Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

CASE No: 22332/2010

in the matter between:
RADIO RETAIL (PTY) LTD					First Applicant 
RADIO RETAIL FOR SPAR (PTY) LTD				Second Applicant
ZAPOP (PTY) LTD						 Third Applicant

And

PRIMEDIA (PTY) LTD t/a PRIMEDIA INSTORE			Respondent

JUDGMENT DELIVERED ON 10 MARCH 2011

HENNEY, AJ:

INTRODUCTION

[1] This is an urgent application launched by the three Applicants for interdictory relief based on unlawful competition. The Respondent thereafter launched a counter-application on the same facts.

The parties seek final relief against each other on the basis of unlawful competition. Both the parties allege that the other unlawfully interfered in the contractual relationship they respectively had with a number of Spar Retail franchisees. Mr. Van Rooyen SC appears for the Applicants. Mr. Hurwitz SC appears for the Respondent.

[2] The facts underlying the main and counter-application briefly stated are as follows:
2.1. The Applicants are involved in the in store marketing and promotions amongst the Spar franchisees and the suppliers since early 2009. The Applicants contend they had concluded exclusive agreements with approximately 333 Spar franchisee stores and as a result of this, they are entitled to provide in store promotions and marketing on an exclusive basis. This fact according to the Applicants was made known by Spar Western Cape (franchisor) by endorsing and promoting the Applicants' services in all Spar franchisee stores on 8 March 2010.
2.2. The agreements were based on three fairly standard written contracts. In all three variations of these agreements, the Spar franchisee grants the Third Applicant the exclusive right to do in store promotions and marketing in their respective stores for a period of 24 months.

2.4. The Respondent on the other hand, insofar as the main application is concerned, disputed the validity of the contracts between the Applicants and the Spar franchisees. In particular, they dispute the existence of any valid contract between the Applicants and the franchisees, due to the fact that a number of those contracts had not been signed as at the date when this application was launched

2.6. In the counter-application, the Respondents allege they had pre-existing agreements with 110 Spar franchisees. Some of which the Applicants allege they had concluded contracts with. The Respondent alleges that by conducting business with them, the Applicants are unlawfully interfering in their contractual relationship.
2.7. In their Replying Affidavit, the Applicants presented new facts and also requested that their original Notice of Motion be amended. In response thereto, the Respondent opposed the Application for Amendment and requested that all new evidence be strike out.
2.8. The Applicants requested that the matter be heard on an urgent basis in terms of Rule 6(12) of the Rules of Court. The Respondent argued that the matter was not so urgent to have warranted an initial heanng on 15 October 2010 and that the Applicants should pay the costs in this regard.

3.1. Whether this matter should be heard on an urgent basis.
3.2. Whether the parties have made out a case for final relief.
3.3. Whether the further submissions in the Replying Affidavit of the Applicants should be struck out as it raises a new cause of action not introduced in the Founding Affidavit

3.4. Whether the cause of action raised by the Applicants in their Founding Affidavit was based on a valid written contract.

3.6. Whether the Third Applicant, despite having not signed such contract, had tacitly accepted the terms of such contract by performing certain functions at the respective Spar franchisees.

3.8. Whether the Applicants are entitled to amend their original Notice of Motion to include further Spar franchisees that need protection from interference on the part of the Respondent.

I now turn to deal with these issues.

4.1. The Respondent submits that the application is not urgent so as to warrant a departure from the ordinary rules of court. The Applicants on the other hand aver that due to the confusion in the market place as to who have the exclusive right to conduct in store marketing and advertising in the numerous Spar outlets country wide. According to the Applicants the longer the confusion reigns, the greater the prejudice will be to their status and credibility.

The Applicants made further submissions that were not raised in their Founding Affidavit. This was in response to the issues raised in the Answering Affidavit of the Respondent. The following evidence was recorded in the Replying affidavit:

a)     that all the written contracts concluded by the Applicants after it had been concluded and after confirmation of it had been obtained by the respective franchisees in a computer programme known as the V-Tiger;

[6] The Respondent contends that the above submissions constitute new evidence and should be struck out.

[7] The Applicants contend that although the material included in the Replying Affidavit may be regarded as new in the context of the main application, such material merely serves as an answerto the Respondent's allegations made in the context of the counter-application. The Respondent did not file a separate affidavit in support of the counter-application, but filed one affidavit in answer to the main application and which also served as a Founding Affidavit in support of their counter-application.

[8] There are clear portions of the Respondents Affidavit that can be considered to be a response to the allegations contained in the Founding Affidavit. There is also sufficient evidence in the same affidavit that lay the foundation for the counter application. The main thrust of the Respondent's answer to the Applicants' case in the main application is that none of the Applicants have any right to market or sell any media types, and that no valid contracts exist between the Applicant and the franchisees.

[9] The main thrust of the counter-application of the Respondent is that the preexisting agreements it has with 110 Spar franchisees and that the Applicants, by attempting to conclude agreements with these Spar franchisees, are unlawfully interfering in their contractual rights.

[10] The submissions contained in the Applicants' Replying Affidavit clearly constitute new evidence. It is apparent that the Applicants' only discovered after disclosure was made that some of the contracts were not signed.

[12] The Applicants, had from the outset based their claim on written contracts entered into by the First or Second Applicant with the franchisees, to make the Third Applicant a party to such contract, the benefits and obligations of which were accepted by the Third Applicant.

[13] The Applicants also sought to amend Annexure "A" to their original Notice of Motion to include further entities in favour of which it seeks protection under this application. These entities are Spar franchisees with which it also concluded agreements, namely, Nzhelele Spar, Pavillion Spar, The Hill Spar and Vorna Valley Spar.

[14] However, it seems that notwithstanding this amendment, the thrust of the dispute between the Applicants and Respondents remains the same. The Applicants contend in their Founding Affidavit that they have concluded agreements with 333 Spar franchisees, which included the abovementioned entities.

The Respondent submitted that there existed no real contractual relationship between the Applicants and the respective franchisees, due to the fact that, firstly, the Third Applicant was not a party to the contract, secondly .they did not sign some of the contracts and thirdly they dispute whether there was a tacit acceptance by the Third Applicant of the contract.

An important determination is whether the written agreements which the Applicants allege they have concluded with the various Spar franchisees {333 stores) are indeed valid contracts.

At this stage it would be appropriate and convenient to closely examine the respective written contracts which the Applicants rely upon. There are three variations of the agreement, the substance is essentially the same, it only has a different annexure and in respect to the first one that follows hereunder, the Third Applicant is not a signatory.  Portions of the first agreement are recorded as follows:

Promotion agreement
Memorandum of agreement entered into by and between
Radio Retail (Pty) Ltd
(registration number 1996/013197/07)
herein represented by RP Labuschagne, being duly authorised to act on its behalf, (hereinafter referred to as the Radio Retail) and

(herein represented by	
duly authorised to act on its behalf ( hereinafter referred to as the Spar Retail Outlet)

This agreement is to be understood, interpreted and applied against the following background:
1.1     	
1.2     	

1.4. The parties have agreed on the basis on which the Spar Retail Outlet will grant an exclusive right to ZaPOP to do the in store promotion within its business on all media as shown in annexure "A".

2.1. The Spar Retail Outlet gives an exclusive right to ZaPOP to do in store promotion within its business on all media as shown in annexure "A".
2.2. The exclusive right is granted for a 24 month period.
2.3. In exchange for being granted this exclusive right and for as long as this agreement is in force, ZaPOP will pay the monthly fee owing by the Spar Retail Outlet to Radio Retail.

3.      General

for and on behalf of Radio Retail (Pty) Ltd

for and on behalf of the Spar Retail Outlet (Own emphasis)

[17] It will be noted that the signatories to the agreement are the First Applicant, Radio Retail (Pty) Ltd, and the respective Spar franchisees.

[21] The second variation of which 227 agreements were concluded will now be considered. For ease of reference, one such agreement is also quoted hereunder.

Promotion agreement Memorandum of agreement entered into by and between Radio Retail for Spar (Pty) Ltd (registration number 2002/03036/07)
herein represented byRP Labuschagne, being duly authorised to act on its behalf (hereinafter referred to as Radio Retail)       and

Hereinafter represented by	, duly authorised to acton its

behalf (hereinafter referred to as the Spar Retail Outlet)

This agreement is to be understood, interpreted and applied against the following background:

1.2     	

1.4     	

2.10	

3.1     	

4.1. The Spar Retail Outlet grants ZaPOP exclusive right to do in store promotion within its business on media shown in annexure "A" hereto,
4.2. This exclusive right shall be for a period of 24 months with effect from 1 August 2010 or from such other date as the parties may agree to in writing.
4.3. The services that ZaPOP can offer can be obtained from Zapop's website.

5.1. The Spar Retail Outlet confirms that it has satisfied itself with the nature of and benefits to be had from Radio Retail's and Zapop's in store promotion services.
5.2. The agreement takes effect when it has been signed by both parties.
5.3. The Spar Retail Outlet may validly cancel the exclusive right of ZaPOP to so do in store promotion on 6 calendar months' written notice to Radio Retail, provided that such notice is given after the expiry of the agreed minimum period referred to in paragraph 4.2.

6. Communication
7. General

For and on behalf of Spar Retail Outlet

For and on behalf of Radio Retail for Spar (Pty) Ltd

For and on behalf of ZaPOP (Pty) Ltd

[23] In their Founding Affidavit the Applicants relied on these agreements as the agreements concluded with the various franchisees. It later however, became evident that as at the time of instituting of proceedings on the 8 October 2010. these agreements had not been signed by the Third Applicant. It seems that the bulk of these types of agreements were only signed on 21 October 2010. The contention of the Respondent was that these agreements were therefore invalid and that none of the Applicant's, particularly. Third Applicant have any right to sell or install the media services or media types referred to in Annexure "B" of the Applicant's Notice of Motion.

I will now turn to consider whether in the absence of a signature by the Third Applicant on this type of agreement there was tacit acceptance by the Third Applicant, and whether the fact that the Respondent disputes this is a genuine dispute of fact.

DISPUTE OF FACT

[24] It was argued by Mr Horwitz that there exists a dispute of fact between the parties as to whether there was tacit acceptance on the part of the Third Applicant in respect of both these types of agreements.

"In order to establish a tacit contract it is necessary to show, by a preponderance of probabilities, unequivocal conduct which is capable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on the terms alleged, ft must be proved that there was in fact consensus ad idem. (See generally Festus v Worcester Municipality 1945 CPD 186 at 192-3; City of Cape Town v Abelsohn's Estate 1947 (3) SA 315(C) at 327-8; Parsons v Langemann and others 1948 (4) SA 258 (C) at 263, Bremer Meulens (Edms) Bpk v Flores and Another, a decision of this Court reported only in Prentice Halt, 1966(1) A36; Blaikie-Johnstone v Holliman 1971 (4) SA 108 (D) at 119B-E; Big Dutchman (South Africa) (Pty) Ltd v Barclays National Bank Ltd 1979 (3) SA 267 (W) at 281E-F; Muhlmann v Muhlmann 1981 (4) SA 632 (W) at 635B-D.)"

Then further:
"In this connection it is stated that a court may hold that a tacit contract has been established where, by a process of inference, it concludes that the most plausible probable conclusion from all the relevant proved facts and circumstances is that a contract came into existence (see Plum's case supra at 163-4)."

The Respondent in their counter-application, states that the Applicants, including the Third Applicant, had conducted in store media advertising and promotions in the stores where they had valid pre-existing contracts. Their version is that the Applicants had been interfering in their contractual rights. By saying this, the Respondent by implication admits that the Third Applicant had performed in terms of the contract.

On the undisputed evidence before me I am satisfied that there was tacit acceptance by the Third Applicant in respect of these 227 contracts, despite not being signed by them.

I will now to deal with the alleged unlawful interference by both parties.
In the present matter, the mere fact that the Respondent was exercising rights in
terms of a pre-existing contractual relationship with the Spar franchisees does not
in itself constitute unlawful interference in the contractual relationship the Applicants had with the Spar franchisees.

[29] If. however, the Spar franchisees indicated that they intended to relinquish or terminate the contractual relationship they had with the Respondent, and despite this, the Respondent persisted to such an extent that it caused the Spar franchisees to breach their contractual relationship with the Applicants, this, in my view, would have amounted to unlawful interference, on the part of the Respondents in the main application.

The same reasoning can be applied to the Respondent's counter-application, where it alleges that there was interference by the Applicants. The mere fact that the Applicants had entered into exclusive agreements with the Spar franchisees with whom the Respondent (110 Stores) had a pre-existing contractual relationship does not in itself constitute unlawful interference on the part of the Applicants.

"Interference with a contractual relationship is present where a third person's conduct is such that a contracting party does not obtain the performance to which he is entitled from the other party, or where a contracting party's contractual obligations are increased by a third person. This type of conduct may naturally also occur in the context of commercial competition".
Which must be proved is not limited to unlawfulness falling into a category of clearly recognised illegality. Fairness and honesty in competition are criteria that have been emphasised in many of the decided cases."

The learned authors further state the following in relation to unlawful interference:

Against this background I will now deal with the conduct of each party in order to ascertain whether there was unlawful interference.

On 6 August 2010. the Managing Director of the Third Applicant addressed a letter to the Chief Executive Officer of the Respondent, requesting that the Respondent desist from marketing, selling or installing any media types in the franchisees with which the Applicants had concluded exclusive agreements. The request was made in response to reports from franchisees like Lakeside Spar and Paarl East Spar that the Respondent's representatives had interfered with the Applicants rights in terms of their agreements they had concluded with the various Spar franchisees.

[31J In response to this request, the Respondent distributed a letter, dated 19 August 2010, wherein the following was recorded:

"19 August 2010

TO OUR VALUED CUSTOMERS

It has come to my attention that ZAPOP have announced that they have been awarded rights to provide in store media services in Spar Group stores.

The announcement is creating confusion in the market place and I consequently want to reaffirm that Primedia Instore remains the official and exclusive provider of instore media services for the Spar Group (Super Spars, Spars, Kwikspar and Tops).

I trust that this letter serves to remove all confusion.

[32] The Respondent contends that this letter was never intended to be distributed to any Spar franchisees, but only to the suppliers of the Spar Group (franchisor). The Respondent claims that it did in fact only send copies of such letter to the latter. If copies of this letter found their way to any of the Spar franchisees, this was not occasioned by the Respondent.

[33] This argument is untenable, because if it was their intention to inform their customers of the facts contained therein, the letter should have been directed only to the Spar Group stores suppliers and it should have clearly stated so. At that time, the Respondent was aware of the fact that the Applicants had dealings with the Spar franchisees and was busy with in store advertising and media services in some stores and if it was their intention not to influence the franchisees from doing business with the Applicants, they should have indicated same

It is important to note that the letter or notice referred to earlier on had also raised concerns with the suppliers as to who was responsible for providing in store media or advertising of their products in the respective Spar franchisees. It is further difficult to understand why they did not inform their own franchisees (110) separately about the actions of the Applicants, and that the franchisees should not permit the Applicants from doing any in store promotions or advertising.

[34] The Applicants in my view had, established, that this letter had an impact on the contractual relationship between the Applicants, the franchisees and their suppliers. The Applicants also cite other examples of conduct on the part of the Respondent as constituting unlawful interference at certain franchisees. These are:
(a) On 1 August 2010, 18 August 2010 and 25 August 2010, a representative of the Respondent approached the owner of the Paarl East Super Spar, and expressed the intention to install media types. The owner was hesitant to allow the Respondent to do this and called the Applicant. The Respondent's representative nevertheless went ahead to install media in this store. Here it seems that there was reluctance on the part of the owner of the franchisee to allow the Respondent's representative to install media in his store due to the exclusive contract already entered into on the 30 March 2010 with the Applicants. He was concerned he would be in breach of contract with the Second Applicant if the Second Respondent was allowed to install such media.
(b) The Lakeside Spar Franchisee owner. Shawn Paulsen had also displayed some discomfort with the continued contractual relationship with the Respondent after it had concluded an exclusive contract with the Applicants. He had indeed communicated this concern to the Spar Western Cape Distribution Centre {the Franchisor) and to the Applicants. He, however, allowed the Respondent to install media despite his reservations.

(c) Mr Yusuf Banderker, of the Westerford Kwikspar Rondebosch, who concluded an agreement on 18 March 2010 with the Applicants, informed them on 17 September 2010 that he had requested the Respondent's representatives to remove all Primedia advertising material from his store. Here it seems that the Spar Franchisee had unconditionally severed all links with the Respondent, if there indeed was such a relationship. The Respondent does not deny these events, nor does it claim in their Answering Affidavit, as they do in the cases of the Paarl East, Lakeside Kraaifontein, Kuilsriver Sonstraal and Bellville Spar Franchisees claim, that they had a contractual relationship with this Spar franchisee.

In my view, in this specific instance, this amounted to clear interference,

(d) Ms Bernadette Visser. of the Kraaifontein Spar, concluded an agreement with the Applicants on 31 March 2010. She claims that the Respondent had put up advertising material contrary to the agreement she had with the Respondent.

(e) In the case of the Kuilsriver Super Spar, (f) the Sonstraal Super Spar, (g) the Bellville Super Spar, there was also some discomfort on the part of owners of the franchisees in continuing with a contractual relationship they had with the Respondents after they had concluded exclusive agreements with the Applicants.

The Respondent in their answer to the Applicants' allegations regarding interference in the contractual relationship with the abovementioned Spar franchisees contends that they have a contractual relationship with such Spar franchisees. In particular, they contend that with regards to the Paarl East Superspar, Lakeside Spar. Kraaifontein Superspar. Kuilsriver Superspar, Sonstraal Superspar and Bellville Kwikspar, they lawfully exercised their contractual rights by sending their representatives to these stores. They also contend they were entitled to do in store marketing and make payments to the franchisees for services they were permitted to render.

[39] It is clear that on a conspectus of evidence the Applicants placed before me, the Respondent and its representatives had caused the franchisees to breach the exclusive agreements with the Applicants.

In summary, it becomes clear that the actions of the Respondent were designed to unlawfully interfere with the exclusive contractual relationship the Applicants had with the Spar franchisees. I therefore find on the main application that the Applicants have made out a case that the Respondent unlawfully interfered in the Applicants' contractual relationship with the franchisees

The Respondent's counter-claim is based on the fact that in terms of the agreements concluded between the Respondent and the "Primedia" Spar franchisees, it has the right to market, sell and install media services. It is alleged that the Applicants are interfering with their contractual rights and the Respondent is therefore entitled to interdictory relief.

[41] If one is to have regard to the contract the Respondent entered into with the "Primedia" Spar franchisees, it seems that it was based on an offer that was sent to the various Spar franchisees to provide certain specified in store media services accompanied by a letter of acceptance. Once the franchisees had accepted the offer, the contract would be concluded There is no provision in the contract/offer prohibiting the "Primedia" Spar franchisees from concluding a similar agreement with a third party.

[42] By concluding the contracts with the Applicants, the Spar franchisees, in my view, would not have been in breach of their contract with the Respondent. This, as said earlier, does not amount to unlawful interference. There is also no evidence similar to that which the Applicants had presented by their individual franchisees that they had reservations or felt discomfort in continuing with the contractual relationship they had with the Respondent due to the interference and certain conduct of the Applicants
[43] In my view, the Respondent has failed to establish that the conduct of the Applicants was such that, it firstly induced one of the Spar franchisees who had an agreement with the Respondent to commit breach of contract and secondly, that the Respondent did not obtain the performance to which they are entitled to from the franchisees, they had contracted with

The counter-application, therefore, is without merit and is accordingly dismissed.

After having considered all the evidence, 1 am of the view that the Applicants have established that they have a clear right based on the various contractual agreements between them and the various Spar franchisees

I am also satisfied that they have established that there is a reasonable apprehension that their commercial or business interest will suffer irreparable harm by the continued conduct of the Respondent.

It is further clear that if regard is to be had to the attitude of the Respondent, by failing to acknowledge the existence of the rights of the Applicants and that they will not desist from exercising what they perceived to be an interference by the Applicants in their rights (Respondent), which were shown not to be exclusive rights, there is clearly no other remedy available other than to restrain them from continuing to do so.

In the result, the following order is made:
1. The Application for Amendment in favour of the Applicants is granted with costs.
2. The application to strike out is dismissed with costs.
3. The main application succeeds with costs.
4. The counter-application is dismissed with costs.
5. The Respondent is interdicted from unlawfully competing with the Applicants by:

5.1. Making any false representations about or concerning the Applicants;
5.2. Interfering with the exclusive contractual relationships between the Applicants and the respective Spar franchisees, namely those as set out in

Annexure "A" attached to the Notice of Motion as amended to include Nzhelele Spar, Pavillion Spar, The Hilt Spar, Vorna Valley Spar by soliciting any of these entities to breach or sever their agreements with the Applicants.

5.3. Marketing, selling or installing media types listed in Annexure "B", as amended, in any of the entities set out in Annexure "A" to the Notice of Motion.

5.4. Diverting corporate opportunities, to which the Applicants are entitled to in terms of their agreements with the entities listed in Annexure "A" of the Notice of Motion as amended, to Primedia or to any other person.
5.5. That the Respondent is directed to remove all media types sold or installed by it and similar to those set out in Annexure "B" to the Notice of Motion from the premises of the entities set out in Annexure "A" of the Notice of Motion as amended.

5.6. Costs to include the costs of two counsel.