Mighty Solutions t/a Orlando Service Station v Engen Petroleum Ltd and Another

• Jurisdiction: South Africa
• Judge: Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Van Der Westhuizen J, Wallis AJ and Zondo J
• Judgment Date: 19 November 2015
• Citation: 2016 (1) SA 621 (CC)
• Docket Number: CCT 211/14 [2015] ZACC 34
• Hearing Date: 11 August 2015
• Court: Constitutional Court
• Counsel: C Woodrow (with D Jordaan) for the applicant. M Chaskalson SC (with C van der Spuy) for the respondent.

Van der Westhuizen J (Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Wallis AJ and Zondo J concurring):

Introduction G

[1] The South African common law of contract is as old as the ancient city of Rome. It developed over centuries in Europe and in the courts of bygone colonies and provinces now making up the Republic of South Africa. Like customary law that has grown from the soil of our continent, H it has proven its value over time, but does not always meet the requirements of a constitutional democracy. Therefore it has to be developed in accordance with the spirit, purport and objects of the Bill of Rights. [1]

[2] This application for leave to appeal raises questions on the content of the law of lease. It concerns an attempt by a petrol wholesaler to evict a I

Van der Westhuizen J (Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Wallis AJ and Zondo J concurring)

A licensed petroleum retailer from premises in Soweto where the retailer had conducted business under the wholesaler's brand.

Facts

[3] The applicant, Mighty Solutions CC trading as Orlando Service Station (Mighty Solutions), is a licensed petroleum retailer in terms of B the Petroleum Products Act (Act). [2] The first respondent is Engen Petroleum Ltd (Engen), a licensed wholesaler and distributor of petroleum products. The second respondent is the Controller of Petroleum Products (the Controller), appointed pursuant to the Act. It was cited insofar as it may have an interest, but did not participate in the C proceedings.

[4] Engen leased a property from its registered owner on the corner of Soweto Highway and Mooki Street, Orlando East, Soweto. [3] It developed the property into a branded service station, investing its capital in installing the necessary equipment, including underground tanks and D pumps. In September 2005 Engen entered into an operating lease with Mighty Solutions. Pursuant to this lease, which would be valid until the end of March 2008 and was cancellable at a month's notice by either party, Mighty Solutions operated a service station on the site. It used Engen's equipment, signage and trademarks.

E [5] The operating lease between Engen and Mighty Solutions expired at the end of March 2008. It then continued on a month-to-month basis until it was validly cancelled in July 2009. Following the cancellation, Mighty Solutions continued to occupy the site. It continued using Engen's equipment, signage and trademarks without paying rent to Engen or the registered property owner.

Previous applications to this court F

[6] Mighty Solutions was one of several fuel retailers that previously sought direct access to this court in Gundu Service Station. [4] The parties sought to challenge the validity of the agreements that major oil companies enter into with petrol station retailers. They argued that the G agreements infringe several of the retailers' fundamental rights recognised in the Bill of Rights and that the Act had created a new dispensation in the industry, one based on the allocation of manufacturing, site, wholesale and retail licences, to the exclusion of private contractual agreements. These private agreements, it was argued, enforced and perpetuated the dominant position of oil companies in a H way that was at odds with the purpose of the Act. The application was dismissed on the grounds that it was not in the interests of justice to hear it at that stage.

Van der Westhuizen J (Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Wallis AJ and Zondo J concurring)

[7] Mighty Solutions annexed the Gundu Service Station application to A its application for leave to appeal to this court, stating that its contents were incorporated by reference.

High Court

[8] In 2013 Engen applied to the Gauteng Local Division of the High Court, B Johannesburg (High Court), for an order to evict Mighty Solutions. The parties filed a joint practice note in which the issues to be determined were stated as (a) '(w)hether [Engen] has locus standi at common law to move for an eviction order'; and (b) '(w)hether [Mighty Solutions] may rely on possessory rights arising from its fuel retail licence as read with the Petroleum Products Act as amended'. [5] It was common C cause that Mighty Solutions had no common-law right to continue occupying the premises, as both the operating lease and any subsequent lease arrangements had been validly terminated.

[9] Engen argued that the onus was on Mighty Solutions to show why Engen was not entitled to evict it. It cited several authorities to show that D a lessee has no right in law to challenge the right of a lessor to occupy the property. One authority was the 1990 Appellate Division decision in Boompret, in which the following was said:

'It is, of course, true that in general a lessee is bound by the terms of the lease even if the lessor has no title to the property. It is also clear that E when sued for ejectment at the termination of the lease it does not avail the lessee to show that the lessor has no right to occupy the property.' [6]

[10] Mighty Solutions submitted that the Act had effectively abolished Engen's common-law rights. It argued that a retail licence-holder in its position acquired possessory rights under the Act and that these could only be terminated after the licence was revoked by the Controller. It F relied mainly on s 2A(5)(a) of the Act, which provides:

'(5) No person may make use of a business practice, method of trading agreement, arrangement, scheme or understanding which is aimed at or would result in —

(a)

a licensed wholesaler holding a retail licence except for training G purposes as prescribed.'

[11] Mighty Solutions argued, as it did in Gundu Service Station, that the contract between it and Engen amounted to a scheme that resulted in a wholesaler effectively holding a retail licence. It further argued that, once a retail licence had been granted to a party to sell petrol on a particular H piece of land, the landowner or lessor could not evict that licence-holder. If a landowner or lessor wished to evict a licensed retailer, they had to apply to the Controller to have the licence revoked.

[12] In a judgment by Matthee AJ the High Court found that Engen had a common-law right to evict Mighty Solutions and that this right had not I

Van der Westhuizen J (Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Wallis AJ and Zondo J concurring)

A been superseded by the Act. The court found that the common-cause facts did not disclose the sort of business arrangement contemplated by s 2A(5)(a). Furthermore, it held that, given the rule in Boompret, it was 'unpersuaded that [Mighty Solutions was] able to question the right of [Engen] to occupy the property'. [7] The court found no support for an B interpretation of the Act that took away Engen's common-law rights and conferred on Mighty Solutions a possessory right that only the Controller could terminate. Accepting Mighty Solutions' argument would 'create a new type of lessee, a sort of super lessee, with rights far in excess of rights of other lessees', the court stated. [8]

C [13] The High Court noted that if, in theory, there were some merit in Mighty Solutions' argument, 'there would be more appropriate methods and fora to test [this]'. [9] The Act provides for arbitration when retailers allege unfair or unreasonable contractual practices by wholesalers. [10] This would have been an appropriate way for Mighty Solutions to challenge the terms of the contract, it stated.

D [14] Thus the eviction of Mighty Solutions was ordered. Mighty Solutions had to pay costs.

Supreme Court of Appeal

[15] Mighty Solutions applied for leave to appeal to the Supreme Court E of Appeal. The application was dismissed with costs, on the grounds that it had no reasonable prospects of success.

[16] Mighty Solutions applied to this court for leave to appeal. During oral argument, its counsel confirmed that it had now been evicted.

Leave to appeal F

[17] Mighty Solutions argues that this matter raises important constitutional issues of public interest, including the right to freedom of trade, occupation and profession, property rights and the principle of legality. It further submits that it raises this court's obligation to 'develop the G common law to give effect to the rights of persons and entities that hold retailers' licences'.

[18] Mighty Solutions abandoned its argument put forward in the dismissed Gundu Service Station application that its retail fuel licence gave it statutory possessory rights. This argument was its central H contention before the High Court. In this court it persisted with its submission that Engen lacked legal standing to evict it, because Engen's head lease with the site owner had terminated before eviction proceedings commenced. In its written and oral submissions Mighty Solutions argued for the first time that it had a real right to the premises in the form I of an enrichment lien.

Van der Westhuizen J (Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Wallis AJ and Zondo J concurring)

[19] Engen argues that it is not in the interests of justice to hear the A appeal, because the application has no prospects of success. It submits that Mighty Solutions acted in a brazenly unlawful fashion in that it had no common-law right to occupy the premises after the termination of the lease agreement. Further, it contends that Mighty Solutions used Engen's equipment and branding for its own benefit for four to five years, without paying rent, under the spurious premise that it had a retail B licence to do so.

[20] To the extent that this case...