BP Southern Africa (Pty) Limited v Mahmood Investments (Pty) Limited

BP Southern Africa sold a developed petrol filling station property in Durban to Mahmood Investments in June 1999, simultaneously concluding a supply agreement for BP fuel products and an equipment loan agreement. The sale agreement included registered servitudes restricting the use of the property exclusively to the operation of a filling station selling BP products. Mahmood Investments leased the property to a third party, Argyle Umgeni Service Station CC, which entered into a (draft but acted-upon) supply agreement with BP. After BP discovered that Argyle was selling competitors’ fuel in breach of its supply obligations, BP demanded that Mahmood Investments terminate the lease and resume operating the filling station itself. Mahmood Investments refused, indicated it did not intend to operate a filling station, and requested BP to remove its equipment. BP removed the pumps and later tendered reinstallation, but Mahmood Investments maintained its refusal and sought cancellation of the servitudes. BP then cancelled the sale and supply agreements and applied for eviction and retransfer of the property.

The appeal was upheld with costs. The order of the full court was set aside and replaced with an order dismissing Mahmood Investments’ appeal with costs, effectively restoring the High Court’s order granting eviction and retransfer of the property to BP.

The case is significant for South African contract and commercial law as it confirms that restrictive-use clauses in property sale agreements, when interpreted in their full contractual and commercial context, may impose positive operational obligations. It reinforces principles of contextual and commercially sensible interpretation of contracts and clarifies repudiation in long-term supply and property arrangements involving servitudes.