CONSTITUTIONAL COURT OF SOUTH AFRICA Masstores (Pty) Limited versus Pick n Pay Retailers (Pty) Limited
CCT 242/15 Date of hearing: 30 August 2016 ________________________________________________________________________
MEDIA SUMMARY
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The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On 24 November 2016 the Constitutional Court handed down judgment in an application for leave to appeal by Masstores (Pty) Limited (Masstores). The case concerned an alleged interference by Masstores with the trade of the respondent (Pick n Pay). The “trade” Pick n Pay sought to protect was not the run of the mill competitive trade between equal participants in a free market. It was an exclusive contractual right to trade as a supermarket in a shopping complex, granted to Pick n Pay by the lessor (Hyprop) in a lease agreement.
Hyprop is also the owner of the shopping complex.
Pick n Pay did not seek enforcement of the contractual exclusivity right against Hyprop, but against Masstores, another tenant in the complex although there was no contractual relationship between Pick n Pay and Masstores. Pick n Pay sought relief against Masstores under the delict of “interference with contractual relations”. It contended that Masstores’s breach of its own lease agreement with Hyprop, which prohibited it from operating a supermarket in the complex, was also an intentional interference with Pick n Pay’s contractual relations with Hyprop.
Pick n Pay approached the High Court on an urgent basis. The High Court interdicted Masstores from operating the supermarket in breach of its own lease agreement with Hyprop. The Supreme Court of Appeal upheld this finding on the basis that the Constitutional Court’s decision in Country Cloud was authority that this kind of prevention of contractual performance constituted wrongful conduct, actionable in delict under our law.
In a majority judgment, Froneman J (Nkabinde ADCJ, Khampepe J, Madlanga J, Mbha AJ, Mhlantla J, Musi AJ and Zondo J concurring) held that leave to appeal must be granted as
the case involved the assessment of wrongfulness in delict which raises matters of policy, infused by constitutional values.
The majority found that Country Cloud is no authority for the proposition that the deprivation of contractual rights in delictual claims for interference with contractual relations is prima facie unlawful. Nor did it lay down that in inducement cases the wrongfulness inquiry need not be concerned with the duty not to cause harm or the infringement of rights. And it confirmed that the degree or intensity of fault may indeed play an important role in the wrongfulness inquiry in these kinds of claims.
The limits of this Court’s judgment in Country Cloud, as explained, effectively disposed of Pick n Pay’s contention that prima facie wrongfulness on the part of Masstores had been established. The majority pointed out that a right can be deprived without usurping it.
Holding-over cases involve both, but the present case does not. Masstores’s trading as a general supermarket does not deprive Pick n Pay of its entitlement to continue trading as a supermarket in the shopping centre. There may have been a deprivation of part of Pick n Pay’s trading interest, namely its exclusivity, but Masstores had not “usurped” that exclusivity. Masstores did not usurp any exclusive right of Pick n Pay and appropriate it as its own.
Pick n Pay’s pleaded case was that of “intentional conduct designed to undermine and thus interfere with Pick n Pay’s contractual rights in respect of its lease agreement with Hyprop”. This was an assertion that South African law recognises a wider form of delictual interference with contractual relations and that the facts of this case fall within that wider ambit. The majority held that neither analogous reasoning nor reliance on the general principles of Aquilian liability justifies development of the common law to recognise this extended form of unlawful competition.
There is no general right not to be caused pure economic loss, but in unlawful competition cases, as this one is, the courts have recognised that the loss may lie in the infringement of a right to goodwill or in the legal duty to respect the right to goodwill. As a general proposition, however, there is no legal duty on third parties not to infringe contractually derived exclusive rights to trade, because exclusive trading rights make the competitive field uneven. No infringement of a right to goodwill or in the legal duty to respect the right to goodwill was established in this case.
Consequently, the majority finds that the appeal must succeed with costs.
A minority judgment written by Jafta J, held that leave to appeal should be refused as this matter does not raise a constitutional issue, but rather concerns an enforcement of commercial rights sourced from contract, and because the application lacks prospects of success.
The minority further held that, the granting of an interdict was discretionary in a sense that a court may not grant the interdict in circumstances where an alternative remedy was available to an aggrieved applicant. It further held that in order to succeed, Pick n Pay
should meet the requirements for an interdict. Pick n Pay would have to establish a clear right, injury actually committed or reasonably apprehended and, the absence of a satisfactory remedy.
The minority held that a clear right had been sufficiently established by Pick n Pay and that such a right can be sourced from contract. It also held that there was no authority that supports the contrary. This was so because the source of the right sought to be protected by an interdict was immaterial in determining whether the interdict should be granted.
Dealing with the second requisite, Jafta J held that Pick n Pay sufficiently showed that its contractual right had been violated. It based this conclusion on the fact that Masstores had violated the terms and conditions of its lease which prohibited it from trading as a supermarket. On the satisfactory remedy requirement, the minority held that the mere existence of other remedies was not sufficient to tilt the scale against the granting of an interdict - as in this matter – a claim for delictual damages may almost be impossible – like any other remedy sought, it should afford equal and effective protection and thus Pick n Pay’s only satisfactory remedy is the interdict.
