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[2017] ZACC 2
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Business Zone 1010 CC t/a Emmarentia Convenience Centre v Engen Petroleum Limited and Others (CCT09/16) [2017] ZACC 2; 2017 (6) BCLR 773 (CC) (9 February 2017)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT 09/16
In the matter
between:
THE BUSINESS ZONE 1010
CC t/a
EMMARENTIA
CONVENIENCE
CENTRE
Applicant
and
ENGEN PETROLEUM
LIMITED
First Respondent
CONTROLLER OF PETROLEUM
PRODUCTS
Second Respondent
MINISTER OF
MINERALS AND
ENERGY
Third Respondent
Neutral
citation:
The
Business Zone 1010 CC t/a Emmarentia Convenience Centre v Engen
Petroleum Limited and Others
[2017]
ZACC 2
Coram:
Mogoeng CJ, Nkabinde ADCJ, Cameron J, Froneman J,
Jafta J, Khampepe J, Madlanga J, Mbha AJ, Mhlantla J, Musi AJ
and Zondo J
Judgments:
Mhlantla J (unanimous)
Heard on:
24 August 2016
Decided on:
9 February 2017
Summary:
Petroleum Products Act 120 of 1977
—
interpretation of
section 12B
— single act constitutes a
contractual practice under
section 12B
— decision of Controller
of Petroleum Products and Minister of Minerals and Energy reviewable
in terms of
section 6
(2) (d) of
Promotion of Administrative Justice
Act 3 of 2000
— referral by the High Court confirmed.
ORDER
On appeal from the Supreme
Court of Appeal (hearing an appeal from the High Court of South
Africa, Gauteng Division, Pretoria):
1.
Leave to appeal is granted.
2.
The appeal is upheld.
3.
The order of the Supreme Court of Appeal is set aside and replaced
with the following:
“
The
appeal is dismissed with costs including the costs of two counsel.”
4.
Engen Petroleum Limited is to pay costs in this Court, including
costs of two
counsel, where applicable.
JUDGMENT
MHLANTLA J (Mogoeng
CJ, Nkabinde ADCJ, Cameron J, Froneman J, Jafta J, Khampepe J,
Madlanga J, Mbha AJ, Musi AJ and Zondo J concurring):
Introduction
[1]
This is an application for leave to appeal
against a judgment and order of the Supreme Court of Appeal.
[1]
The application concerns the review of decisions by the
Controller of Petroleum Products (Controller) and the Minister of
Minerals and Energy (Minister) not to refer an alleged unfair or
unreasonable contractual practice by Engen Petroleum Limited (Engen)
to arbitration in terms of
section 12B(1)
[2]
of the Petroleum Products Act
[3]
(Act). This application in the main is about the proper
interpretation of section 12B.
[2]
The applicant is The Business Zone 1010 CC
t/a Emmarentia Convenience Centre (Business Zone) and the first
respondent is Engen.
Business Zone is a licensed retailer
and Engen is a licensed wholesaler of petroleum products, each as
contemplated by the
Act. The second respondent is the
Controller, and the Minister is the third respondent. They
abide the decision of
this Court.
Background
[3]
During 2005, Business Zone purchased a fuel
and service station business situated at the corner of Tana Road and
Barry Hertzog Avenue,
Emmarentia, Johannesburg. Business Zone
then concluded an agreement with Engen for the lease and operation of
a service station.
This agreement was for a period of three
years. In terms of this agreement, Business Zone agreed to
conduct the business
of selling and distributing petroleum products
supplied exclusively by Engen under its brand name. Pursuant to
the conclusion
of the agreement, Business Zone took occupation
of the premises and began conducting its business.
[4]
During April 2008, the parties
concluded a second lease and operation of service station agreement
(lease agreement). Then,
on 16 February 2010, the
parties concluded an addendum to the lease agreement (addendum).
In terms of the addendum,
Engen made certain undertakings. In
particular, Engen would provide Business Zone with premises in
accordance with the
site development plan annexed to the addendum and
two additional access points to the site in accordance with the
provisions of
the site development plan.
[5]
On 20 September 2010,
Business Zone wrote to Engen advising that the two additional
access and entry points on Barry Hertzog Avenue
and
Crocodile Road were not provided in accordance with the
addendum. Business Zone called upon Engen to remedy this
breach.
[6]
Engen did not respond to Business Zone’s
demand but, in a letter dated 12 October 2010, claimed that
Business Zone
had breached the addendum. It averred that
Business Zone had, in contravention of the law or contrary to
Engen’s
guidelines, effected certain alterations to the leased
premises without its prior written consent. Engen accordingly
called
upon Business Zone to remedy the breach within seven
days. Paragraph 4 of the letter stated that failure to comply
with
the demand within the stipulated time would entitle Engen to
cancel the lease agreement.
[7]
On 15 October 2010, Business Zone
responded to Engen’s letter and conceded that installations had
been implemented
without Engen’s prior written consent.
However, Business Zone averred that Engen had been aware of the
installations
and that reasons for the installations had been
furnished. Indeed, Business Zone provided a detailed
explanation in
respect of the installations and in the process sought
Engen’s written consent for the installations.
[8]
Engen ignored Business Zone’s
letter. Instead, on 22 October 2010, Engen addressed
another letter to
Business Zone. It referred to its
earlier letter and stated that Business Zone had failed to
comply timeously with
the requirements therein. Engen stated
that Business Zone’s conduct constituted a repudiation of
the lease agreement,
and noted that Engen had accepted the
repudiation. Engen accordingly advised Business Zone that,
as a result, the lease
agreement had been cancelled.
[9]
Business Zone immediately responded to
Engen’s second letter. It recorded that it was of the
view that Engen’s
conduct amounted to an unfair or unreasonable
contractual practice. Business Zone accordingly notified
Engen that it
would make a formal referral for adjudication to the
Department of Mineral Resources and Energy under section 12B(1)
of the
Act.
[10]
Notwithstanding the purported cancellation
of the lease agreement, Engen continued to supply Business Zone
with petroleum products
under an interim arrangement until
24 March 2011. On that date, Engen gave Business Zone
48 hours’ notice
of its intention to terminate the supply
of petroleum products. It also terminated Business Zone’s
rights under
the lease agreement to sell Woolworths products from the
leased premises.
[11]
On 30 March 2011, Engen
again wrote to Business Zone stating that it had become apparent
that Business Zone
had started storing and selling petroleum
products purchased from a source other than Engen. The letter
noted that this sale
of foreign products constituted passing off
and an infringement of Engen’s marks. Engen then
purported to cancel
the lease agreement for a second time, on the
basis of Business Zone’s sale of foreign products.
[12]
On 1 April 2011, Business Zone sought
relief from the High Court of South Africa, Gauteng Local Division,,
Johannesburg (Johannesburg
High Court). It obtained an
interdict pending its referral under section 12B (1) of the
Act. The interdict
directed Engen to continue supplying
Business Zone with petroleum products on standard terms and
conditions in accordance with
the previous practice between the
parties. Engen was further ordered to cease interfering with
the arrangement between Business Zone
and Woolworths.
Section 12B(1) Referral
[13]
On 4 April 2011, Business Zone lodged
its request for a referral to arbitration with the Controller under
section 12B
(1) of the Act. In its request, Business Zone
set out the background of the matter and emphasised the problems it
had
experienced. In particular, Business Zone noted that
Engen’s conduct had worsened since 2009, when Business Zone
had referred a different dispute to arbitration.
[4]
Business Zone contended that Engen had since made every
effort to cancel the lease agreement between the parties on
spurious
grounds. Business Zone accordingly submitted three claims
(A, B and C) alleging that Engen’s conduct
amounted to unfair
and/or unreasonable contractual practices.
[14]
In Claim A, Business Zone averred that
under the addendum, Engen was obliged to provide it with the premises
in accordance with
the site development plan annexed to the
addendum. Notwithstanding renovations having been completed in
August 2010
and the site development plan obliging Engen to
provide two additional access points to the site, Engen had failed to
provide the
access points. Thus, Engen breached its obligations
under the addendum. Business Zone also averred that Engen
had failed to take any steps to remedy the situation and persisted in
its failure to provide the necessary access points.
This,
Business Zone argued, fell within the bounds of section 12B(1)
of the Act.
[15]
Claim B concerned Engen’s
failure to give consent to the improvements effected by Business Zone
as requested on
15 October 2010. Under the addendum,
all improvements made to the site were subject to Business Zone
obtaining
Engen’s prior written consent. Although
Business Zone sought Engen’s consent for improvements only
after
Business Zone had in fact effected the improvements,
Business Zone argued that an implied term of the addendum was
that
Engen’s consent would not be unreasonably withheld.
It alleged that Engen’s failure to consent to its alterations,
which were necessary for Business Zone to comply with its
obligations under the addendum, was unfair and unreasonable.
[16]
Claim C concerned Engen’s
conclusion of a lease agreement with a Kentucky Fried Chicken (KFC)
franchisee. Business Zone
alleged that the negotiation or,
alternatively, the conclusion of this lease agreement with the
franchisee and the collection of
rent from the franchisee during the
subsistence of the agreement between Business Zone and Engen
(without the prior consent
of Business Zone) was unfair and
unreasonable.
[17]
Engen, in its response, disputed the
existence of the contract relied upon by Business Zone. It
contended that an arbitrator
could not determine a dispute between
the parties when one of the parties alleged that the contract had
been cancelled. Furthermore,
an arbitrator could not adjudicate
a dispute where the validity of the cancellation of the contract was
contested. Engen
argued that the arbitrator had no jurisdiction
to determine the validity of the cancellation of the contract,
because doing so
would amount to determining his or her own
jurisdiction, which would be impermissible. In any event, the
cancellation of
a contract did not amount to an unfair or an
unreasonable contractual practice.
[18]
Engen went on to argue that a referral to
arbitration would result in a conflict of jurisdiction between the
arbitrator, on the
one hand, and the courts, on the other. In
this case, Engen had launched an application in the Johannesburg High
Court where
it sought the cancellation of the lease agreement on the
grounds that Business Zone was dealing in foreign products. That
issue, including the validity of the cancellation of the lease
agreement, was pending before the Johannesburg High Court.
Engen contended that a pronouncement by that Court, that the
cancellation of the lease agreement was valid, would render any
arbitration academic.
Response of the
Controller and the Minister
[19]
The Controller refused Business Zone’s
section 12B request to refer the dispute to arbitration.
He noted that
the agreement, which formed the basis of
Business Zone’s allegations of an unfair or an
unreasonable contractual practice,
had been cancelled. He then
took the view that “in the absence of an existing valid
Agreement of Lease and Operation
of Service Station,
[Business Zone’s] request for arbitration does not satisfy
the minimum requirements in terms of
section 12B of the Act”.
He also stated that Business Zone’s “allegations of
unfair or unreasonable
contractual practice are centred around the
agreements which are currently under consideration by the
[Johannesburg] High Court
and as such, the matter is therefore
sub judice
and can no longer be considered for arbitration”. The
Controller thus concluded that Business Zone’s request
failed to meet the “minimum requirements” in
section 12B(1) for a referral to be made.
[20]
Aggrieved by the decision, Business Zone
appealed to the Minister in terms of section 12A of the Act.
[5]
The Minister dismissed Business Zone’s appeal on the same
grounds as the Controller. The Minister found that “section 12B
of the Act may only be applied in cases where there is an existing or
continuing contract between the parties”. The
Minister
added that because Engen had cancelled the contract and the validity
of its cancellation was pending before the Johannesburg
High Court,
a referral to arbitration would not be proper. Further, a
single juristic act intended to terminate an agreement
could not in
law constitute or be characterised as an unfair or unreasonable
contractual practice for purposes of section 12B.
Pretoria High Court
[21]
As a result of the Minister’s
dismissal of the appeal, Business Zone brought an application in
the High Court of South
Africa, Gauteng Division, Pretoria (Pretoria
High Court) for the review of the Controller’s and the
Minister’s
decisions. The application, which was opposed
by Engen, came before Prinsloo J.
[22] The Pretoria High Court
[6]
dismissed an argument by Engen that the decisions of the Controller
and Minister were preliminary in nature and thus did not amount
to
“administrative action” capable of review in terms of
Promotion of Administrative Justice Act
[7]
(
PAJA).
[8]
The Court relied on this Court’s decision in
Viking Pony
[9]
that demanded that regard be had to the facts of each case in
determining the existence of “administrative action”.
It continued to hold that the statutory context of section 12B
made it apparent that the Controller’s decision amounted
to a
final pronouncement.
[23]
Regarding the
interpretation of section 12B, the Pretoria High Court held that
section 12B contained an
“extremely low”
referral
threshold. It was
not the
place of the Controller to decide “that there is no longer a
valid agreement between Business Zone and Engen”
and that
“the agreement . . . [had] been cancelled”. The
Court concluded that it was procedurally more appropriate
that an
arbitrator be appointed to adjudicate a section 12B issue and make a
decision so that the pending Johannesburg High Court
proceedings
could proceed.
[24]
The
Pretoria
High Court rejected
Engen’s reliance on
Tlhamo
[10]
on the basis that, in that case, the lease terminated by effluxion of
time. There was no dispute as to the lease’s
cancellation. The Judge relied on this Court’s decision
in
Maphango
[11]
and analogous principles of labour law to conclude that a single act
may amount to a “practice”. He concluded
that
Tlhamo
, on this point, had been wrongly decided. Accordingly,
the Pretoria High Court upheld Business Zone’s application
with
the result that the decision of the Controller was reviewed and set
aside.
The Court ordered the
substitution
of the decision of the Controller with a referral to arbitration in
terms of section 12B.
Supreme Court of Appeal
[25]
Engen appealed to the Supreme Court of
Appeal. In a judgment penned by Ponnan JA, the Supreme Court of
Appeal rejected the
Pretoria
High Court’s
interpretation
of section 12B. The Supreme Court of Appeal held that
section 12B could not confer jurisdiction on an
arbitrator to
decide disputes where a contract between the parties had been
terminated. The Supreme Court of Appeal further
held that the
interpretation proffered by Business Zone would result in a
concurrency of jurisdiction and with the potential to
cause anomalous
consequences.
[26]
The Supreme Court of Appeal disagreed with
the finding of the Pretoria High Court that the Controller should
decline a request “only
in the rarest and most exceptional of
circumstances” and held that this amounted to an unnecessary
fettering of the Controller’s
discretion. As for the
arbitrator, the Supreme Court of Appeal confirmed the interpretation
of section 12B adopted in
Tlhamo
.
It held that the only jurisdiction conferred on an arbitrator was “to
determine whether an ongoing practice in the
performance of an
existing agreement or contract is unfair or unreasonable”.
[27]
In support of its finding that the Controller could validly
consider the existence of an underlying contractual relationship, the
Supreme Court of Appeal
contrasted
the
nature of the arbitrator’s remedial powers under
subsections 12B(4)(a) and 12B(4)(b). The remedial powers
under the former being corrective, the latter compensatory. It
held that a corrective jurisdiction implied that any relief
granted
by an arbitrator had to be against the backdrop of an ongoing
contractual relationship. It was impermissible for
an
arbitration to occur after the severing of this relationship.
[28]
The Supreme Court of Appeal held that the
phrase “unfair or unreasonable contractual practice”
should also derive meaning
from its context, namely the Act’s
regulation of the bulk supply of petroleum products. Only those
aspects of the contractual
relationship relating to the supply of
bulk petroleum products can be subjected to arbitration under section
12B. The Court
noted that Business Zone’s complaints
related to matters beyond the supply of petroleum products, extending
into the
terrain of approval of the Johannesburg Roads Agency, and
the Woolworths and KFC franchises. Accordingly, the Controller
could not properly exercise jurisdiction over a dispute between Engen
and Business Zone in relation to the contractual provisions
that
involve and affect those interests, let alone refer these disputes to
arbitration.
[29] In the result, the
Supreme
Court of Appeal
concluded that as
Tlhamo
was correctly
decided, there was no error of law on the part of the Minister and
the Controller when they exercised their discretions.
The Court
therefore upheld Engen’s appeal, set aside the decision of the
Pretoria High Court and dismissed the review.
Submissions
in this Court
[30]
Business Zone argues that the real
significance of section 12B is the standard of equity it imposes
on the parties.
When a dispute is referred to arbitration, the
arbitrator determines the contractual practices by what is fair and
reasonable and
not merely by the terms of the contract. It
further argues that the ordinary meaning of a “contractual
practice”
includes cancellation by one of the parties acting in
accordance with the contract and the common law. Business Zone
further
relies on this Court’s finding in
Maphango
that a single act, including the termination of a
contract, may constitute a “practice”.
[12]
In this regard, Business Zone seeks a reinstatement of the
Pretoria High Court’s order, including its decision to
substitute the decision of the Controller with a referral to
arbitration in terms of section 12B.
[31]
On the other hand, Engen submits that a
single act of cancellation of a contract between a licensed
wholesaler and a licensed retailer
cannot constitute a contractual
practice for the purposes of section 12B. Engen points out
that the statutory framework
applicable in
Maphango
is
distinguishable from this matter. It maintains that that
decision specifically related to the provisions of the Rental
Housing
Act
[13]
(RHA) and no similar provisions under the Act suggest a similar
position.
[32]
Furthermore and in the alternative, Engen
submits that, if a separate dispute over the termination of a
contract between a licensed
wholesaler and a licensed dealer is
pending before a High Court, it would be inappropriate to refer
any alleged unfair and
unreasonable contractual practice for
determination under section 12B.
[33]
Engen highlights that the request for
arbitration did not take issue with Engen’s second cancellation
on 30 March 2011,
which was based on Business Zone’s
storage and sale from the premises of foreign products.
Accordingly, the request
concerned alleged disputes in terms of a
contract that Engen had cancelled in circumstances which would be
beyond the jurisdiction
of any arbitrator to arbitrate.
Primarily, these disputes related to the Woolworths and KFC outlets,
and road access to the
site and not the supply of petroleum
products. Lastly, Engen submits that substitution of the
Controller’s decision
could not have been justified in light of
the pending Johannesburg High Court proceedings, the patently
spurious nature of Claims
A and C, and that the claims concerned a
wide range of issues that only tenuously related to the supply of
petroleum products.
Jurisdiction and Leave
to Appeal
[34]
This Court is empowered to decide matters
of a constitutional nature, and any other matter that raises an
arguable point of law
of general public importance that ought to be
considered by it.
[14]
In addition, it must be in the interests of justice to grant
leave.
[35]
This matter raises a constitutional issue
as it concerns the exercise of public power pursuant to empowering
legislation.
This power ultimately stems from the Constitution
and a determination of its ambit falls within this Court’s
jurisdiction.
Section 33(1) of the Constitution guarantees that
everyone has the right to administrative action that is lawful,
reasonable and
procedurally fair. This Court has held that the
exercise of all public power must comply with the Constitution
[15]
and, therefore, any dispute in relation to the exercise of such power
falls within this Court’s jurisdiction.
[36]
It is in the interests of justice that this
Court makes a final determination on this matter in order to
establish legal certainty
in a large and regulated sector of the
economy that is currently uncertain as a result of conflicting
lower-court decisions on
the interpretation of section 12B.
There are also reasonable prospects of success. Therefore,
leave to appeal
should be granted.
Issues
[37]
This Court has to determine the following
issues:
(a)
Do the decisions of the Controller and the Minister amount to
administrative action for
purposes of PAJA?
(b)
If so, are these subject to review under PAJA?
(c)
What is the proper interpretation of section 12B of the Act?
(d)
Can a singular act of cancellation of a contract amount to a
“contractual practice”
in the context of section 12B
of the Act?
(e)
What is the effect, if any, of Engen’s purported “second
cancellation”
on the Controller’s ability to refer
Business Zone’s complaint under section 12B of the Act?
(f)
What is an appropriate remedy?
Nature of the decisions
of the Controller and the Minister
[38]
It is common cause that Business Zone
requested the Controller to refer allegations of unfair or
unreasonable contractual practices
to arbitration. Aligned to
this question is the issue whether the decisions of the Controller
and Minister not to refer this
allegation constituted administrative
action for purposes of a PAJA review.
[39]
Counsel for Engen disputed the contention
that the Controller’s decision amounts to “administrative
action” under
PAJA. He argued that a decision by the
Controller to refuse to refer a matter to arbitration is not one that
“adversely
affects the rights of any person” nor is it a
decision that has a “direct, external legal effect”.
In addition,
that referral to arbitration is a purely procedural step
of a preliminary nature that has no adverse effect on the rights of
Business
Zone.
[40]
It must be borne in mind that in order for
conduct to amount to administrative action, PAJA requires that there
be a decision.
The decision must be made by an organ of state
(or natural or juristic person) exercising a public power or
performing a public
function, in terms of legislation or an
empowering provision that adversely affects rights; and has a direct,
external legal effect.
[16]
[41]
In
Viking
Pony
, Mogoeng J invoked this Court’s
decision in
SARFU
[17]
and held that:
“
PAJA
defines administrative action as a decision or failure to take a
decision that adversely affects the rights of any person,
which has a
direct, external legal effect. This includes ‘action that
has the capacity to affect legal rights’.
Whether or not
administrative action, which would make PAJA applicable, has been
taken cannot be determined in the abstract. Regard
must always
be had to the facts of each case.”
[18]
[42]
When Business Zone approached the
Controller and later the Minister, it sought to rely on its statutory
rights under section 12B
of the Act. More specifically,
Business Zone sought its statutory right to have the subject of its
allegations adjudicated
before an arbitral forum rather than a
court. The decisions that these entities made were
determinative of whether Business Zone
could access such a right
and that right falls squarely within the scope of the “legal
rights” Mogoeng J contemplated
in
Viking Pony
.
[43]
In this vein, Engen’s contention that
the decisions of the Controller and Minister were purely preliminary
in nature cannot
be sustained. These decisions prevented
Business Zone from exercising its statutory right of access to
arbitration.
I am satisfied that the decisions of both the
Controller and Minister amount to administrative action capable of a
PAJA review.
The decisions they were called upon to make, in
terms of the powers conferred on them by the Act, clearly affected
the rights of
the parties to the dispute and had a direct, external
legal effect on the legal relationship between the parties.
[44]
It is apposite at this stage to point out
why I do not think that the existence of a contract between the
parties an
d
the
absence of an ongoing dispute that could affect the validity of that
contract are prerequisites to establishing section 12B
referral
power. I will do so by analysing section 12B and other related
aspects.
Proper interpretation of
section 12B
[45]
The Petroleum Products Amendment Act
[19]
(Amendment Act) amended the Act during 2004. Arbitral dispute
resolution mechanisms were introduced by the insertion of
sections 12A, 12B and 12C of the Amendment Act respectively.
Licensed retailers and wholesalers were, in terms of section
12B(1),
now entitled to request that the Controller refer a dispute to
arbitration rather than resolving the dispute through court
litigation. Section 12B provides:
“
(1)
The Controller of Petroleum Products may on request by a licensed
retailer alleging an unfair
or unreasonable contractual practice by a
licensed wholesaler, or vice versa, require, by notice in writing to
the parties concerned,
that the parties submit the matter to
arbitration.
(2)
An arbitration contemplated in subsection (1) shall be heard—
(a)
by an arbitrator chosen by the parties concerned; and
(b)
in accordance with the rules agreed between the parties.
(3)
If the parties fail to reach an agreement regarding the arbitrator,
or the applicable
rules, within 14 days of receipt of the notice
contemplated in subsection (1)—
(a)
the Controller of Petroleum Products must upon notification of such
failure, appoint
a suitable person to act as arbitrator; and
(b)
the arbitrator must determine the applicable rules.
(4)
An arbitrator contemplated in subsection (2) or (3)—
(a)
shall determine whether the alleged contractual practices concerned
are unfair or
unreasonable and, if so, shall make such award as he or
she deems necessary to correct such practice; and
(b)
shall determine whether the allegations giving rise to the
arbitration were frivolous
or capricious and, if so, shall make such
award as he or she deems necessary to compensate any party affected
by such allegations;
(5)
Any award made by an arbitrator contemplated in this section shall be
final and binding
upon the parties concerned and may, at the
arbitrator’s discretion, include any order as to costs to be
borne by one or more
of the parties concerned.”
[46]
When interpreting a statutory provision the
point of departure is that the words employed must be construed in
accordance with their
ordinary grammatical meaning provided an
absurdity does not result. The jurisprudence is clear that this
is subject to the
requirement that statutory provisions must be
interpreted purposively and be properly contextualised.
[20]
Equitable standard
[47]
One of the purposes of the Amendment Act is
set out in its preamble and is, amongst others, “to promote
transformation of
the South African petroleum and liquid fuels
industry”. Schedule 1 to the Amendment Act goes on to
introduce an industry
charter “on empowering historically
disadvantaged South Africans in the petroleum and liquid fuels
industry”.
Unequal bargaining power in the petroleum
industry is pervasive even in more developed countries such as our
common law comparator,
England, whose history of inequality pales in
comparison with our own.
[21]
[48]
Both in written and oral argument counsel
for Business Zone submitted that the real significance of
section 12B does not
lie in the Controller’s power to
compel the parties to refer their dispute to arbitration, but in the
equitable standard
it imposes. A standard that overrides the
terms of their contract to ensure that fairness and reasonableness
prevail.
Counsel for Engen agreed with this proposition when
questioned during oral argument.
[49]
It would seem that the standard of fairness
provided for in section 12B was inspired by the standard of fairness
upon which our
pre-democracy unfair labour practice jurisprudence
under the Labour Relations Act, 1956, as amended, (1956 LRA) was
based
and upon which our unfair dismissal law under the current
Labour Relations Act
[22]
(LRA) is based. Support for this view is as follows: Prior to
the LRA, the unfair labour practice jurisprudence was based
on the
concept of an “unfair labour practice” which was defined
in the 1956 LRA. Section 12B refers to the concept
of an
“unfair or unreasonable contractual practice”. Both
the words “unfair” and “practice”
which we
had in the concept of an unfair labour practice under the 1956 LRA
are to be found in the concept of an “unfair
or unreasonable
contractual practice” provided for in section 12B. Under
section 46(9) of the 1956 LRA a party referring
an unfair labour
practice dispute to the Industrial Court for adjudication had to
allege
an
unfair labour practice by the other party to the dispute. Under
section 12B as well, a licensed retailer seeking
the referral of
“an unfair or unreasonable contractual practice” by a
licensed wholesaler is required to
allege
an unfair or unreasonable contractual practice by the licenced
wholesaler. Under the 1956 LRA an alleged unfair labour
practice
would be subjected to adjudication or sometimes
arbitration. Under section 12B an alleged unfair or
unreasonable contractual
practice is subjected to arbitration.
Therefore, the fairness required in our labour law jurisprudence is
the same as the
fairness in section 12B.
[50]
Understanding that the nature of the
standard of fairness provided for in section 12B is the same as
that found in the
concept of an unfair labour practice and in
our law of unfair dismissal is important, because the unfair labour
practice jurisprudence
and the unfair dismissal jurisprudence may
throw light on what is and what is not possible under the standard of
fairness created
in section 12B. A good example of this is that both
in terms of the unfair labour practice jurisdiction under the 1956
LRA and
in terms of the unfair dismissal jurisprudence under the LRA,
a court or tribunal given power to decide unfair labour practice
disputes or unfair dismissal disputes has the power to order the
reinstatement of a contract of employment that had been lawfully
and
validly terminated by the employer if that court or tribunal
concluded that the employer committed an unfair labour practice
or
under the LRA concludes that the dismissal was unfair for lack of a
fair reason to dismiss. In other words, the tribunal
or court
has power to compel the employer to continue with an employment
contract which had been validly terminated. In this
regard
reference can be made to
National Union
of Mineworkers v Marievale Consolidated Mines Ltd (Marievale)
.
[23]
In that case, although the High Court had found that the termination
of the employees’ contracts of employment had
been valid in
law,
[24]
the Industrial Court ordered the employer to reinstate the employees
after it had found that the termination of their contracts
of
employment had been unfair or constituted an unfair labour
practice.
[25]
Subsequently, the High Court dismissed a review application that
sought to have the reinstatement order of the Industrial
Court
reviewed and set aside on,
inter alia,
the basis that the termination of the contracts of employment of the
employees had been valid in law.
[51]
It is not the first time that the standard
of fairness in the labour and employment field inspires the
imposition of the standard
of fairness in other areas as well. The
Legislature also included the same standard in regard to disputes
between landlords and
tenants under the Rental Housing Act (RHA). The
RHA uses the concept of an “unfair practice” where the
1956 LRA used
the concept of an “unfair labour practice”
and section 12B uses the concept of “unfair or unreasonable
contractual
practice”.
[52]
In its judgment, the Supreme Court of
Appeal stated that the failure to define the jurisdiction of the
arbitrator, on the one hand,
and the courts, on the other, would
result in anomalous consequences.
[26]
I disagree. The contention that two different adjudicative
standards, one equitable and one not, apply based on the
forum that
the parties find themselves before is unsustainable. There is
sufficient context and justification to accept that
the equitable
standard of fairness and reasonableness prevails in all petroleum
contracts regardless of whether they are subject
to statutory
arbitration or ordinary court litigation.
[53]
As I have already stated, the imposition of
the equitable standard on contractual relationships already happens
in employment matters
and in residential leases. The LRA
imposes a fairness standard on the contractual relationship between
employers and employees,
[27]
and the RHA does the same for landlords and their tenants through its
unfair practice standard.
[28]
It is true that the LRA and RHA also established separate
adjudication structures to deal with disputes under the equitable
standard,
[29]
but this does not assist the argument that section 12B establishes an
exclusive parallel institution to deal with the equitable
standard.
[54]
First, the establishment of separate
adjudicative institutions under the LRA and RHA does not mean that
the equitable standard under
those Acts does not also apply to common
law contractual employment and residential lease disputes. It
is difficult to imagine
any employment dispute under the common law
still being determined as if the fairness standard developed under
the LRA is irrelevant,
and I am not aware of that being the
case.
[30]
The application of the unfair practice standard under the RHA to
common law residential lease disputes was left open by this
Court in
Maphango
.
[31]
[55]
Second, the institutions set up under those
two statutes form part of an elaborate construction of a separate and
parallel institutional
hierarchy to deal with and give effect to the
respective constitutional rights to fair labour practices and access
to housing.
Section 12B of the Act holds no pretence to giving
effect to a particular constitutional right nor can it, by any
stretch of the
imagination, be seen as establishing a separate
adjudicative hierarchy. Furthermore, the normative commitments
underlying
the legal framework of arbitration are increasingly
incorporated and reflected in the common law of contract. There
is no
reason why the specifics of the general standard of fairness
and good faith in the common law of contract should not be given
shape
in the context of petroleum contracts, as is done in the
context of labour or rental housing contracts.
[56]
In my view, the absence of two adjudicative
regimes, one transformatively equitable and the other not, will
address the Supreme
Court of Appeal’s concern that failing to
precisely define the jurisdiction of the arbitrator, on the one hand,
and the courts,
on the other, would result in anomalous
consequences. Forum shopping between these two different
systems of law applied
in different institutions will disappear.
Instead,
what remains is only the choice of
arbitration rather than adjudication in the courts, a procedure well
known to our law.
And the law will be the same in arbitration
as in court adjudication: equitable and giving effect to the demand
of constitutional
transformation of this part of our industry.
Interpreted in this way, the purpose of introducing a fairness
standard in petroleum
contracts is better given effect to, without
shielding the common law from statutory development.
Referral to arbitration
[57]
The purpose of the Act is not only to
transform the petroleum industry but “to provide for appeals
and arbitrations”.
Section 12B introduces an
equitable standard in the framework of the statutory arbitration
mechanism under section 12B.
If the same adjudicative
standard can be relied on in section 12B arbitration proceedings
and court litigation alike, would
that detract from the purpose of
the Act to provide for arbitrations? I think not.
[58]
Section 12B arbitration presents an
additional route for licensed retailers and wholesalers alike to have
their disputes adjudicated
quicker within rules and processes of
their own design.
[32]
Section 12B offers a statutory guarantee of a mechanism that has
become ubiquitous in contract, which may otherwise
not exist possibly
due to the unequal bargaining position retailers
vis
a vis
wholesalers find themselves in.
Reliance on the section 12B arbitration procedure can more
accurately be understood
as arbitration is ordinarily in contract: it
suspends the institution of court litigation.
[33]
In turn the section 12B arbitral mechanism is insulated from
becoming a mere preliminary, strategic step to court litigation
in
that section 12B (5) speaks to the finality of such an award.
[34]
[59]
The purpose of the Amendment Act “to
provide for appeals and arbitrations” through section 12B
cannot be overlooked.
The inherent value of section 12B
enabling a party to resolve a dispute through arbitration rather than
court proceedings
must be recognised. Arbitration offers an
expedient, specialised and procedurally flexible forum to resolve
disputes.
It is no wonder that Business Zone would want to
benefit from its statutory right under section 12B to access
such a
forum. A purposive interpretation of section 12B
must give effect to this right.
[60]
The ordinary meaning of the words employed
in section 12B accord with such a purposive approach. In
the context of a
referral to arbitration, section 12B(1)
requires that there must be an “allegation” of an unfair
or unreasonable
contractual practice by either a licensed retailer or
wholesaler. It does not require the “proving”,
“demonstrating”,
or “showing” of an unfair or
unreasonable contractual practice. This suggests that the
Controller’s discretionary
threshold is a low one in line with
the Act’s purposes, seeking to promote arbitration mechanisms
and to transform the industry
by holding the contractual dealings of
retailers and wholesalers to an equitable standard.
[61]
The only jurisdictional requirement for the
Controller to make a referral under section 12B(1) is an
allegation by a retailer
that a wholesaler, or vice versa, has
committed an unfair or an unreasonable contractual practice.
The Controller need only
satisfy himself to the existence of such an
allegation and must accordingly limit his interrogation of the merits
of the dispute
to the extent required to establish the allegation’s
existence. The Controller should then refer the matter to
arbitration.
[62]
That the Controller’s discretionary
threshold is a low one is clear when consideration is had to the
mandate and powers of
the arbitrator under section 12B(4).
Unlike section 12B(1), subsections 12(B)(4)(a) and (b)
clearly demand
that the arbitrator enter into the merits of a
dispute. Subsection 12(B)(4)(a) provides that the
arbitrator “shall
determine whether the alleged contractual
practices concerned are unfair or unreasonable”.
Subsection 12(B)(4)(b)
contains a similar mandate, this time
requiring that the arbitrator “shall determine whether the
allegations giving rise
to the arbitration were frivolous or
capricious” and authorising the arbitrator to award
compensatory relief if this is the
case.
[63]
My reading of subsection 12(B)(4)(a)
is that it mandates the arbitrator to enter into and interrogate the
merits of the alleged
contractual practice in order to make a
determination into the unfairness or unreasonableness thereof.
Likewise subsection 12(B)(4)(b)
provides a legislative safeguard
to prevent frivolous and capricious use of the section 12B
referral mechanism in view of
the Controller’s low
discretionary threshold. Indeed, the arbitrator is not only
mandated to determine frivolity and
capriciousness, but is empowered
to make a compensatory award, which imposes remedial and punitive
costs beyond that of an ordinary
costs award.
[35]
This provides a strong deterrent for parties seeking to exploit the
section 12B (1) arbitration mechanism.
[64]
Section 12B(1) does not require that
the Controller be satisfied before approving a referral that an
underlying contract still
exists. Furthermore, it does not
require the Controller to pre-determine that an award to correct the
practice would be issued
in the event of a referral being made.
It is also clear that the Controller does not have the power to
determine whether
an allegation is frivolous or capricious –
that duty vests in the arbitrator in terms of section 12B(4)(b).
All
that is required is that the request for a referral must contain
an allegation of an unfair or unreasonable contractual practice,
which the Controller in turn refers to arbitration.
[65]
This interpretation of section 12B may
create the impression that any piece of paper purporting to be an
allegation would trigger
a referral to arbitration. This would
render the Controller’s discretion superfluous. I
disagree.
[66]
Firstly,
it goes
without saying that, as with all administrative acts, the
Controller’s decision to refer an allegation must comply
with
the standards of just administrative action under PAJA. The
Controller would in the ordinary course conduct his or her
own
assessment and determine whether his decision would almost certainly
be met with a successful review, and, if it would, not
make such a
determination. This would preclude, for example, a referral
decision that is based on irrelevant considerations;
[36]
is not rationally connected to the information before the
Controller;
[37]
or is so unreasonable that no reasonable person could have so
exercised the power or performed the function.
[38]
[67]
Secondly, if the allegation is indeed
referred, the arbitrator wields the big stick of a compensatory costs
award should he or she
determine that the allegation is frivolous or
capricious. Parties would be hesitant to abuse the process
knowing their potential
liability extends beyond legal costs.
[68]
Thirdly, the adjudication is premised on
equitable grounds. If an allegation is referred by the
Controller and is also not
found to be frivolous or capricious by the
arbitrator, then the standard of fairness and reasonableness still
factor into the arbitrator’s
determination of corrective
relief. This provides an additional layer of protection against
abuse.
Singular act of
cancellation
[69]
Engen submits that a single act of
cancellation of a contract cannot constitute a contractual practice.
In support of this
argument, it relies on the decision of
Tlhamo
,
which was approved by the Supreme Court of Appeal. In
Tlhamo
,
the Court had to determine the meaning of the words “contractual
practice”. In interpreting the words the Court
relied on
their dictionary meaning and held that a juristic act could not be
characterised as a practice, which is a habitual doing
or carrying on
of something. The Court concluded that the termination of an
operating lease agreement and the month to month
agreement
did not constitute a contractual practice that could be referred to
the arbitrator in terms of section 12B of the Act.
[70]
In
Maphango
,
this Court analysed the meaning of practice in the context of the
RHA. It concluded that a once off termination of a lease
may
amount to a practice. Cameron J said:
“
It
has long been established in our law that a ‘practice’
may consist in a single act. This accords with one of
the
dictionary meanings of the word. . . . A cramped interpretation
of ‘practice’ would thwart its good ends.”
[39]
[71]
Engen made much of this Court’s
decision in
Maphango
being distinguishable from the present matter. The provisions
of the RHA differed from those in the Act; the jurisdiction
of the
tribunal under the RHA and the arbitrator under the Act differed; and
the RHA implicated fundamental rights. In my
view, none of
these considerations sufficiently distinguishes Cameron J’s
interpretation of the word “practice”
from applying to
this matter. This interpretation was reached independently of
the distinguishing considerations advanced
by Engen on the basis of
the ordinary meaning of the word; established jurisprudence; and
adopting a broader interpretive approach
that accords with the
Constitution.
[72]
That a practice can amount to a single act
is well founded in labour law. A single act of dismissal
constitutes an “unfair
labour practice”. In
Marievale
,
Goldstone J held:
“
The
reference to ‘labour practice’ in the definition of
‘unfair labour practice’ relates to a customary
or
recognised device, scheme or action adopted in the labour
field. . . . [I]t does not in any way relate
to
habitual or repetitious conduct on the part of a particular
employer.”
[40]
[73]
In the result, the interpretative approach
adopted in
Tlhamo
is incorrect. The Court in
Tlhamo
interpreted the meaning of “practice” without taking
cognisance of its relevant context or the purpose of the Act,
which
is a necessary step in any interpretive exercise.
[41]
That Court failed to apply the established principles of statutory
interpretation. It should have considered the context
of the
Act and the well understood legal construction of the term when
embarking on its interpretive approach.
[74]
The facts of this case indeed demonstrate
why an interpretive approach that excludes “practice”
from constituting a
singular act, such as cancellation, is
inconsistent with promoting the Act’s purpose, which our
interpretive jurisprudence
demands. Engen’s purported
cancellation of 22 October 2010 – for the said non consensual
alterations –
took place long after Business Zone had
already referred a request for arbitration on 17 June 2009.
[42]
That arbitration was pending at the time of Engen’s purported
cancellation.
[75]
Again, on 30 March 2011, Engen sought to
effect a second cancellation – done under the pretext of
unlawful foreign products
being brought onto the premises. It
cannot be gainsaid that the unavailability of the products had been
“instigated”
by Engen’s conduct: its termination of
the interim agreement forced Business Zone to source foreign
products to protect
the business. Besides, the cancellation was
effected despite Business Zone having written to and notified
Engen that
it will refer the claims to arbitration. Engen
claims this was done “
ex abundanti
cautela
”
(
out
of abundant caution)
. This is
disingenuous: what Engen
sought to do by
cancelling was not to exercise caution, but to frustrate
Business Zone’s statutory right of referral.
Preventing these situations that retard the efficacy of the Act
demands an interpretation of “practice” which encompasses
a single act.
[76]
I therefore conclude that a single act of
cancellation may amount to a contractual practice under section 12B.
Like any other contractual practice, it is
susceptible to arbitral correction under section 12B(4)(a).
The arbitrator’s corrective relief
would extend to the terrain of setting aside the unfair or
unreasonable act of cancelling
the underlying agreement and directing
that the parties reinstate their agreement.
[43]
It follows that Engen’s argument that the arbitrator’s
corrective power under section 12B presumes the backdrop
of an
ongoing contractual relationship that can be subject to such
correction must fail.
[77]
Nevertheless, the fact that the dispute
relating to the validity of the termination of the contract is
pending in the Johannesburg
High Court is not a ground for the
Controller to refuse a referral in terms of section 12B of the
Act. The interpretation
advanced by Engen, that a
Controller may not refer a dispute where a contract has been
cancelled, would defeat the purpose of arbitration
under
section 12B. In that case, the retailers would be unable
to access their right of referral as Engen or similar
wholesalers
would oust the jurisdiction of the arbitrator by cancelling the
contracts. Wholesalers like Engen would hold
dealers to ransom
under threat of cancellation.
[78]
The next question is whether the decisions
of the Controller and Minister are reviewable under PAJA.
Merits of PAJA review
[79]
In his response to Business Zone’s
request, the Controller stated:
“
Before
a matter can be referred to arbitration, the Controller of Petroleum
Products (hereinafter referred to as ‘the Controller’)
must be satisfied that the reason(s) for the request is as a result
of the alleged unfair or unreasonable contractual practice
by a
licensed retailer or wholesaler in the performance of an existing
valid contractual agreement in an ongoing business relationship.
The
information we have before us is that there is no longer a valid
agreement between [Business Zone] and Engen. The agreement
forming the basis of [Business Zone’s] allegations of
unfair or unreasonable contractual practice have been cancelled.
Further, [Business Zone’s] allegations of unfair or
unreasonable contractual practice are centred around the agreements
which are currently under consideration by the [Johannesburg] High
Court and as such, the matter is therefore
sub-judice
and can no longer be considered for arbitration.
In
light of the foregoing, it is our considered view that in the absence
of an existing valid Agreement of Lease and Operation of
Service
Station, [Business Zone’s] request for arbitration does not
satisfy the minimum requirements in terms of Section 12B
of the
Act. As such, the Controller has no basis for referring this
matter to arbitration because of the requirements in
the regulatory
framework.”
[80]
Likewise, the Minister refused to refer the
dispute to arbitration. In her response, the Minister stated:
“
[I]n
my opinion, section 12B of the Act may only be applied in cases
where there is an existing or continuing contract between
the
parties. Since the validity of the termination of the contract
by Engen Petroleum Limited is disputed by [Business Zone],
and
the matter is currently before a competent court, we believe that the
arbitration under section 12B of the Act would not
be proper.
I am advised further that a single juristic act (the exercise of a
legal right to cancel a contract) intended
to terminate an agreement
cannot, in law, constitute or be characterised as ‘an unfair or
unreasonable contractual practice’
for purposes of section 12B
of the Act. Therefore, an arbitrator would not have
jurisdiction to determine the validity
or otherwise of the
cancellation of the agreement.”
[81]
The Minister was of the view that she was
precluded from doing so since the contract had been cancelled and the
dispute relating
to the cancellation was pending before the
Johannesburg High Court. She also stated that a single act
of cancellation
did not constitute a contractual practice.
[82]
In light of my interpretation of
section 12B, it is clear that the Controller laboured under the
erroneous belief that he did
not have the power to refer the dispute
to arbitration because the contract between the parties had been
cancelled. In addition,
the validity of that cancellation was
under consideration before the Johannesburg High Court, and this
precluded him from referring
the matter to arbitration.
[83]
The Controller was clearly wrong, as the
provisions of section 12B did not require him to ascertain the
existence of these
two requirements. The only jurisdictional
requirement is an allegation by a retailer that a wholesaler has
committed an unfair
or unreasonable contractual practice. The
issues raised by the Controller were irrelevant for purposes of the
request for
referral.
[84]
Jafta J held in
City
of Johannesburg
that—
“
a
mere error of law is not sufficient for an administrative act to be
set aside. Section 6(2)(
d
)
of [PAJA] permits administrative action to be reviewed and set aside
only where it is ‘materially influenced by an error
of law’.
An error of law is not material if it does not affect the outcome of
the decision. This occurs if, on
the facts, the decision-maker
would have reached the same decision despite the error of law.”
[44]
[85]
The Controller’s misunderstanding of
his powers under section 12B was clearly material. He came
to his decision
on the basis that the existence of the two
requirements he specified were a prerequisite to him having the power
to refer under
section 12B. In the result, the Controller
laboured under a material error of law as he clearly misunderstood
his powers
under section 12B. His refusal to refer the
dispute to arbitration constitutes a ground of review under
section 6(2)(d)
of PAJA.
[45]
[86]
Likewise, the Minister also misunderstood
the provisions of sections 12A and 12B of the Act. She too
refused to refer
the dispute, as she believed that she was precluded
from doing so since the contract had been cancelled and the dispute
relating
to the cancellation was pending in the Johannesburg
High Court. She also stated that a single act of
cancellation did
not constitute a contractual practice. These
are not prerequisites to exercising referral powers under
section 12B(1)
and, consequently, section 12A. It
follows that the refusal to refer the dispute to arbitration
constitutes a ground
of review under section 6(2)(d) of PAJA.
Petroleum products
argument
[87]
Engen argues that some of the complaints
made by Business Zone are unrelated to the supply of petroleum
products and therefore fall
outside the ambit of matters that can be
referred in terms of section 12B. For example, Engen alleges
that the disputes relating
to the KFC franchise and the Woolworths
shop are unrelated to the supply of petroleum and, therefore, cannot
be adjudicated under
the Act. Resultantly, Engen argues, these
claims would never have been competent for referral to arbitration
and accordingly,
a decision to do so could never have been disturbed
on review.
[88]
The Supreme Court of Appeal agreed with
Engen’s approach and held that the phrase “unfair or
unreasonable contractual
practice” only relates to the Act’s
context and disputes arising from the bulk supply of petroleum
products.
It went on to hold that the Act does not contemplate
jurisdiction over disputes that do not relate directly to the supply
of petroleum
products.
[89]
I disagree. The requirement that
section 12B’s ambit extends only to the supply of petroleum
products is not an explicit
one. The reading in of this
requirement is unwarranted. I have already highlighted a number
of safeguards that exist
to prevent unsuitable claims from becoming
the subject of section 12B arbitration. Here, it is worth
mentioning three
further reasons in the context of the supply of
petroleum products as to why I am satisfied that the Controller and
arbitrator
would not find themselves swamped with disputes about
utilities or unrelated contractual breaches.
[90]
The first is that an allegation must be
made that the contractual practice is between a licensed retailer and
wholesaler of petroleum
products. Contractual dealings between
retailers and wholesalers are bound to touch on the supply of
petroleum products.
Should this not be the case, the arbitrator
can beat frivolous claims with the big stick of compensatory costs.
[91]
Secondly, the remedy in section 12B is
a layperson’s remedy – it does not expressly provide for
legal representation
and oral argument. It is desirable that
complex and potentially intersectional issues are unpacked at the
arbitral, rather
than the referral stage.
[92]
Lastly, the arbitrator’s remedial
powers can go no further than correcting the contractual practice in
question. The
interests of third parties are protected in the
section 12B arbitration process, the subject matter of which is
limited to
a “contractual practice”. This presumes
that remedying the dispute lies squarely within the contractual
rights
and obligations of the parties to the contract. In this
case, Engen submitted that certain complaints lodged by Business Zone
would affect municipal interests and resolution of this dispute
through arbitral means would not cater for these and other
third party
interests. What Engen’s submission fails
to consider is that the arbitrator’s remedial powers are
limited to
correcting the contractual practice in question. The
arbitrator is not compelling the Johannesburg Roads Agency to remedy
the dispute, the arbitrator is merely compelling Engen to engage with
the Johannesburg Roads Agency to the extent that it is contractually
obliged to do so.
[93]
For these reasons, the interrogation of the
merits of a matter is clearly the mandate of the arbitrator. In
adopting a purposive
interpretation of section 12B, additional
requirements to the exercise of section 12B rights beyond those
contemplated by
the Legislature cannot be read-in. Such
an interpretation is a far shot from the interpretive “absurdity”
that
Endumeni Municpality
and related cases contemplated. In the result, the Controller
cannot, based on this argument, refuse to refer an allegation.
Effect of second
cancellation
[94]
Engen argued that in its correspondence of
30 March 2011, it purported to cancel the lease with
Business Zone a second
time. This second cancellation was
based on Business Zone supplying foreign products after Engen
cut off Business Zone’s
supply of fuel, following
termination of the interim arrangement. Engen contends that
Business Zone failed to include
this second cancellation in its
section 12B(1) request. This failure was fatal as the
second cancellation was pending
before the Johannesburg High Court
and its determination is a prerequisite to determining the
section 12B(1) request,
rendering any referral
sub-judice
(pending determination). Engen argued that if the Controller
had referred Business Zone’s complaint under these
circumstances a finding by the Johannesburg High Court that
Engen had validly cancelled the lease agreement would render the
section 12B arbitration academic. This was because the
arbitrator’s remedial powers under section 12B(4)(a)
were
corrective in nature and thus presumed to remedy a contractual
practice against the backdrop of an ongoing contractual relationship.
[95]
Engen’s contention seems to be this.
The dispute that Business Zone asked the Controller to refer to
arbitration relates
to the first cancellation and not the second
cancellation. Therefore, if arbitration does take place
pursuant to that request,
the arbitrator can only grant a remedy in
respect of the first cancellation and not the second cancellation
because no request
was made for the referral of the second
cancellation to arbitration. That being the case, the request
for arbitration in
respect of the first cancellation is irrelevant
and academic when there is a later cancellation in respect of which
Business Zone
did not request a referral to arbitration. In
other words, Engen’s argument was that, even if the arbitrator
were to
grant Business Zone a remedy the effect of which was to
reverse the first cancellation, the second cancellation would still
stand.
It was implied in this argument that in such a case
there would be no lease between Business Zone and Engen which would
enable
Business Zone to operate its business.
[96]
Whilst Engen’s argument may have some
merit, that question need not be answered now. This is so because the
Controller has
no duty to consider the merits of the matter as that
is the domain of the arbitrator. This is so even if the
arbitrator’s
powers are limited, should Engen be correct that
the second cancellation is valid, to the period before it took
effect. This
does not preclude the Controller from referring
the dispute concerning the first cancellation to arbitration.
Regardless
of the second cancellation, the arbitrator may have power
to grant relief for the intervening period. In any event,
should
it be so advised, Business Zone may be still able to refer the
second cancellation to arbitration subject to the provisions of the
Act. In the result, Engen’s purported second cancellation
has no effect on the Controller’s ability to refer
Business
Zone’s complaint under section 12B of the Act.
Remedy
[97]
Regarding remedy, I support the conclusion
of the Pretoria High Court when it substituted the decision of the
Controller.
While substitution is an exceptional remedy,
[46]
it is appropriate in this matter because of the extended period of
time that has elapsed since Business Zone brought the referral.
Since the Controller’s threshold is low and the full contents
of Business Zone’s allegations and Engen’s
responses
thereto are before this Court, nothing more can be done by the
Controller. It follows that the order of the Pretoria
High
Court must be restored. All three claims will be considered by
the arbitrator, who will make a determination in terms
of sections
12B(4)(a) and (b) of the Act.
[98]
Engen raised concerns that referring
claim C would be inappropriate. This is because claim C
concerned Engen’s
conclusion of the lease agreement with a KFC
franchisee on an area that the addendum had specifically carved out
from the scope
of Business Zone and Engen’s relationship.
This Court steps into the shoes of the Controller by making an order
of substitution, and I have already indicated that such disputes will
be appropriately adjudicated at the arbitral, rather than
the
referral stage.
Order
[99]
In the result, the following order is made:
1.
Leave to appeal is granted.
2.
The appeal is upheld.
3.
The order of the Supreme Court of Appeal is set aside and
replaced with
the following:
“
The
appeal is
dismissed with costs including
the costs of two counsel.”
4.
Engen Petroleum Limited is to pay the costs in this Court, including
costs of
two counsel, where applicable.
For the
Applicant:
W Trengove SC and N Redman SC instructed
by Des Naidoo Attorneys
For the First Respondent:
GJ Marcus SC and M Chaskalson SC instructed by A.D. Hertzberg
Attorneys
[1]
Engen Petroleum Limited v The Business Zone
1010 CC t/a Emmarentia Convenience Centre )
[2015]
ZASCA 176
(SCA judgment).
[2]
Section 12B(1) empowers the Controller to
refer an alleged unfair or unreasonable contractual practice
performed by a licensed
retailer or wholesaler of petroleum products
to arbitration. Section 12B is quoted in full at [45].
[3]
120 of 1977.
[4]
On 17 June 2009, Business Zone
requested the Controller to refer certain allegedly unfair and
unreasonable contractual
practices to an arbitrator.
Adv. Kuper SC was thereafter appointed as an arbitrator to
determine the dispute
between Business Zone and Engen. On
4 April 2011, that arbitration had not been finalised.
[5]
Section 12A of the Act provides:
“
(1)
Any person directly affected by a decision of the Controller
of Petroleum Products may, notwithstanding any other rights that
such a person may have, appeal to the Minister against such
decision.
(2)
An appeal in terms of paragraph (a) shall be lodged within
60
days after such decision has been made known to the affected person
and shall be accompanied by—
(a)
a written explanation setting out the nature of the appeal;
(b)
any documentary evidence upon which the appeal is based.
(3)
The Minister shall consider the appeal, and shall give his or her
decision thereon, together with written reasons therefore, within
the period specified in the regulations.”
[6]
Business Zone 1010 CC t/a Emmarentia
Convenience Centre v Controller of Petroleum Products
[2014]
ZAGPPHC 257;
[2014] 3 All SA 94
[Pretoria High Court Judgment].
[7]
3 of 2000.
[8]
Engen relied on
City of Cape Town v
Hendricks
[2012] ZASCA 90
;
2012 (6) SA 492
(SCA) at 495C-D in
support of its proposition.
[9]
Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v Hidro-Tech
Systems (Pty) Ltd
[2010] ZACC 21
;
2011 (1) SA 327
(CC);
2011 (2)
BCLR 207
(CC) (
Viking Pony
).
[10]
Engen Petroleum Ltd v Tlhamo Retail (Pty) Ltd
2010
JDR 0958 (GSJ) (
Tlhamo
)
.
[11]
Maphango v Aengus Lifestyle Properties (Pty) Ltd
[2012] ZACC
2
;
2012 (3) SA 531
(CC);
2012 (5) BCLR 449
(CC) (
Maphango
).
[12]
Maphango
above n 11
at para 57.
[13]
50 of 1999.
[14]
See section 167(3)(b) of the Constitution.
[15]
Pharmaceutical Manufacturers Association of
South Africa: In re Ex Parte President of the Republic of South
Africa
[2000] ZACC 1; 2000 (2) SA 674
(CC); 2000 (3) BCLR 241 (CC).
[16]
Section 1 of PAJA defines “administrative
action” as—
“
any
decision taken, or any failure to take a decision, by—
(a)
an organ of state, when—
(i)
exercising a power in terms of the Constitution or a provincial
constitution;
(ii)
exercising a public power or performing a public function in terms
of any legislation; or
(b)
a natural or juristic person, other than an organ of state, when
exercising a public power or performing a public function in terms
of an empowering provision,
which
adversely affects the rights of any person and which has a direct,
external legal effect . . . .”
[17]
President of the Republic of
South Africa v South African Rugby Football Union
[1999]
ZACC 11
;
2000 (1) SA 1
(CC);
1999 (10) BCLR 1059
(CC) (
SARFU
).
[18]
Viking Pony
above
n 9 at para 37.
[19]
58 of 2003.
[20]
Cool Ideas 1186 CC v Hubbard
[2014]
ZACC 16
;
2014 (4) SA 474
(CC);
2014 (8) BCLR 869
(CC) (
Cool Ideas
)
at para 28 and
Natal Joint Pension Fund
v Endumeni Municipality
[2012] ZASCA
13
;
2012 (4) SA 593
(SCA) (
Endumeni
Muncipality
) at para 18.
[21]
In the context of English law, see the cases of
Alec Lobb (Garages) Ltd v Total Oil GB
Ltd
[1984] EWCA Civ 2
;
[1985] 1 All ER 303
(CA) and
Esso
Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd
[1967] 1 All ER 699 (H.L.).
[22]
66 of 1995.
[23]
(1986) 7
ILJ
123 (IC).
[24]
Marievale Consolidated Mines Ltd v National
Union of Mineworkers
1986 (2) SA 472
(W); (1986) 7
ILJ
108
(W).
[25]
Marievale Consolidated Mines Ltd v President
of the Industrial Court and Others
1986
(2) SA 485
(T); (1986) 7
ILJ
152
(T).
[26]
SCA judgment above n 1 at para 27.
[27]
See, for example, Chapter 8 of the LRA, which
prohibits unfair dismissals and classifies certain labour practises
as unfair.
[28]
In
Maphango
above n 11 at para 51 it was characterised thus:
“
In
this way, the [RHA] superimposes its unfair practice regime on the
contractual arrangement the individual parties negotiate.
That
the statute considers its unfair practice regime to be
super-ordinate emerges not only from the requirement that a
lease-based termination must not constitute an unfair practice, but
also from what the [RHA] enjoins the tribunal to take into
consideration when issuing its rulings: these include ‘the
provisions of any lease’, but only ‘to the extent
that
it does not constitute an unfair practice’. The effect
of these provisions is that contractually negotiated
lease
provisions are subordinate to the tribunal’s power to deal
with them as unfair practices.”
[29]
The Commission for Conciliation, Mediation and
Arbitration, the Labour Court and the Labour Appeal Court under the
LRA and the
Gauteng Rental Housing Tribunal under the RHA.
[30]
Compare
Old Mutual
Life Assurance Co SA Ltd v Gumbi
[2007] ZASCA 52
;
2007 (5) SA 552
(SCA) at para 5:
“
It
is clear however that co-ordinate [labour] rights are now protected
by the common law: to the extent necessary, as developed
under the
constitutional imperative (section 39(2)) to harmonise the common
law into the Bill of Rights (which itself includes
the right to fair
labour practices (section 23(1))).”
[31]
Maphango
above n
11 at para 55.
[32]
Section 12B(2) of the Act allows the parties
to a section 12B arbitration to determine the rules in
accordance with
which the arbitration will be conducted as well as
the arbitrator before whom the arbitration will proceed.
[33]
This will of course depend on the specific
contractual provisions agreed upon between contracting parties.
However, the
general position is stated in
section 6
of the
Arbitration Act 42 of 1965
, which provides that:
“
Stay
of legal proceedings where there is an arbitration agreement
(1)
If any party to an arbitration agreement commences any legal
proceedings
in any court (including any inferior court) against any
other party to the agreement in respect of any matter agreed to be
referred
to arbitration, any party to such legal proceedings may at
any time after entering appearance but before delivering any
pleadings
or taking any other steps in the proceedings, apply to
that court for a stay of such proceedings.
(2)
If on any such application the court is satisfied that there is
no
sufficient reason why the dispute should not be referred to
arbitration in accordance with the agreement, the court may make
an
order staying such proceedings subject to such terms and conditions
as it may consider just.”
[34]
Section 12B(5)
provides that:
“
Any
award made by an arbitrator contemplated in this section shall be
final and binding upon the parties
concerned and may, at the arbitrator’s discretion, include any
order as to costs to be borne by one or more of the parties
concerned.”
In this vein,
section 28
of the
Arbitration Act analogously
speaks to the finality of
arbitration awards. It provides:
“
Unless
the arbitration agreement provides otherwise, an award shall,
subject to the provisions of this Act,
be
final and not subject to appeal
and
each party to the reference shall abide
by and comply with the award
in
accordance with its terms.”
[35]
It must be borne in mind that compensatory relief
goes further than relief for costs, the latter’s purpose being
simply
to indemnify a successful party and to refund expenses
actually incurred. See
Minister
of Police v Kunjana
[2016] ZACC 21
;
2016 (9) BCLR 1237
(CC) at para 43.
[36]
Section 6(2)(e)(iii) of PAJA.
[37]
Section 6(2)(f)(ii)(cc) of PAJA.
[38]
Section 6(2)(h) of PAJA.
[39]
Maphango
above n
11 at para 57.
[40]
See n 25 at 498B .
[41]
Cool Ideas
above
n 20 at para 28 and
Endumeni
Municipality
above n 20 at para 18.
[42]
See n 4 above.
[43]
In its written submissions, Business Zone
summed up the position succinctly as follows:
“
The
flaw in the [Supreme Court of Appeal’s] reasoning lies, with
respect, in the [Supreme Court of Appeal’s] assumption
that,
once the contract has been cancelled, the arbitrator cannot grant
prospective relief. But the arbitrator is given
a wide
remedial power to ‘correct’ any unfair or unreasonable
contractual practice. If the arbitrator finds
that the
cancellation of the contract was unfair or unreasonable, she may for
instance set aside the cancellation and direct
the party responsible
for it to reinstate the contract. Such a remedy corrects the
unfair or unreasonable contractual practice
despite the prior
cancellation of the contract.”
[44]
City of Johannesburg Metropolitan Municipality
v Gauteng Development Tribunal
[2010]
ZACC 11
;
2010 (6) SA 182
(CC);
2010 (9) BCLR 859
(CC) (
City
of Johannesburg
) at para 91. See
also
Minister of Local Government,
Environmental Affairs and Development Planning of the Western Cape v
Lagoonbay Lifestyle Estate
(Pty) Ltd
[2013]
ZACC 39
;
2014 (1) SA 521
(CC);
2014 (2) BCLR 182
(CC) at para 67.
[45]
Section 6(2)(d) of PAJA provides:
“
(2)
A court or tribunal has the power to judicially review an
administrative action
if—
. . .
(
d
)
the action was materially influenced by an error of law.”
[46]
Trencon Construction (Pty) Ltd v Industrial
Development Corporation of South Africa Limited
[2015]
ZACC 22
;
2015 (5) SA 245
(CC);
2015 (10) BCLR 1199
(CC) at para 42.