CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 19/20
In the matter between:
CROMPTON STREET MOTORS CC
t/a WALLERS GARAGE SERVICE STATION Applicant
and
BRIGHT IDEA PROJECTS 66 (PTY) LIMITED
t/a ALL FUELS Respondent
Neutral citation: Crompton Street Motors CC v Bright Idea Projects 66 (Pty) Ltd
[2021] ZACC 24
Coram: Mogoeng CJ, Jafta J, Khampepe J, Madlanga J, Majiedt J,
Mhlantla J, Theron J, Tlaletsi AJ and Tshiqi J
Judgment: Mhlantla J (unanimous)
Heard on: 9 March 2021
Decided on: 3 September 2021
Summary: Petroleum Products Act 120 of 1977 — Section 6 of the
Arbitration Act 42 of 1965 — stay of proceedings — referral to
statutory arbitration — section 12B does not oust the High Court’s
jurisdiction
MHLANTLA J
2
ORDER
On appeal from the High Court of South Africa, KwaZulu -Natal Division,
Pietermaritzburg:
1. Leave to appeal is granted.
2. The appeal is dismissed.
3. Crompton Street Motors CC must pay the costs of Bright Idea Projects 66
(Pty) Limited, including the costs of two counsel.
JUDGMENT
MHLANTLA J (Mogoeng CJ, Jafta J, Khampepe J, Madlanga J, Majiedt J, Theron J,
Tlaletsi AJ and Tshiqi J concurring):
Introduction
[1] This is an application for leave to appeal against a judgment and order of the
High Court of South Africa, KwaZulu -Natal Division, Pietermaritzburg.1 It concerns
the question whether the High Court was entitled to refuse a request by the applicant to
stay proceedings pending a referral of the dispute to arbitration in terms of section 12B
of the Petroleum Products Act. 2 In terms of that section, licensed retailers and
wholesalers are entitled to request the Controller of Petroleum Products to refer a
dispute to arbitration where there are allegations of u nfair or unreasonable contractual
practices.
1 Bright Idea Projects 66 (Pty) Ltd v Crompton Street Motors CC 2019 JDR 1102 (KZP) (High Court judgment).
2 120 of 1977.
MHLANTLA J
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Background facts
[2] In February 2003, in terms of a written franchise agreement, Chevron
South Africa (Pty) Limited, formerly known as Caltex Oil (SA) (Pty) Limited, granted
the applicant, Crompton Street Motors CC, t/a Wallers Garage Service Station, the right
to operate a Caltex Service Station on its premises. 3 The franchise agreement was
operative for an initial period of five years, with an option to renew the agreement for
two further periods of five years each. Both options were exercised, and the third period
expired on 28 February 2018. The franchise agreement included a written lease
agreement for the same period.
[3] In December 2011, Chevron ceded and assigned its rights and obligations in
terms of the franchise agreement to the respondent, Bright Idea Projects 66 (Pty)
Limited t/a All Fuels. The respondent acquired the immovable property on which the
service station is situated. The deed of transfer in respect of the immovable property
was registered on 14 January 2013. The applicant was informed of these new
developments in writing, and an appropriate addendum to the franchise agreement was
signed by the parties.
[4] On 25 August 2017, the respondent’s attorney wrote to the applicant and stated
that the agreement between the parties would terminate by effluxion of time on
28 February 2018. The applicant was informed that the respondent had decided not to
grant any further extensions of the franchise and lease agreements and that the applicant
would, therefore, be required to vacate the premises on or before 28 February 2018. No
response was forthcoming from the applicant.
[5] On 6 February 2018, the respondent’s attorney wrote another letter to the
applicant, requesting an unequivocal written undertaki ng that it would vacate the
premises. On 14 February 2018, the applicant responded by stating that it was in the
3 High Court judgment above n 1 at para 3.
MHLANTLA J
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process of drafting an application for arbitration and would not be vacating the
premises.
Litigation history
High Court
[6] On 16 February 2018, the respondent launched an application for the ejectment
of the applicant from the premises. Since this was done before the expiry of the
franchise and lease agreements, the respondent sought a declarator that the lease
agreement would terminate on 28 February 2018 as well as an order directing the
applicant to vacate the premises by that date.
[7] On 27 February 2018, the applicant filed its notice to oppose as well as a
conditional counter -application. That application indicated that in the event the
High Court declined to stay the main application in terms of section 12B of the
Petroleum Products Act, or alternatively clause 20 of the original franchise agreement,
the applicant would seek an order directing the respondent to provide it with a new
franchise agreement for signature. It also sought an order declaring that the applicant
was entitled to conduct business on the premises for a further period of five years,
commencing on 1 March 2018.
[8] The applicant also filed an answering affidavit setting out its defence against the
eviction application. In the answering affidavit, the request for a stay was dealt with
upfront, followed by the substance of its defence. In response to the eviction
application, the applicant submitted that the respondent had verbally undertaken to
renew the franchise agreement until 28 February 2023. The alleged verbal agreement
was based on a conversation between Mr Bester, the applicant’s representative, and
Mr Naidoo, the regional manager of Chevr on at the time, who had advised him that
after the cession “nothing would change, and the respondent would treat the applicant
as Chevron treats its retailers”.
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[9] The High Court relied on section 6 of the Arbitration Act 4 when it considered
the application for a stay. It held that the applicant had failed to follow the correct
procedure in that it did not apply for a stay in the manner prescribed by section 6(1).5
This was because the application should have been filed after delivery of its notice of
intention to oppose, but before it took any further steps in the proceedings. 6 Instead,
the applicant delivered its answering affidavit in which it dealt with the merits of the
application, as well as the application to stay the proceedings. 7 The High Court thus
held that the application was not properly before it.
[10] The High Court thereafter considered whether it could nevertheless exercise its
discretion in terms of section 6(2)8 to order a stay of the proceedings. In this regard, it
held that there were sufficient reasons why the dispute should not be referred to
arbitration. These included the fact that the matter had been dealt with as an opposed
application and both parties presented arguments on whether the proceedings should be
stayed, and on the merits.9 Furthermore, when the respondent launched the application
in February 2018, it was entitled to have the matter heard without undue delay.10
[11] Concerning the submission that the nature of the contractual practice was unfair
or unreasonable, the Court characterised the dispute before it to be one based on the law
of contract.11 In particular, whether the respondent had bound itself contractually to
4 42 of 1965.
5 Section 6(1) of the Arbitration Act provides that 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 delivery of any pleadings or ta king any other steps in the proceedings, apply to that court
for a stay of such proceedings.
6 High Court judgment above n 1 at para 14.
7 Id.
8 Section 6(2) provides that if on any such application the court is satisfied that there is no sufficient reason why
the dispute should not be referred to arbitration in accordance with the agreement, the court may make an order
staying such proceedings, subject to such terms and conditions it may consider just.
9 High Court judgment above n 1 at para 16.
10 Id at para 17.
11 Id at para 19.
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conclude new franchise and lease agreements with the applicant. 12 It held that the
dispute had nothing to do with an unfair or unreasonable contractual practice that could
be correc ted by an arbitrator as contemplated in section 12B of the
Petroleum Products Act.13
[12] The High Court held that the arbitration clause set out in clause 20 of the
franchise agreement did not apply as clause 20 envisaged disputes between the parties
concerning the agreement.14 The dispute before the Court did not concern the franchise
or lease agreements, since both had expired through effluxion of time.15 What was left
to be decided was whether the respondent undertook to conclude new agreements after
the expiry of the existing ones. 16 Furthermore, the applicant did not, in its papers,
specify which issues it wished to be decided by the arbitrator in terms of clause 20, nor
did its counsel indicate such during argument.17
[13] The High Court rejected the applicant’s submission that it was entitled to remain
on the premises based on an agreement between the parties that they would conclude a
new franchise agreement substantially on the same terms as Chevron ’s standard
agreement. It held that the evidence did not establish the agreements contended for by
the applicant , and it could not be said that the parties agreed to enter into new
agreements.18 The High Court did not decide the constitutional issue that the
respondent’s refusal to conclude those agreements was contrary to the values enshrined
in the Constitution and public policy, and the contention that such refusal deprived the
agreement of business efficacy. It stated that none of these constitutional points raised
on the papers was pursued in argument. 19 The Court further held that it was not
12 Id.
13 Id.
14 Id at para 20.
15 Id.
16 Id.
17 Id at para 21.
18 Id at para 26.
19 Id at para 30.
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concerned with the question whether the respondent’s refusal to conclude a new
franchise agreement with the applicant was fair and reasonable, as the respondent was
under no obligation to do so.20 It saw no basis on which it could be said that the effect
of section 12B was to introduce an implied term importing such a n obligation.
Furthermore, section 12B did not have anything to do with the respondent’s right to
decide who it wished to contract with, on what basis, and for how long.21
[14] In the result, the High Court refused to grant the application to stay the
proceedings pending the conclusion of an arbitration process in terms of section 12B of
the Petroleum Products Act. Instead, it upheld the application for the eviction of the
applicant from the premises. 22 An application for leave to appeal was dismissed with
costs.
Supreme Court of Appeal
[15] A petition to the Supreme Court of Appeal was dismissed with costs. On
22 January 2020, the Presiden t of the Supreme Court of Appeal dismissed an
application for the reconsideration of the order. The applicant thereafter applied for
leave to appeal in this Court.
In this Court
Issues
[16] In addition to the preliminary issues of jurisdiction and leave to appeal, this Court
has to determine the following issues:
(a) Whether a section 12B referral to the Controller has the effect of ousting
the High Court’s jurisdiction;
(b) If not, whether the applicant’s failure to comply with section 6(1) of the
Arbitration Act rendered the stay application defective; and
20 Id at para 31.
21 Id at para 27.
22 Id at para 34.
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(c) Whether the High Court had the discretion to refuse a request to refer the
matter to arbitration.
Jurisdiction and leave to appeal
[17] The applicant submits that this matter raises a constitutional issue in that the
High Court did not apply the law as set out by this Court in Business Zone.23 Further,
in its submissions, the applicant argues that its section 34 constitutional right to access
a specialist tribunal or forum (in the form of the section 12B arbitration) is limited when
the High Court hears a matter notwithstanding a referral to the Controller having been
instituted.24 It adds that it would be in the interests of justice to h ear this matter, as it
affects not only its interests but those of the entire petroleum retail and wholesale
industry.
[18] The respondent submits that this Court’s jurisdiction is not engaged, because this
matter does not involve any constitutional issue and none was raised before the
High Court; nor does it raise any questions of law of general public importance.
[19] 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. 25 In addition, it must also be in the interests of justice to grant
leave.
[20] This Court must determine the effect of a statutory provision, section 12B of the
Petroleum Products Act, on an application to stay High Court proceedings pursuant to
a request for a referral in terms of section 12B. We are called upon to consider the
scope of the High Court’s jurisdiction to refuse a stay when section 12B is implicated.
23 The Business Zone 1010 CC v Engen Petroleum Limited [2017] ZACC 2; 2017 JDR 0259 (CC); 2017 (6) BCLR
773 (CC) (Business Zone).
24 In terms of section 34 of the Constitution “[e]veryone has the right to have any dispute that can be resolved by
the application of law decided in a fair public hearing before a court or, where appropriate, another independent
and impartial tribunal or forum.” (Emphasis added).
25 Section 167(3)(b) of the Constitution.
MHLANTLA J
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A challenge to the High Court’s jurisdict ion based on the principle of legality, paired
with the purported limitation of the section 34 right to access an appropriate or
“specialist” tribunal or forum, raises constitutional issues.
[21] What remains for consideration is whether the interests of justi ce favour the
granting of leave. There have been several conflicting decisions concerning the impact
of a section 12B request for referral on stay applications before various divisions of the
High Court.26 It is, therefore, in the interests of justice fo r this Court to provide legal
certainty on the issue. Leave to appeal should be granted.
Ouster of High Court’s jurisdiction
[22] The applicant’s primary submission is that, in light of section 34 of the
Constitution and this Court’s judgment in Business Zone, when a licensed retailer has
initiated the procedure for a referral to the Controller in terms of section 12B of the
Petroleum Products Act, the High Court’s jurisdiction to hear a dispute on the subject
matter of the arbitration is ousted. The applican t submits that the statutory arbitration
mechanism in section 12B is a special procedure or forum created for the petroleum
industry, and that granting the High Court jurisdiction when a request has been made to
the Controller undermines its section 34 right. This is the right “to have any dispute
that can be resolved by the application of law decided in a fair public hearing before a
court or, where appropriate, another independent and impartial tribunal or forum”.27
[23] I disagree. The High Court’s jurisdi ction is located in section 169 of the
Constitution. In terms of that section, the High Court “may decide any matter not
26 See for example KZN Oils (Pty) Ltd v Nelta (Pty) Ltd t/a Keyway Motors [2021] ZAKZPHC 12; 2021 JDR
1261 (KZP); [2021] 2 All SA 478 (KZP); Former Way Trade & Invest (Pty) L td v Bright Idea Projects 66 (Pty)
Ltd [2020] ZASCA 118; 2020 JDR 2072 (SCA); KZN Oils (Pty) Ltd v Frenserve CC t/a John Ross Service Station
(KZD) unreported judgment of the KwaZulu -Natal High Court, Durban, Case No D2658/2018 (30 September
2020); Engen Petroleum L td v Rissik Street One Stop CC t/a Rissik Street Engen unreported judgment of the
Limpopo High Court, Polokwane, Case No: 1583/2019 (12 February 2020); and Future Phambili Petroleum (Pty)
Ltd v Chamdor Service Station CC [2017] ZAGPPHC 1206; 2017 JDR 1909 (G).
27 Section 34 of the Constitution.
MHLANTLA J
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assigned to another court by an Act of Parliament”.28 The High Court’s jurisdiction is,
therefore, extensive in its scope and includes all matters unless they have been
specifically excluded from its jurisdiction.
[24] It is an accepted rule of statutory interpretation that there is a strong presumption
against the ouster of a court’s jurisdiction. In Hurley,29 the then Appellate Division held
that “the curtailment of the powers of a court of law is, in the absence of an express or
clear implication to the contrary, not to be presumed”. 30 The mere fact that the
Legislature has created an extra-judicial remedy is in no way conclusive of the question
whether the court’s jurisdiction has been restricted. It is necessary to determine
whether, in light of the circumstances, a necessary implication arises that the court’s
jurisdiction is either wholly excluded or at least deferred until the extra -judicial
remedies have been exhausted.31
[25] Section 12B of the Petroleum Products Act reads—
“12B Arbitration
(1) The Controller of Petroleum Products may on request by a licensed retailer
alleging an unfair or unreasona ble 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
28 Section 169(1) of Constitution sets out the jurisdiction of the High Court of South Africa and provides:
“(1) The High Court of South Africa may decide—
(a) any constitutional matter except a matter that—
(i) the Constitutional Court has agreed to hear directly in terms of
section 167(6)(a); or
(ii) is assigned by an Act of Parliament to another court of a status
similar to the High Court of South Africa; and
(b) any matter not assigned to another court by an Act of Parliament.”
29 Minister of Law and Order v Hurley 1986 (3) SA 568 (A).
30 Id at 584A-B. See also Millman NNO v Pieterse 1997 (1) SA 784 (C) at 788GJ.
31 Welkom Village Management Board v Leteno 1958 (1) SA 490 (A) at 502-3.
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(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.”
[26] The provisions of s ection 12B and the Petroleum Products Act, in general, do
not assign jurisdiction exclusively to the arbitrator over disputes between licen sed
retailers and wholesalers in the petroleum industry. Nor do they provide that the dispute
resolution mechanism in section 12B is mandatory, or that it must be exhausted before
parties may approach the High Court where there are allegations of unfair or
unreasonable contractual practices. 32 In any event , it is trite that arbitration does not
oust the jurisdiction of courts. 33 In light of the presumption against ouster and the
wording of the Petroleum Products Act, there is no basis to find that the High Court’s
32 This can be contrasted with other statutes that require an exhaustion of the internal remedies in a statute before
a court is approached. Consider for example section 96(3) of the Mineral and Petroleum Resources Development
Act 28 of 2002 which provides that “ [n]o person may apply to the court for the review of an administrative
decision c ontemplated in subsection (1) until that person has exhausted his or her remedies in terms of that
subsection”.
33 Parekh v Shah Jehan Cinemas (Pty) Ltd 1980 (1) SA 301 (D) at 305D-H citing Rhodesian Railways Ltd v
Mackintosh 1932 AD 359 (Rhodesian Railways ); Yorigami Maritime Construction Co Ltd v Nissho -Iwai
Company Limited 1977 (4) SA 682 (C); Walters v Allison 1922 (NPD) 238; and Davies v South British Insurance
Company (1885) 3 S.C. 416.
MHLANTLA J
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ability to hear disputes of this nature has been assigned by the Petroleum Products Act
exclusively to the arbitrator.
[27] Furthermore, in Business Zone, this Court unanimously confirmed that the just
and equitable standard required by the Petroleum Products Act applies to High Court
litigation. This Court specifically said the following–
“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 pet roleum contracts regardless of whether they are
subject to statutory arbitration or ordinary court litigation.
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.
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 .”34
(Emphasis added)
[28] Clearly, the parties have a choice between the section 12B arbitration and
High Court litigation and both forums must apply the fairness standard. The claim that
the High Court’s jurisdiction is ousted is therefore unfounded and must fail.
Stay application
Section 6(1) procedure
[29] The applicant submits that it was not required to apply for a stay in accordance
with section 6(1) of the Arbitration Act for two reasons. First, it argues that it is settled
law that a stay can be applied for by way of a special plea or in terms of the procedure
34 Business Zone above n 23 at paras 52 and 55-6.
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required by section 6. Second, that section 6 applies to “voluntary arbitrations” which
are incomparable to the “involuntary process” envisaged in section 12B.
[30] In determining the applicant’s argument, I will firstly dea l with its contention
that the Arbitration Act was not applicable at all. Following that, it will be considered
whether the failure to comply with section 6(1) was fatal to the applicant’s stay
application.
[31] The applicant’s submission that section 6(1) is not applicable because it relied
on statutory arbitration and not contractual arbitration, is without merit. This is because,
in terms of section 40 of the Arbitration Act, the provisions of the Act are made
applicable, mutatis mutandis, to arbitration proceedings under any legislation. 35 This
captures the exact kind of statutory arbitration created by the Petroleum Products Act.
The Arbitration Act does not apply to statutory arbitration where the legislation
explicitly excludes its applicability; or if the Arbitration Act is inconsistent with the
procedure recognised by the relevant law. The Petroleum Products Act in no way
excludes the applicability of the Arbitration Act, nor can the provisions of the
Arbitration Act be said to be inherently inconsistent with the procedure set out in the
Petroleum Products Act. The High Court was , therefore, entitled to rely on the
provisions of section 6 of the Arbitration Act in assessing whether to grant a stay of
proceedings.
[32] What then of the manner in which the applicant applied for the stay? As a matter
of fact, the applicant did not apply for a stay before delivering its pleadings, and ,
therefore, the High Court was correct to find that it did not comply with the provisions
of section 6(1) of the Arbitration Act. The incorporation of the application for a stay in
35 Section 40 of the Arbitration Act reads–
“This Act shall apply to every arbitration under any law passed before or after the commencement of this
Act, as if the arbitration were pursuant to an arbitration agreement and as if that other law were an
arbitration agreement: [p]rovided that if that oth er law is an Act of Parliament , this Act shall not apply
to any such arbitration in so far as this Act is excluded by or is inconsistent with that other law or is
inconsistent with the regulations or procedure authorised or recognised by that other law.”
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the applicant’s conditional counter-application and answering affidavit was a step
beyond entering an appearance, and therefore one of the prerequisites for a stay in terms
of section 6(1) was absent. However, non-compliance with section 6(1) does not render
the request for a stay invalid. There are two avenues to apply for a stay of proceedings:
a substantive application in terms of section 6 of the Arbitration Act may be made, or a
special plea requesting a stay of the proceedings pending the determination of the
dispute by arbitration.36 In PCL Consulting, the Supreme Court of Appeal put it in the
following terms—
“If a party institutes proceedings in a court despite an [arbitration] agreement, the other
party has two options:
(i) it may apply for a stay of the proceedings in terms of section 6 of the
Arbitration Act 42 of 1965; or
(ii) it may in a special plea (which is in the nature of dilatory plea) pray for a stay
of the proceedings pending the final determination of the dispute by
arbitration.”37
[33] A special plea for arbitration is one of several dilatory pleas and can be included
in pleadings.38 Generally, when a special plea is raised, all the defences on which the
defendant intends to rely must be raised at the same time. 39 This is so because should
the special plea fail, there would be no further opportunity to plead over on the merits.40
36 PCL Consulting (Pty) Ltd t/a Phillips Consulting SA v Tresso Trading 119 (Pty) Ltd [2007] ZASCA 9; [2007]
SCA 9; 2009 (4) SA 68 (SCA) (PCL Consulting) at para 7. See also Transasia 1 (Pty) Limited v Arbitration
Foundation of South Africa [2018] ZAGPJHC (Transasia) 548 at para 19.
37 PCL Consulting id at para 7.
38 Foize Africa (Pty) Ltd v Foize Beheer BV [2012] ZASCA 123; 2013 (3) SA 91 (SCA) at para 30. See Rhodesian
Railways above n 33 at 370-1, where the Appellate Division said the following—
“All that section 6(1) lays down is that you cannot adopt the cheaper and speedier procedure
therein provided when once you have delivered pleadings or taken any other step in the
proceedings. If you have taken any step in the proceedings, then you can no longer adopt the
speedier and less costly procedure of applying to the Court to stay proceedings but you must
file your pleadings in the ordinary way. In pleading, however, you can raise the defense that
the case ought to be decided by arbitration; this can be done by a special preliminary plea .”
[Emphasis added].
39 Thyssen v St. Francis Township (Pty) Ltd 1966 (2) SA 115 (E) at 116G.
40 David Beckett Construction (Pty) Ltd v Bristow 1987 (3) SA 275 (W) at 280E.
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There is no objection to pleading a special defenc e in the course of the plea, with or
without a special heading.41
[34] Therefore, the inclusion of the request for a stay of proceedings in the applicant’s
conditional counter-application and as part of the answering affidavit did not render the
application defective. The High Court erred when it considered the first option and
omitted to consider the second one as set out in PCL Consulting.
[35] Fortunately for the applicant, the High Court did not regard its finding that the
application did not comply with secti on 6(1) as the end of the matter, as it went on to
consider the merits of the stay application in terms of section 6(2).42 Therefore, what
must now be considered is the scope of the High Court’s discretion when considering
whether to grant a stay pending arbitration and whether the High Court in this matter
exercised that discretion judicially.
Discretion to stay proceedings
[36] The applicant submits that the High Court’s discretion to refuse to stay
proceedings is limited where there has been a referral to the Controller. In such a case,
so the argument goes, the High Court must exercise its discretion in favour of a stay.
To do otherwise would defeat the purpose of the section 12B arbitration mechanism and
undermine the applicant’s right to access a specialist tribunal.
[37] In addition, it states that the discretion exercised by the High Court refusing to
stay the proceedings was influenced by the premise that an arbitrator acting in terms of
section 12B does not have the power to create contracts for parties and that, in any
event, refusal to extend a contract does not constitute an unfair contractual practice. In
the applicant’s view, this was an incorrect premise and the High Court erred in finding
that a referable contractual practice only arises from an existing contract.
41 Harms and Hugo, 9 ed Amler's Precedents of Pleadings (Butterworths 2018) at 5.
42 High Court judgment above n 1 at paras 14-9.
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[38] The respondent submits that the applicant is occupying the property without its
consent; and it is common cause that the franchise agreement, formin g the basis of the
applicant's occupation, terminated by effluxion of time on 28 February 2018. In terms
of this agreement, it was agreed that upon termination, the applicant would vacate the
premises; and the parties did not conclude any further agreements for the period beyond
28 February 2018. Therefore, the respondent was entitled to evict the applicant from
the premises and courts and arbitrators do not and cannot make contracts for parties
against their will. The respondent adds that the arbitrator is not given any power to
override the ownership rights of a wholesaler, which include the right to evict persons
occupying property against the owner’s will. In addition, Business Zone is wholly
distinguishable from the relevant facts in this applicatio n, and that the matter did not
address the position of agreements that have already expired after a fixed period.
[39] The respondent denies the allegation that it committed an unfair contractual
practice by refusing to extend the franchise and lease agreements. It submits that, as an
autonomous party, and in line with the principle of freedom of contract, it was entitled
to exercise its full contractual freedoms in its dealings and interactions with its
franchisees within the framework of the law.
[40] The determination of this issue requires the consideration of the question whether
the effect of a section 12B request to the Controller is to curtail the High Court’s
discretion such that it is required to stay the proceedings pending the outcome of the
arbitration. This requires an examination of the relationship between section 6 of the
Arbitration Act and section 12B of the Petroleum Products Act and the principles set
out by this Court in Business Zone. I now proceed to consider that issue.
[41] Section 6(2) of the Arbitration Act allows a court to stay proceedings “if [upon
application in terms of section 6(1)] the court is satisfied that there is no sufficient
reason why the dispute should not be refe rred to arbitration in accordance with the
agreement”. The language of section 6(2) directs a court acting under that section to
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stay proceedings where such an application is made unless sufficient countervailing
reasons exist for the dispute not to be referred to arbitration. The words “no sufficient
reason why the dispute should not be referred to arbitration” denotes that the standard
position is that a stay should be granted upon request. The onus of satisfying the Court
that the matter should not be referred to arbitration and instead heard by the High Court
is on the party who instituted the legal proceedings.43 In Universiteit van Stellenbosch,44
the then Appellate Division held that when a court is faced with a stay application, the
discretion to refuse arbitration in the circumstances should be exercised judicially, and
only when a “very strong case” has been made out.45 This high threshold for refusal is
because the party who does not want the matter referred to arbitration “is seeking to
deprive the other party of the advantage of arbitration to which the latter is entitled”.46
[42] As I see it, the above requirements that there must be substantial grounds
proffered against a stay, are imperative in the context of a stay application for the
purposes of section 12B arbitration. The very creation of the arbitral mechanism in the
Petroleum Products Act was an attempt by the Legislature to address the unequal
bargaining power between wholesalers and retailers in the petroleum industry. 47 As
was stated in Business Zone, section 12B provides access to arbitration “which may
otherwise not exist possibly due to the unequal bargaining position retailers vis a vis
wholesalers find themselves in”.48
43 Kathmer Investments (Pty) Ltd v Woolworths (Pty) Ltd 1970 (2) SA 498 (A) at 504 H; Metallurgical and
Commercial Consultants (Pty) Ltd v Metal Sales Co (Pty) Ltd 1971 (2) SA 388 (W) at 391 C-E; and Rhodesian
Railways n 33 above at 361.
44 Universiteit van Stellenbosch v JA Louw (Edms) Bpk 1983 (4) SA 321 (A).
45 Id at 327C-D. See also Transasia above n 36 at para 19 where the High Court said—
“Where a party to an arbitration agreement commences legal proceedings against the other party to that
agreement, the defendant is entitled either to apply for a stay of the proceedings pursuant to section 6 of
the Arbitration Act 42 of 1965 or to deliver a special plea relying upon the arbitration clause. Whichever
course it adopts the onus then rests on the claimant to persuade the court to exercise its discretion to
refuse arbitration. This requires a very strong case to be made out.” (Emphasis added).
46 Body Corporate of Via Quinta v Van der Westhuizen N.O. [2017] ZAFSHC 215 at para 41.
47 The Petroleum Products Amendment Act (Amendment Act) amended the Petroleum Products Act in 2004.
Arbitral dispute resolution mechanisms were intro duced 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), entitled to
request that the Controller refer a dispute to arbitration rather than resolving the dispute through court litigation.
48 Business Zone above n 23 at para 58.
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[43] When the Arbitration Act is being applied in terms of a statutory right to
arbitration as opposed to a contractual right, section 6(2) must be read to require that a
court may stay proceedings if there is no sufficient reason to refer the dispute to
arbitration in accordance with the applicable stat ute or legislation (in this case
section 12B) as opposed to the terms of an agreement. Therefore, a Judge considering
whether to stay proceedings where there has been an application to stay in light of
section 12B, must find that there are compelling reas ons to refuse the stay despite the
purpose of section 12B and all its numerous benefits for retailers and wholesalers. The
court is, therefore, required to engage with section 12B, its purpose and benefits when
weighing up whether there are sufficient rea sons that warrant refusing to send the
dispute to the section 12B arbitration.
[44] In addition to the industry -specific benefits, the general benefits of arbitration
have been considered by this Court. In Lufuno,49 for example, this Court expressed the
advantages as follows:
“Some of the advantages of arbitration lie in its flexibility (as parties can determine the
process to be followed by an arbitrator including the manner in which evidence will be
received, the exchange of pleadings and the like), its cost-effectiveness, its privacy and
its speed (particularly as often no appeal lies from an arbitrator’s award, or lies only in
an accelerated form to an appellate arbitral body). In determining the proper
constitutional approach to private arbitration, we need to bear in mind that litigation
before ordinary courts can be a rigid, costly and time-consuming process and that it is
not inconsistent with our constitutional values to permit parties to seek a quicker and
cheaper mechanism for the resolution of disputes.”50 (Emphasis added).
[45] Although the above was said in the context of private contractual arbitration, it
applies equally to statutory arbitration in terms of section 12B, which must be
49 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews [2009] ZACC 6; 2009 (4) SA 529 (CC); 2009 (6) BCLR
527 (CC) (Lufuno).
50 Id at para 197.
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understood as arbitration ordinarily is in the law of contract. 51 The benefits of
arbitration outlined in Lufuno are evident from the text of section 12B itself and were
considered in Business Zone. Among others, the parties can choose both a specialised
arbitrator and the rules of procedure which that arbitrator is to follow; 52 the arbitrator
has wide remedial powers to remedy the unfair or unreasonable contractual practice and
make compensatory awards;53 and, the arbitrator’s award is final and binding, 54 which
avoids the ordinary appellate processes applicable to litigation, and thus saves time and
resources. This is particularly beneficial for retailers who have fewer resources and
bargaining power than wholesalers. These benefits require that there should be
legitimately compelling reasons to refuse a stay of proceedings.
[46] Section 6(2) confers a discretion upon the courts to grant or refuse a stay.
Ordinarily, appellate courts do not interfere in the exercise of discretion by other courts,
and may do so only when it is shown that the discretion has not been exercised
judicially. That is, where the court takes into account irrelevant considerations or the
discretion has been exercised based on a wrong appreciation of the facts or wrong
principles of law.55 However, even if the discretion exercised is not a “true” or “strict”
one, appellate courts will still show restraint.56 In SA Broadcasting,57 this Court said:
“Where the discretion is a discretion in the strict sense, in that the court had a range of
legal choices open to it, an appellate court will ordinarily interfere with the exercise of
that discretion only in narrow circumstances. However, this Court has also recognised
that there will be occasions where a decision made by another court which doe s not
51 Business Zone above n 23 at para 58.
52 Section 12B(2) of the Petroleum Products Act.
53 Id at section 12B(4).
54 Id at Section 12B(5).
55 Giddey N.O. v J C Barnard and Partners [2006] ZACC 13; 2007 (5) SA 525 (CC); 2007 (2) BCLR 125 (CC)
at para 22.
56 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 paras 88-9.
57 South African Broadcasting Corporation Limited v National Director of Public Prosecutions [2006] ZACC 15;
2007 (1) SA 523 (CC); 2007 (2) BCLR 167 (CC) (SA Broadcasting).
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involve the exercise of a discretion in the strict sense, will also be interfered with only
in narrow circumstances.”58
[47] This Court has explained that “ [t]his principle of appellate restraint preserves
judicial comity. It fosters certainty in the application of the law and favours finality in
judicial decision-making.”59
[48] Here, the Arbitration Act requires that a court satisfy itself that in the
circumstances, sufficient reasons exist not to refer the dispute before it to arbitration.
The type of re asons that must be given and considered are not specified in the
Arbitration Act. To be satisfied or persuaded that sufficient reasons exist, a court can
therefore have regard to several disparate and incommensurable factors when
considering the reasons p roffered by the parties for and against a stay, and these will
invariably differ from case to case. While the reasons must be compelling to sway a
court against a stay, any number of factors could influence a court to exercise its
discretion in one way or the other.
[49] In this matter, the High Court considered several factors in concluding that there
were “sufficient” reasons provided to refuse to stay the proceedings. The first reason
was one of judicial resources. The High Court held that staying proceedings would be
a waste of judicial resources as the merits of the applications were fully argued before
it and that the matter was on the opposed roll. 60 This was primarily because the
application for a stay was included in the answering papers that also addressed the
merits. Second, the High Court was of the view that the respondent (the applicant
before it) was “entitled to have the matter heard without undue delay”. 61 Third, the
High Court did not consider the refusal to extend the lapsed franch ise and lease
58 SA Broadcasting id at para 39.
59 Florence v Government of the Republic of South Africa [2014] ZACC 22; 2014 (6) SA 456 (CC); 2014 (10)
BCLR 1137 (CC) at para 113.
60 High Court judgment above n 1 at para 16.
61 Id at para 17.
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agreements, or the refusal to conclude new ones, to be “contractual practices” that could
be corrected by an arbitrator in terms section 12B.62 Fourth, clause 20 of the franchise
agreement (the arbitration clause) dealt with disputes “concerning the agreement”, and
because the agreement had expired through effluxion of time, the dispute did not
“concern the agreement”, and in any event, the applicant (respondent in the High Court)
did not specify the issues it wished to be decided in terms of clause 20.63
[50] In my assessment, the High Court was entitled to consider factors such as the
voluminous application and the judicial resources that had been expended by the time
the stay application was made. We must take cognisance of the “critical need for
prudence and frugality in the deployment of court time and its other resources”.64
[51] The High Court also considered the fact that the agreement had lapsed to be a
significant factor against granting a stay, because, as it was held, the arbitrator would
not have the power to extend the lapsed agreement or force the parties to conclude a
new agreement.
[52] In this matter, this Court is not required to make a definitive finding on the
precise scope of the corrective powers of a section 12B arbitrator and whether she may
extend a lapsed agreement in making an “award as she deems necessary to correct such
[unfair or unreasonable] practice”.65 I do, however, caution courts against making stay
decisions based on prematur e assessments of what the section 12B arbitrator (or any
arbitrator) would or would not decide. Prospects of success, so to speak, before the
arbitrator should not be given undue weight in the analysis.
62 Id at para 18.
63 Id at paras 20-1.
64 Economic Freedom Fighters v Minister of Justice and Correctional Services [2020] ZACC 25; 2021 (2) SA 1
(CC); 2021 (2) BCLR 118 (CC) at para 23.
65 Section 12B(4)(a) of the Petroleum Products Act.
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[53] Nevertheless, considering the facts, the High Court was entitled to consider the
fact that the agreement had lapsed. I say so for the following two reasons. First, in this
matter, the franchise and lease agreement had a fixed termination date. The agreement
was ceded to the respondent in 2011, six years before its expiry. The applicant may
have taken the view then that, due to industry practice or its previous relationship with
Chevron, the termination date ought to have been extended . Alternatively, that there
ought to have been a clause to the effect that the agreement would only terminate if it
breached any of the contractual provisions. In either event, it ought to have approached
the Controller at that time to arbitrate on the reasonableness or otherwise of the duration
of the agreement or its terms. It ought not to have done so shortly before the expiry of
the lease agreement. This would have allowed the section 12B process to unfold well
before the lease agreement (which entitled the applican t to remain on the property)
expired.
[54] Second, it must be repeated that the respondent informed the applicant by way
of a letter on 25 August 2017 that it would not be renewing the agreement. And it
pertinently pointed out that the applicant would, in the circumstances, be required to
vacate the premises on or before the termination date. This letter came some
five months before the applicant referred the request to the Controller on
22 February 2018. This was a mere six days before the agreement was set to lapse and
after the eviction proceedings had been launched. I can think of no good reason why
the applicant would wait until the life of the agreement was to imminently expire to
seek the relief. It is particularly confounding considering that a clea r consequence of
termination is set out in clause 11.1.2 of the agreement, which provides that upon the
termination of the agreement “the franchisee and its permitted assign ees, heirs and
executors will forthwith surrender possession of the premises to the franchisor”. The
applicant would have been well aware of this and should have acted expeditiously if it
believed that the refusal to extend the agreement was an unfair or unreasonable
contractual practice. The respondent gave the applicant sufficient notice of its intention,
and was , therefore, well within its rights to seek the eviction of the applicant and
vindicate its ownership rights. The High Court was entitled to consider the applicant’s
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delay in acting, and weigh this set of facts in its assessment whether sufficient reasons
existed not to grant a stay.
[55] It is also important to remember that before the High Court, the applicant
primarily argued that there had been an oral agreement between the parties which
extended the life of the franchise agreement beyond 28 February 2018. This claim
could not be sustained on the facts. Indeed, this argument was abandoned by the
applicant on appeal. This also explains why the High Court considered the dispute to
be one of contract and not of u nreasonable or unfair contractual practices. It was
requested to determine, amongst other things, whether as a matter of fact there had been
an agreement to extend the life of the franchise and lease agreement s (had there been,
the eviction of the applicant would have been a non-starter).
[56] The final issue for consideration is whether the High Court was influenced by a
wrong principle of law in finding that the respondent’s refusal to extend the lapsed
franchise and lease agreements or to conclude new ones did not amount to a “contractual
practice” that could be corrected by an arbitrator in terms of section 12B, and therefore
rendering the section inapplicable. The applicant submits that the High Court failed to
understand the nature and content of a “contractual practice” as defined and explained
in Business Zone. Is this so?
[57] In considering the merits of this submission, it is important to have regard to
what this Court held in Business Zone.66 That matter concerned the cancellation of a
franchise agreement and operational agreement as a result of alleged breaches by the
retailer operating the franchise business. 67 The cancellation by the franchisor was
challenged as constituting an unfair contractual practice within the meaning of
section 12B, hence the application to the Controller to refer the matter to arbitration in
terms of section 12B(1). Business Zone is authority for the proposition that a single act
66 Business Zone above n 23.
67 Id at para 8.
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may amount to a contractual practice under the Act and , if that is so, the Ac t provides
for arbitration to determine whether the practice is just and equitable. In this context,
this Court said the following:
“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. 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.”68
[58] This finding was made in the context of a contract cancelled before the
termination date. The single act of premature cancellation of the agreement was the
“contractual practice” that was alleged to be unfair or unreasonable and which the
arbitrator coul d reinstate. 69 Here, the respondent did not cancel the franchise
agreement. Rather, it terminated on the agreed date. On this issue, Business Zone is
distinguishable. It did not create a binding precedent for courts regarding the question
whether the refusal to extend a lapsed agreement or enter into a new agreement was a
contractual practice. That issue was not before this Court. Therefore, it cannot be said
that the High Court, in its assessment whether a “contractual practice” existed, ignored
a legal principle established by this Court. While the Act provides that the arbitrator
may make such award as she deems necessary to correct such practice, it is silent on
whether this includes the power to reinstate lapsed agreements. The High Court’s
finding on this point was therefore not in conflict with Business Zone or the
Petroleum Products Act. It cannot be said that, in the exercise of its discretion, the
High Court was influenced by the wrong principles of law.
68 Id at para 76.
69 Id.
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[59] Accordingly, the High Court exercis ed its discretion judicially when it refused
to stay the proceedings and there is no basis for this Court to intervene.
Interplay between section 6(2) of the Arbitration Act and section 12B of the Petroleum
Products Act
[60] Having said that, I do wish to emphasise that when the Arbitration Act is applied
and section 12B is implicated, section 6(2) of the former must be read to require that a
court must stay proceedings if there is no sufficient reason not to refer the dispute to
arbitration in terms of sec tion 12B (and not the contract governing the parties). It is ,
therefore, necessary in these matters, where section 12B and section 6(2) of the
Arbitration Act are at play, for a court to seriously consider whether there are ample
reasons not to refer the dispute for statutory arbitration in terms of section 12B of the
Petroleum Products Act in light of the broader legislative scheme. This requires
engagement with the legislative purpose of the section 12B arbitration. In considering
that issue, it is imp ortant to have regard to what this Court held in Business Zone
regarding the proper interpretation of section 12B. In that matter, this Court considered
the purpose of the Petroleum Products Amendment Act which introduced the
section 12B arbitration and said:
“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 chart er
‘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.”70
[61] That context is crucial when considering a stay application. This is so because
the purpose of the Petroleum Products Amendment Act 71 was “to provide for appeals
70 Id at para 47.
71 See above n 47.
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and arbitrations” and that purpose cannot be overlooked.72 It is worth re-iterating what
this Court held—
“[T]he inherent value of section 12B enabling a party to resolve a dispute through
arbitration rather than court proceedings must be recognised. Ar bitration 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.”73 (Emphasis added).
[62] In addition to considering the larger context of the petroleum industry and the
purpose of the Act when considering a stay application, courts ought to guard against
treating these disputes as purely contractual. They must bear in mind that the
Legislature intended t hat a fairness standard be imposed on contractual relationships
between retailers and wholesalers in the petroleum industry. 74 The equitable standard
of fairness and reasonableness prevails in all petroleum contracts. 75 This fairness
standard does not exist in all commercial contracts and, therefore, a High Court cannot
treat those disputes as regular contractual disputes when they are considering whether
to stay the proceedings. To do so would be to ignore the Legislature’s transformative
goals in the petroleum industry in light of the unequal bargaining power between
retailers and wholesalers.
[63] A court assessing a stay must c onsider all the benefits of section 12B, and the
broader power dynamics of the petroleum industry when weighing up whether to grant
a stay in favour of either a retailer or a wholesaler. Of course, that is not to say that a
court must always grant stay ap plications when applied for . That will depend on the
facts of each case.
72 Business Zone above n 23 at para 59.
73 Id.
74 This is clear from section 12B permitting “unfair” or “unreasonable” contractual practices to be corrected. See
Business Zone above n 23 at para 56.
75 Business Zone id at para 52.
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Conclusion
[64] This matter is a cautionary tale to both retailers and wholesalers in the petroleum
industry to approach the Controller without undue delay once a party suspects that there
are unfair or unreasonable contractual practices. In this case, while the High Court’s
analysis failed to consider the importance of the section 12B arbitral process in light of
Business Zone, it cannot be said that the High Court’s exercise of discretion fell outside
the ambit of section 6(2) of the Arbitration Act and the “sufficient reasons” requirement
such that the discretion was not exercised judicially. It is not for this Court to say
whether the High Court came to a right or wrong conclusion wh en exercising its
discretion, but whether it was influenced by wrong principles of law or fact. The High
Court used the “sufficient reasons” test in section 6(2). It considered countervailing
factors based on the facts before it, which in its assessment amounted to sufficient
reasons to refuse a stay. The countervailing factors were sufficient. Accordingly, there
is no basis to set aside the decision of the High Court to refuse the stay application. It
follows that the appeal must be dismissed.
Costs
[65] On costs, there is no reason to depart from the general rule that costs should
follow the result.
Order
[66] In the result, the following order is made–
1. Leave to appeal is granted.
2. The appeal is dismissed.
3. Crompton Street Motors CC must pay the costs of Bright Idea Projects 66
(Pty) Limited, including the costs of two counsel.
For the Applicant:
For the Respondent:
B Savvas instructed by K Swart and
Company Incorporated
GD Harpur SC and D Ramdhani SC
instructed by Norton Rose Fulbright
Incorporated