Chevron South Africa (Pty) Limited and Another v Kiribati Traders CC (10295/2015) [2016] ZAGPJHC 342 (7 December 2016)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 10295/2015

Reportable: No

Of interest to other judges: No

Revised.

In the matter between:

CHEVRON SOUTH AFRICA (PTY) LIMITED First

Applicant

INVESTOR AMALGAM (PTY) LIMITED Second

Applicant

and

KIRIBATI TRADERS CC Respondent

JUDGMENT

MAKUME, J:

INTRODUCTION

[1] In this matter the applicants seek an order evicting the respondent from certain business premises being a petrol filling station situate at the Corner of Jim Fouche and .Without Streets, Weltevreden Park, Roodepoort known as Portion 1 of Erf 1789 Weltevreden Park Extension 9 and Erf 3565 Randpark Ridge Extension 13.

[2] In the Franchise and Lease Agreement on which this application is based reference was made only to Portion 1 of Erf 1789 Weltevreden

Park Extension 9 as constituting the leased premises. The applicants seek an order rectifying the description of leased premises to include Erf 3565 Randpark Ridge Extension 13.

[3] It is clear that the filling station operated by the respondent extends over Erf 3565 Randpark Extension 13. The omission of that Erf from the agreement was unintended and has been explained and accepted by the respondent. Accordingly prayer 1 of the notice of motion is by agreement granted.The definition of premises in the schedule to the lease agreement is amended to read: Portion 1 of Erf 1789 Weltevreden Park Extension 9 and Erf 3565 Randpark Ridge Extension 13 (hereinafter referred to as the leased premises).

FACTUAL BACKGROUND

[4] During or about the year 1992 a fuel filling station was established on the leased premises. The first applicant then known as Caltex Oil (Pty) Ltd concluded a notarial deed of sublease with the then lessor of the property in terms of which the property was let to the first applicant for a period of twenty years for purposes of conducting the business of a fuel filling station and its allied trade.

[5] Shortly thereafter the first applicant a licensed wholesaler and distributor of petroleum products entered into a Franchise and Lease Agreement with an entity known as Myburgh Belange BK t/a Welridge Auto in terms of which the first applicant granted Myburgh Belange a licence to operate the franchise business from the leased premises for a period of 15 years. This Franchise and Lease Agreement was ceded with the consent of first applicant to the respondent during December 2003.

[6] On the 20th April 2011 the second applicant became owner of the leased premises. On the 31st July 2012 which is the day on which the notarial deed of sublease expired the second applicant's attorneys addressed a letter to the first applicant which reads as follows:

"We act on behalf of our client Investor Amalgam (Pty) Ltd who are the owners of the property leased and occupied by you. Our instructions are:-

1. The lease to the premises expires on the 31st July 2012.

2. Our client represented by Mr A Suliman has informed you of the terms of the offer by Sasol to lease the said property. Our client has had a further meeting on Friday the 21h July 2012 regarding the Sasol offer and for you to consider this. Our instructions are to give you 21 days' notice within which to exercise your option to renew the lease on the terms as discussed by our client Mr Su/iman. As from the 01st August 2012 the rental for the leased premises shall be R140 000,00 per month plus water, rates and taxes and effluent."

[7] Despite that letter the first applicant continued to pay monthly rental of R43 300,00 and wrote to the second applicant on the 1st August 2012 and said the following:

"Management has advised me that while still negotiating the final rental, the monthly rental for the period effective 1st August 2012 will be R43 300,00 (Forty Three Thousand Three Hundred Rand) plus VAT has been paid and any shortfall will be addressed once the negotiations are complete.

I have processed rental payment of R43 300,00 in respect of rental for August 2012 and same will be reflected in your account by Friday 17 August 2012."

[8] The tone of the two letters clearly indicates a standoff between the owner and the lessee. The lessee through the Franchise and Lease Agreement remained in occupation of the leased premises paying the amount it had been paying all along.

[9] The respondent also remained in occupation and continued trading. Ultimately it seems no agreement could be reached and on the 1oth July 2014 the second applicant gave notice to the first applicant to vacate the leased premises.·The letter of termination reads as follows:

"We hereby give Chevron notice to remove fuel tanks and pumps from the site, WeLridge Auto and give us a clean bill of health. All environmental health procedures to be done by Chevron. The effective date for vacating the premises is 30 September 2014. Rental on the site is still due until all environmental procedures and a clean bill of health is supplied."

[10] On receipt of this letter the first applicant addressed a letter to the respondent in its capacity as the franchisor in terms of the Franchise and Lease Agreement. The letter is head "Re Notice of Termination of Franchise Agreement'. It is dated the 30th July 2014 and reads as follows:

"We refer to the Franchise Agreement originally entered into between Chevron South Africa (Ply) Ltd (formerly Caltex Oil (Pty) Ltd) and Myburgh Belange BK which was assigned to you with effect 1 December 2003."

Clause 3.2.3 of the Franchise Agreement reads as follows:

"Notwithstanding the provisions of Clause 3.2.2 and 3.2.3 it is recorded that in the event that the franchisor is not the owner of the premises but is the Jessee in terms of a head lease agreement with a third party and such head lease terminates for whatever reason then this contract shall be deemed to have terminated or expired with effect from the day immediately preceding the expiry of the head lease agreement. The franchisee will have no claim of any nature whatsoever against the franchisor as a result of such termination."

[11] The letter goes on to say the following:

"Please note that the head lessor has given us notice to vacate the premises, a copy of which notice is attached hereto. You will note that the head lessor requires that the premises be vacated on the 3dh September 2014.

In view of the above we hereby give you notice that in terms of the clauses referred to above both the Franchise Agreement and the Lease Agreement terminate on 29 September 2014. You are accordingly required to vacate the premises by not later than the 29th September 2014."

[12] In response to the letter the respondent in a letter dated the 15th August 2014 said the following:

"3. Our position is as follows:

3.1 In so far as Chevron's lease or head lease rights have expired, Chevron falls out of the picture and we see no necessity to address Chevron any further.

3.2 As holders of Retail Licence Rights over the site our client needs only to address, engage or deal with the holder of the Site Licence as there is no other legal relationship other than between the holder of the Site Licence and the Retail Licensee on the other.

Our client has no intention of relinquishing its Licence Rights over the site and will continue to trade as it deems fit.

5. Chevron is invited to continue conducting business with our client on an ad hoc (indefinitely) basis on such terms as we are prepared to negotiate with you.

6. Should Chevron not wish to conduct any further business with our client you are required to:

6.1 identify for us precisely what items of the plant, equipment, machinery, signage or items of a proprietary nature your client wishes to remove;

6.2 forward us a proposal roll out of such removal.

7. Kindly copy this advice to Messrs Investor Amalgam (Ply) Ltd."

[13] On the 18th March 2015 this application was launched and served on the respondent.

THE APPLICANTS' CASE

[14] It is common cause that the first applicant's right over the leased premises expired on the 31st July 2012 when the notarial deed of sublease expired. The first applicant says that despite that event it retained a right over the leased premises in terms of an indefinite month-to-month lease. The first applicant's bases that conclusion on the fact that the owner accepted payments of the monthly rental of R43 000,00 which the first applicant tendered and that the second applicant did not take any steps to evict first applicant.

[15] First applicant relies on the provisions of Clause 4.3 of Annexure 2 to the Franchise Agreement being the lease in respect of the premises occupied by the respondent which states that on termination of the head lease then the sublease between the first applicant and the respondent will be deemed to have also expired. This is the basis on which the first applicant claims the relief in prayer 2 of the notice of motion.

THE SECOND APPLICANT'S CASE

[16] It is not disputed that the second applicant is the owner of the leased premises. No agreement of whatever nature granting respondent occupation of the leased premises exists between second applicant and the respondent. Second applicant's claim is based on the rei vindicatio.

THE RESPONDENT'S CASE

[17] The respondent's defence to the eviction application is twofold. It is that the first applicant lacks locus standi to institute this application since the expiry of the notarial deed of sublease.

[18] Secondly, as against the second applicant the respondent takes issue with the fact that Radali who deposed to the founding affidavit on behalf of both applicants is not an officer of the second applicant (Amalgam) and holds no authority from shareholders. The respondent relies on section 165(1) of the Companies Act No 71 of 2008 which provides as follows:

"165(1) Any right at common law of a person other than a company to bring or prosecute any legal proceedings on behalf of that company is abolished and the rights in this section are in substitution of any such abolished right."

[19] The respondent maintains that the second applicant is not properly before court. It is argued that Radali is neither an employee, member nor director of the second applicant and accordingly that the second applicant's case must be dismissed or absolved with costs.

[20] The third and perhaps what the respondent contends is its main defence appears in a rather convoluted manner. It is based on what the respondent calls an arbitrary deprivation of its property in violation of sections 25 and 22 of the Constitution of the Republic of South Africa. The respondent says it acquired a retail licence issued to it in terms of Act 120 of 1977 (the Petroleum Products Act) as amended by Act 58 of 2003 over the leased premises and that this constitutes goodwill which is property under section 25 of the Constitution.

THE ISSUE LOCUS STANDI

[21] The respondent has raised this issue in respect of both applicants although for different reasons and I deem it appropriate to first deal with that aspect starting with the second applicant.

[22] The second applicant's cause of action is the rei vindicatio and to succeed with the rei vindicatio a claimant must prove that he or she is the owner of the thing, and that the thing was in the possession of the defendant at the commencement of the action which thing is still in existence and clearly identifiable (see Chetty v Naidoo 1974 (3) SA 13 (A)).

[23] The respondent does not dispute that the second applicant is the owner of the leased premises and that it the respondent is in possession thereof. To succeed with any defence against the owner the respondent needs to establish an independent stronger right. It seems to me that the respondent relies on a right which it says was conferred on it by the issuing and granting of the retail licence to it. I do not agree that the retail licence granted any real right to the respondent which right is superior to the owner's right.

[24] Reliance on the provisions of section 165 of the Companies Act as ousting the second applicant's right to claim eviction is in my view misdirected. The documents at page 120 being Annexure "FA1B"

is a clear indication that the directors of second applicant resolved in a meeting held on the 26th February 2015 to authorise the law firm Norton Rose Fullbright to institute the application and simultaneously authorised Takalani Titus Radali to sign the founding affidavit.

[25] Section 165 of the Companies Act introduced a codification and streamlining of the right to commence or pursue legal action in the name of the company which replaces any common law derivative action. It abolished the common law derivative action. It is applicable in instances as defined in section 165(1) and (2) which is that the persons referred to in 165(2) may serve a demand upon a company in order to compel the company to commence or continue legal proceedings or take related steps to protect the legal interests of the company.

[26] In the current matter the company itself resolved to institute action and to that extent authorised its attorneys to do so. The respondent should have invoked the provisions of Rule 7 of the Uniform Rules of Court to challenge the authority of the second applicant's attorneys and their witness Titus Radali. The respondent did not do so and instead relies on section 165(1) of the Companies Act which section has no bearing in the present matter. In the matter of Eskom v Soweto City Council 1992 (2) SA 703 at 705F-G Flemming DJP writes as follows:

"The developed view adopted in Rule 7(1) is that the risk is adequately managed on a different level."

If the attorney is authorised to bring the application on behalf of the applicant, the application necessarily is that of the applicant.

There is no need that any other person whether he be the witness or someone who becomes involved especially in the context of authority,

should additionally be authorised. It is therefore sufficient to know whether or not the attorney acts with authority (see also Games and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA)).

[27] I am accordingly satisfied that the second applicant is properly before the court in accordance with the resolution of the company dated the 26th February 2015.

[28] Equally Iam satisfied that the first appellant is properly before the court based on the Franchise and Lease Agreement concluded with the respondent's predecessors. Clause 3.2.3 of the Franchise Agreement read together with clause 4.3 of the Lease Agreement are identical and clothe the first applicant with powers to institute the action.

[29] The common law rule that a subtenant cannot raise the sublessor's lack of title as a defence in an action for eviction flows naturally from the rule that a valid lease is not dependable on the title of the landlord. The Constitutional Court very recently expressed itself on a matter almost similar to the present case and in conclusion held that despite the fact that the head lease between the owner and its lessee had terminated prior to commencement of eviction proceedings did not disbar the lessee to evict its subtenant. This was in the matter of Mighty Solutions tla Orlando Service Station v Engen Petroleum Ltd and Another 2016 (1) SA 621 (CC) at page 630 the Constitutional Court said the following:

"Mighty Solutions' submissions that the common law rule falls away because its rationale does not apply in this case is untenable. The rule is clear a lessee or sublessee cannot rely on a defence that its lessor or sublessor lacks title in order to resist eviction upon termination of the lease. Mighty Solutions is a sublessee trying to do exactly that."

DOES THE PETROLEUM PRODUCTS ACT CREATE A RIGHT OF

POSSESSI ON FOR A HOLDER OF RETAIL LICENCE?

[30] The respondent maintains that with the coming into operation of the Petroleum Products Amendment Act No 58 of 2003 the law governing and regulating the sale and distribution of petroleum products was substantially overhauled in that the new section 2(A)(d) of the Petroleum Products Act 120 of 1997 conferred a real right of possession on the holder of a retail licence. That section reads as follows:

"2A PROHIBITION OF CERTAIN ACTIVITIES

(1) A person may not -

(d) retail prescribed petroleum products without an applicable retail licence, issued by the controller of petroleum products ."

[31] The respondent refers to the case of Blue Dot Properties (Pfy) Ltd v Engen Petroleum Limited Case No: 2505/2 ECHC a judgment by Schoeman J in support of its contention that a retail licence issued to the respondent granted it a right of possession. In my reading of that judgment I could find no support for this argument. What does appear clear is that in fact no rights to possession or ownership are conferred. At paragraph [34] the Judge writes as follows:

"I am of the view that the Act and the regulations ensure that a licence cannot be issued to a person who is not an owner of the business. Neither the Act nor the regulations bestow ownership of a business on a licence holder and does not perpetuate ownership once a licence has been issued."

[32] The other case that the respondent relies on is that of C WA Snyders NO v Louistaf (Pty) Ltd Case 56178/2014 a judgment by Janse van Nieuwenhuizen J GNP. Similarly this case does not support the respondent's case. It deals with the transfer of a site licence as opposed to a retail licence. In that case the court came to a conclusion that a site licence issued in terms of the Act does not have commercial value and is accordingly not a merx or res vendita. The court went on in that case by referring to Regulation 38 to make a finding that a site licence remains the physical property of the Department of Mineral and Energy and that in terms of Regulation 12(2) such a licence must be transferred to a new owner or new lessee when ownership or possession of the site terminates. The licence is therefore a statutory requirement granted to the owner or lessee of a site in order to enable the person/entity to retail petroleum products from the site.

[33] In Shell South Africa Marketing (Pty) Ltd v Exclusive Access Trading 431 (Pty) Ltd Case Number 5434/2014 Gauteng Local Division, Johannesburg an unreported case by Andrew AJ delivered in October 2014. The respondent in that matter raised a similar defence arguing that the issuing of the two licences namely the site licence issued to the landowner and the retail licence issued to the business owner qualify only the landowner and the retail operator with possessory rights over the land and accordingly that no right of action for eviction can legally exist in the hands of the franchisor.

[34] The court in dismissing that defence concludes as follows at paragraph [22]:

"I fail to see how these provisions have the result argued by counsel for the respondent that no one other than the owner of the land and the owner of the retail business can possibly legally have possessory rights over the land on which a retail right exist. The owner who acquires a site licence and develops a site would surely be entitled for example to employ the services of an intermediary who performs management functions under a sublease agreement and such intermediary may in tum lease the premises to the retailer. The argument that the applicant does not have possessory rights over the premises concerned is without merit."

DOES THE ACQUIRING OF A RETAIL LICENCE IN TERMS OF THE PETROLEUM ACT CONSTITUTE GOODWILL PROTECTABLE BY THE CONSTITUTION

[35] The argument advanced by the respondent on this issue is rather convoluted. The respondent maintains that the termination of its occupation of the leased premises is akin to arbitrary deprivation of property in violation of section 25 of the Constitution. It is argued that the proprietary right is located in the goodwill that has been purchased and developed by it throughout the year.

[36] Goodwill when used in relation to a business has led to a number of judicial pronouncements. Colman J in the matter of Jacobs v Minister of Agriculture 1972 (4) SA 608 0llfJ at 621A-B described goodwill as "an intangible asset pertaining to an established and profitable business for which a purchaser of the business may be expected to pay because it is an asset which generates or helps generate turnover and consequently profits".

[37] Lord MacNaughten in Inland Revenue Commissioner v Muller and Companies Margarine Ltd 1901 AC 217 said that goodwill was a thing easier to describe than to define and went on to offer a few descriptions of the definition one of which was "theattractive force which brings in custom".

[38] Goodwill in respect of the respondent in this matter is affected by the term of tenure on the premises as well as a particular locality. On the termination of the lease that goodwill terminates and can never be argued to

I

remain on the locality. Goodwill is also dependent on personalities that manage the particular business. It is accordingly something intangible and can never be a fixed and easily determinable asset.

[39] The constitutional challenge is thus misconceived in that no fundamental right of the respondent Is infringed by the existing

common law rules. The value of the filling station can only be calculated based on the assumption that its right to occupy the

leased premises comes to an end at the end of the lease agreement. Accordingly an eviction at the end of a lease is not and can never be described as deprivation of property let alone an arbitrary one. The applicant followed due process in terms of the contract of lease as well as the Franchise Agreement.

[40] The respondent has in my view failed to raise any valid defence and the application must succeed and I accordingly make the following order:

40.1 The respondent and all those occupying through or under it are evicted from the filling station premises situate at the Corner of Jim Fouche and Without Streets, Weltevreden Park, Roodepoort being Portion 1 of Erf 1789 Weltevreden Park Extension 9 and Erf 3565 Randpark Ridge Extension 13.

40.2 The Sheriff of the Court is authorised and directed to take all the necessary steps to give effect to the order in 40.1 above if the respondent does not vacate the premises within 7 (seven) days of the service of this order.

40.3 The respondent is ordered to pay the first and second applicants' cost of suit on the scale as between attorney and client.

DATED at JOHANNESBURG this the 2nd day of NOVEMBER 2016.

_________________

M A MAKUME

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

Date of Hearing 12 October 2016

Date of Judgment 7 December 2016

For Applicants Adv Lamplough

Instructed by Norton Rose Fullbright

15 Alice Lane

Sandton

c/o Cnr Jeppe & Von Wielligh Streets

17th Floor, Marble Towers

Johannesburg

Tel: (011) 685 8824

Ref: 55/CTX426/Mr P M Chronis

For Respondent Adv Sawwas

Instructed by Venn & Muller Attorneys

Waterkloof Heights

Pretoria

Tel: (012) 346 0934

Ref: Murray Kotze/008557/ls