Kekkel en Kraai Suid Afrika (Pty) Ltd v Bes-Buhr Trading CC and others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Mantame J
• Judgment Date: 01 September 2023
• Citation: 2023 JDR 3304 (WCC)
• Hearing Date: 17 July 2023
• Docket Number: A05/2023

Mantame J:

Introduction

[1]

The appeal is against the whole of the judgment and order of Wathen-Falken AJ dated 7 June 2022 in which the appellant’s application for review of the Appeal Tribunal (“the Tribunal”) award granted on 18 December 2020 was dismissed.

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[2]

The first respondent opposed the appeal. The second and third respondents whose award is the subject of the appeal elected to abide by the decision of the Court.

Background History

[3]

The matter has extensive history. On or about April 2013, the appellant herein referred to as ‘franchisor’, and the first respondent herein referred to as ‘franchisee’, conducted a written franchise agreement in terms of which the first respondent was granted the exclusive right and licence to establish a Kekkel en Kraai outlet at 30 Bokomo Road, Malmesbury (“the premises”) and to exclusively trade within a five hundred meters (500 m) radius from the premises (“the exclusive area”) by selling fresh and frozen chicken and poultry products (“the product”).

[4]

During 2019, the first respondent approached the appellant for permission to deliver the product to areas outside the exclusive area which was granted on a temporary basis and subject to the appellant’s exclusive right to withdraw such consent. The appellant stated that the first respondent breached the agreement by delivering and selling the product outside the designated area without the appellant’s consent. The temporal consent was withdrawn by the appellant due to complaints from, amongst others, its franchisee in Langebaan and the first respondent was duly informed of the withdrawal.

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[5]

According to the appellant, despite the withdrawal of consent, the first respondent persisted with its delivery of product outside its exclusive area. It was therefore agreed between the parties that the appellant would seek Counsel’s opinion on this dispute. On 26 August 2019, the opinion held that this dispute was to be determined in favour of the appellant.

[6]

During December 2019, it came to the attention of the appellant that the product forming part of the franchise agreement was being distributed by a third party, Olhys (Pty) Ltd (“Olhys”) under the packaging style of Swartland Poultry which closely resembled the packaging style of Swartland Fresh Products, a brand licensed to the appellant and designed for sales to non-Kekkel en Kraai outlets. Olhys was formed on 1 November 2019. Its only director was Olinka van Wyk (“Olinka”) who is the daughter-in-law of van Wyk Senior (“van Wyk Sr”) the majority holder of a ninety-five percent (95%) membership interest in the first respondent, and his wife Marina van Wyk (“Marina”), the manageress of the first respondent. Matthys van Wyk (“Thys”) the husband of Olinka and the son of van Wyk Sr and Marina was said to be involved in the running of Olhys. Olinka was a swimming instructor employed by the Swartland Swimming Club, and the appellant suggested that she had very little, if any experience in the chicken industry.

[7]

During October 2019, Thys sold his 50% shares at SVW Kekkels to D van Wyk. On 1 November 2019, Thys resigned as a director of SVW Kekkels. The appellant was aware of his resignation. The appellant alleged that Thys was the one responsible for the day-to-day running of Olhys and utilised the employees and

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vehicles of the first respondent. The first respondent disputed the allegation and claimed that Olhys was run by Olinka who was assisted by Thys, her husband. The appellant claimed that Olhys delivered the product outside the exclusive area of the first respondent.

[8]

The involvement of this family in this new business, Olhys, culminated in the appellant employing the services of a private investigator, Mr Willem van Romburgh (“Mr van Romburgh”) to investigate the relationship between the first respondent and Olhys. Mr van Romburgh compiled an investigative report and findings in respect of certain alleged breaches of the franchise agreement. His conclusions were that:

8.1

Olhys was a related party to the first respondent as defined in section 2 of the Companies Act 71 of 2008;

8.2

Olhys did not operate as an independent party from the first respondent; and / or;

8.3

Olhys did not act on its own behalf alternatively not only on its own behalf but for and on behalf of the first respondent and / or van Wyk Sr its 95% member;

8.4

Olhys was and has been an instrument and / or conduit of the first respondent alternatively for its business;

8.5

Olhys had been used as a front or façade for the first respondent’s interests, behind which first respondent was committing the breaches.

[9]

He concluded that the conduct of the first respondent and / or van Wyk Sr as set out above was furthermore dishonest and / or improper. The first respondent in the formation of Olhys and / or its business operations as set out above was in

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breach of clauses 6.6, 8.2.1, 8.2.2, 8.2.3, 8.13.2, and 9.1.5 and / or 21.1 of the franchise agreement.

[10]

During December 2019, a dispute arose between the parties. Clause 22 of the franchise agreement required that in the event of any dispute between the parties arising out of or relating to any aspect of the franchise agreement, such dispute would be referred to arbitration in Cape Town on the written request of any party, in accordance with the rules of the Arbitration Foundation of South Africa (“AFSA”).

[11]

On 9 March 2020, the appellant through its attorney addressed a demand to the first respondent to remedy its breaches of the franchise agreement within 48 hours. On 13 March 2020 the first respondent denied any breaches and indicated that it could not and would not close the business of Olhys as it was not in a position to do so. The appellant then declared a dispute. The dispute was referred by the appellant to arbitration.

The Arbitration

[12]

The parties agreed to the terms of reference that were reduced to an arbitration agreement. In those proceedings, the appellant was the Claimant, and the first respondent was the Defendant. Advocate Louis Olivier SC was appointed as an Arbitrator in terms of the AFSA Commercial Rules. The issues which were referred to arbitration for determination arose from the alleged breaches of the franchise agreement.

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[13]

From the onset, the arbitration agreement regulated the conduct of the arbitration. The arbitration proceeded on 23 and 24 June 2020. On 24 June 2020, the parties entered into an addendum to the franchise agreement which stated inter alia, that “there shall be a right of appeal in the arbitration to two senior advocates, each one to be nominated by one of the parties respectively, to be appointed by the Chairman of the Cape Bar Council, from amongst the ranks of the senior counsel with more than 20 years’ experience as such”.

[14]

At the commencement of the arbitration proceedings the first respondent made an application for separation of issues on whether the business conducted under the name Swartland Poultry constituted a breach of any of the provisions of the franchise agreement and that further issues be determined later. The application was opposed by the appellant and the Arbitrator reserved his ruling in this regard.

[15]

In its statement of claim, the appellant asked for a declarator that:

15.1

the first respondent and Olhys were related or interrelated parties as defined in section 2 of the Companies Act, 71 of 2008;

15.2

Olhys did not operate as an independent company from the first respondent;

15.3

the first respondent was involved in the formulation of Olhys alternatively had knowledge thereof;

15.4

the first respondent had assisted Olhys in its business;

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15.5

the first respondent’s knowledge of and involvement in the business of Olhys and its operations was in breach of clauses 6.6, 8.2.1, 8.2.2, 8.2.3, 8.13.2, 9.1.5, and / or 21.1 of the franchise agreement;

[16]

Further, that the first respondent be ordered to comply with the franchise agreement and in particular with clauses 6.6, 8.2.1, 8.2.2, 8.2.3, 8.13.2, 9.1.5, and / or 21.1 thereof by inter alia;

16.1

Not permitting or assisting Olhys – including its employees, directors, members, related parties or any party with any interest therein – in its business operations and in particular not permitting or assisting Olhys to make use of the first respondent’s property, facilities, staff or equipment in its operations;

16.2

Not supplying any product to Olhys; and/or

16.3

Not selling or distributing or delivering product outside of the exclusive area whether directly or indirectly through Olhys;

16.4

. . .;

16.5

The first respondent be ordered to pay the costs of the arbitration, including the costs of the arbitrator and two Counsel.

[17]

In its defence, the first respondent denied any breach of the franchise agreement. However, it admitted that it had approached the appellant for permission

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to deliver products outside of the exclusive area as defined in the franchise agreement. The appellant confirmed its consent to the permission on the basis that the appellant reserved the right to terminate such consent. Since the franchise agreement did not allow for deliveries, the appellant would not rely on the deliveries as a breach of the franchise agreement. After the consent was terminated in respect of the deliveries in specific areas due to complaints by or on behalf of certain Kekkel en Kraai franchisees, the first respondent thereupon terminated the amendment of the franchise agreement in respect of deliveries in those specific areas. According to the first respondent, the consent by the appellant was unenforceable. The...