N Juglal NO (Jumbo Trust t/a OK Foods Port Shepstone) v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division

The respondent, Shoprite Checkers (Pty) Ltd trading as the OK Franchise Division, was the franchisor and central purchasing organisation for OK Foods franchisees. The Jumbo Trust, represented by its trustee N Juglal NO, became a franchisee in July 2000. To secure amounts owing to the respondent from time to time, the Trust registered a continuing general notarial covering bond over all its movable assets in August 2000. By September 2001 the Trust was indebted to the respondent in excess of R2,3 million and was trading in insolvent circumstances while refusing to allow the respondent to perfect the bond. The bond contained wide parate executie clauses (clause 14) authorising the respondent, upon default or perceived risk to its security, to take possession of the business and movables, operate the business, and sell the assets without prior court order. The respondent applied ex parte for judicial sanction to perfect the bond and exercise its contractual rights. The High Court confirmed a rule nisi authorising such perfection. The trustee appealed to the Supreme Court of Appeal, challenging the validity of the parate executie clauses on grounds of public policy and constitutionality.

The appeal was dismissed and the order of the court a quo confirming the rule nisi and authorising perfection of the notarial bond was upheld, with costs.

The case is a leading authority on the validity of parate executie clauses in South African law after the advent of the Constitution. It clarifies that such clauses remain enforceable subject to judicial oversight, and that the common law governing security and contract is generally consistent with section 34 of the Constitution. The judgment is also significant for franchise and commercial security arrangements, particularly general notarial bonds over movables.