Masstores (Pty) Ltd v Pick n Pay Retailers (Pty) Ltd (20711/14) [2015] ZASCA 164 (25 November 2015) per Majiedt JA (Maya DP, Leach, Theron and Zondi JJA concurring).

The Supreme Court of Appeal disallowed the appeal and held that

‘trading in competition with a contracting party in contravention of a restraint clause in a lease agreement constitutes unlawful interference in the contractual relationship between the contracting party and the landlord – an exclusivity clause in a lease agreement is an integral part of that lease and not a collateral right’.

Excerpts [footnotes omitted]

Introduction

[1]        This case concerns the alleged unlawful interference with a contractual relationship.  In the Gauteng Division of the High Court, Pretoria, J W Louw J granted a final interdict restraining the appellant, Masstores (Pty) Ltd (Masstores), from unlawfully interfering in the contractual relationship between the first respondent, Pick n Pay Retailers (Pty) Ltd (Pick n Pay), and the second respondent, Hyprop Investments Limited (Hyprop).  The interference was alleged to relate to Masstores’ operating a general food supermarket at the Capegate shopping centre in Brackenfell, Western Cape (Capegate).  This appeal is with the leave of the court a quo.  Although Pick n Pay had joined Hyprop as a second respondent, and notwithstanding the fact that the latter had filed answering papers, no relief was sought in the court a quo against Hyprop.

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The central issue

[8]        Our law has recognised for more than a century that a delictual action lies in instances where an outside party knowingly deprives a person of his rights under a contract with another.[1]  The outside party’s conduct results in the contracting party not obtaining the performance to which it is entitled on the contract, or where a contracting party’s obligations under the contract are increased.  In the first mentioned instance one is concerned with the infringement of a personal right.  These types of cases typically occur in instances where a former lessee holds-over the leased premises well knowing that the incumbent lessee is, in the process, being deprived of its contractual rights under the lease, and in instances where employees are induced by a competitor to breach their employment restraint conditions contractually agreed with a former employer.

The somewhat novel question that arises here is whether the breach by an outside party of its lease obligations towards a contracting party can give rise to a delictual action by the other party to the contract in circumstances where the breach impacts directly on the latter and infringes upon its contractual rights.  Before I consider the first question, namely whether the court a quo was correct in its finding that Game was in breach of its lease agreement with Hyprop by trading as a general food supermarket, I deal first with Masstores’ contentions regarding the manner in which Pick n Pay has pleaded its case.

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Is Masstores, through its conduct, unlawfully interfering in Pick n Pay’s contract with Hyprop?

[19]      Three requirements must be met for a successful claim based on the unlawful interference in a contractual relationship.  They are:

(a)        An unlawful act;

(b)        which constitutes an interference in the contractual relationship; and

(c)        which is committed with some form of dolus.

. . . . .

[22]      Turning from the general to the specific – in the present instance the claim is based on the intentional deprivation of a benefit a contract party would otherwise have obtained from performance under a contract.  Such a cause of action has again been confirmed recently in Country Cloud Trading CC v MEC, Department of Infrastructure Development.

Pick n Pay’s case is that Masstores has intentionally infringed upon its subjective right to exclusivity to operate a supermarket at Capegate.  The contention that Pick n Pay had to prove an inducement by Hyprop to Masstores in this regard is devoid of merit.  In Lanco Engineering CC v Aris Box Manufacturers (Pty) Ltd Galgut J held that inducement or enticement is not a requirement in a claim based on the unlawful interference in a contractual relationship.  . . . . .

. . . . .

[23]      In Country Cloud, the Constitutional Court agreed with the findings of this court that dolus eventualis would suffice as far as intent is concerned in a claim such as the present one.  It held that subjective foreseeability that interference would cause loss, coupled with a reconciling with the foreseen consequences, is sufficient to sustain such a claim.

In the present instance Masstores was asked in writing on 9 May 2014 by Hyprop to desist from conducting a supermarket at Game, Capegate.  Masstores failed to heed this and other demands issued by Hyprop and Pick n Pay.  Masstores’ conduct clearly constitutes direct intent or, at the very least, dolus eventualis.  The requirements of the delictual action had therefore been proved by Pick n Pay, as the court a quo correctly found.

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Is the right to exclusivity a collateral right?

[24]  . . . . .

But the restraint in the present instance is not a collateral right at all.  As explained above, it became common cause that Pick n Pay as anchor tenant required exclusivity in its lease agreement.  It is indisputable that such exclusivity was a sine qua non for its tenancy.  Thus understood, the right to exclusivity is integral to the right of occupancy and cannot be regarded as a collateral right.  The argument that Pick n Pay’s personal right did not become binding upon the successive owners of Capegate and that, therefore, there were no restraining rights between Pick n Pay and Hyprop, is unsustainable and falls to be rejected.