Former Way Trade & Invest (Pty) Ltd v Bright Idea Projects 66 (Pty) Ltd

Former Way Trade & Invest (Pty) Ltd operated a Caltex service station on property owned by Bright Idea Projects 66 (Pty) Ltd (trading as All Fuels). Former Way conducted business under a franchise agreement that had been ceded to it on 26 February 2016, which was set to expire on 31 December 2017. The franchise agreement contained no right or option to renew. On 30 June 2017, All Fuels sent a notice of termination. Former Way refused to vacate the premises after the franchise agreement expired on 31 December 2017. All Fuels commenced eviction proceedings on 15 January 2018. Former Way opposed the eviction on two grounds: (1) it had concluded an enforceable new franchise agreement with All Fuels for five years with an option to renew for a further five years; and (2) the matter should be stayed pending arbitration under section 12B of the Petroleum Products Act 120 of 1977. Former Way had submitted a request for arbitration on 22 December 2017 alleging unfair contractual practices. The high court (D Pillay J) dismissed Former Way's counter-application and granted the eviction order on 19 July 2018, finding no new franchise agreement had been concluded. Leave to appeal was refused by the high court and subsequently by two judges of the Supreme Court of Appeal on petition. Former Way then applied for reconsideration of the refusal of leave to appeal in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013.

• Whether Former Way had concluded a binding new franchise agreement with All Fuels entitling it to remain in occupation of the premises beyond 31 December 2017
• Whether a referral to arbitration under section 12B of the Petroleum Products Act 120 of 1977 ousted the High Court's jurisdiction to hear the eviction application
• Whether the High Court proceedings should have been stayed pending arbitration
• Whether there were reasonable prospects of success on appeal warranting the grant of leave to appeal
• Whether the arbitrator under section 12B had jurisdiction to fashion or create a contract between parties where none existed

The order of the Supreme Court of Appeal dismissing the application for leave to appeal was confirmed. Former Way Trade & Invest (Pty) Ltd was ordered to pay the costs of the application for leave to appeal and its reconsideration, including costs consequent upon the employment of two counsel.

1. A referral to arbitration under section 12B of the Petroleum Products Act 120 of 1977 does not automatically oust a court's jurisdiction to adjudicate disputes between petroleum wholesalers and retailers. Section 12B arbitration provides an additional route for dispute resolution, not an exclusive one. 2. An arbitrator's remedial powers under section 12B are limited to correcting unfair contractual practices within the framework of existing contractual rights and obligations between the parties. An arbitrator cannot make a contract for parties where none exists. 3. Where parties intend an agreement to be reduced to writing and essential terms remain unresolved, no binding contract is concluded until the written agreement is executed. 4. A party claiming a right to occupy property bears the onus of proving such right. Where occupation is based on an alleged contract, that party must establish the existence of a binding agreement. 5. A stay of court proceedings pending arbitration under section 12B is discretionary, not automatic, and operates similarly to stays under the Arbitration Act 42 of 1965.

The court noted that the characterization of the alleged agreement as a 'renewal agreement' was a misnomer, as it was unrelated to the existing franchise agreement but rather was alleged to be an entirely new agreement. The court observed that the refusal to pay a non-refundable royalty fee was difficult to understand as a business position, since if the agreement was not concluded, the fee would ordinarily be recoverable under the condictiones. The court commented that forum-shopping between arbitration and court adjudication, which the Constitutional Court in Business Zone indicated would disappear under the section 12B regime, was essentially what Former Way was attempting by seeking to reargue the same factual issue (existence of a binding contract) in a different forum. The court also noted that there is no reason why the normative equitable standard applied in section 12B arbitrations should not also apply to court adjudication of disputes in this industry, citing the Constitutional Court's reasoning in Business Zone.

This case clarifies important principles regarding arbitration under section 12B of the Petroleum Products Act 120 of 1977 in South African law. It confirms that section 12B arbitration does not create an exclusive dispute resolution mechanism that ousts court jurisdiction, but rather provides an additional route for resolving disputes between petroleum product wholesalers and retailers. The judgment reinforces that arbitrators under section 12B cannot create contracts for parties but can only remedy unfair contractual practices within the framework of existing contractual relationships. The case also demonstrates the application of established contract law principles in the petroleum industry context, particularly regarding the requirements for formation of binding contracts where parties intend their agreement to be reduced to writing, and the onus of proof where a party claims a right to occupy property. It provides guidance on when court proceedings should be stayed pending arbitration, emphasizing that stays are discretionary and not automatic even where arbitration has been initiated. The case contributes to jurisprudence on transformation in the petroleum industry while maintaining the primacy of established legal principles of contract formation and property rights.