter -application, which has been successful. But there is a modifying
factor here – its delay in making the request for referral to the Controller. With merely
the promise of a request, and not the request itself, I wou ld likely have dismissed the
counter -application. Engen’s opposition was entirely reasonable up to the day before
the hearing.
[31] In my view, despite Slick Oil’s success , each party should bear their own
costs in the counter -application. The main application is merely stayed. The costs of
that application will need to be determined in due course, depending on the result of
the Controller’s decision and any arbitration that may follow.
[32] Accordingly, I make the following order:
32.1. The counter -application is granted .
32.2. The main application is stayed pending the outcome of : (a) the
Controller of Petroleum Product’s decision in terms of s 12B(1) of the
Petroleum Products Act 120 of 1977 whether to require the parties to
submit the Respondent’s allegations to arbitration ; and (b) if the
Controller does require the parties to submit to arbitration, the outcome
of that arbitration.
32.3. Each party shall pay their own costs in the counter -application.
____________________
M J BISHOP
Acting Judge of the High Court
Counsel for Applicant : Adv A Coetzee
Attorneys for Applicant DM5 Incorporated
Counsel for Respondent : Adv A Heunis
Attorneys for Respondent Laubscher & Associates