Masstores (Pty) Limited v Pick n Pay Retailers (Pty) Limited

Hyprop, the owner of Capegate Shopping Centre, entered into separate lease agreements with Masstores (February 2006) and Pick n Pay (May 2006). Under the Masstores lease, Masstores agreed not to trade as a general food supermarket except in limited circumstances (where no general food supermarket traded in the centre for 90 consecutive days). Under the Pick n Pay lease, Hyprop undertook not to permit hypermarkets or supermarkets to be conducted at the shopping centre, save for existing ones, giving Pick n Pay exclusive trading rights as a supermarket. In 2013, Masstores began trading as a general supermarket at the shopping complex. Masstores became aware of Pick n Pay's contractual exclusivity rights in May 2014. Pick n Pay sought and obtained a final interdict in the High Court preventing Masstores from operating a general food supermarket at the shopping centre, on the basis that doing so interfered with the contractual relations between Pick n Pay and Hyprop. Pick n Pay originally sought interdictory relief against Hyprop in the alternative but later abandoned this claim. Hyprop was no longer a party to the proceedings.

• Whether the delict of 'interference with contractual relations' extends to a situation where a third party's breach of its own contract interferes with another party's exclusive contractual trading rights
• Whether Pick n Pay's exclusive contractual trading right is protectable against third parties outside of contract
• Whether wrongfulness is established or can be presumed in cases of alleged deprivation of contractual rights by third parties
• Whether the requirements for a final interdict were established
• Whether contractual exclusivity rights fall within the protection of the law of unlawful competition
• Whether an interdict can be granted to protect contractual (personal) rights against third parties who are not party to the contract

The appeal succeeded. The orders of the High Court and Supreme Court of Appeal were set aside. The High Court order was substituted with an order dismissing the application with costs, including the costs of two counsel. Pick n Pay (the respondent) was ordered to pay the costs in the Constitutional Court and the Supreme Court of Appeal, including the costs of two counsel.

The binding legal principles established are: (1) For a third party's conduct to constitute wrongful interference with contractual relations, the complainant must show that the contractual right protects an interest that is enforceable against third parties outside the contract, not merely a personal right between contracting parties. (2) Mere deprivation of contractual benefits by a third party is insufficient to establish prima facie wrongfulness - there must be usurpation of the right (appropriating it for oneself) or other aggravating circumstances. (3) Exclusive contractual trading rights are personal rights (rights in personam) that do not generally command protection against third parties who are not party to the contract. (4) In the law of unlawful competition, wrongfulness must be assessed according to general principles of Aquilian liability, with the policy consideration that the law protects free competition rather than contractual restrictions on competition. (5) Where a party has an alternative remedy available (such as a contractual claim against the party who granted the exclusive right), this weighs against granting an interdict against a third party. (6) The wrongfulness enquiry in delict must consider whether it is reasonable to impose liability on the defendant, taking into account the nature and intensity of fault, the interests at stake, and relevant policy considerations including freedom of trade and competition.

The majority judgment made several non-binding observations: (1) There may potentially be room for delictual liability where a party exercises its own rights in an unreasonable manner, grounded in malice, abuse of rights, or where there is a high level of intention and motive to cause harm, but this issue was not properly pleaded and must await another case. (2) If Pick n Pay had sought protection of its exclusive right against the whole world, it could have negotiated for a real right (such as a negative personal servitude) rather than a personal contractual right, which would have given notice to all later lessees. (3) English law on "unlawful interference with economic interests" may provide some guidance, particularly the principle in OBG Ltd that something more than breach of one's own contract is required - the means used must be independent of the normal means used in contractual interference cases. (4) Guidance may be drawn from cases involving publicly-sourced exclusive trading rights (such as municipal grants), which involve different considerations from purely privately negotiated rights. (5) The "competition principle" articulated by Van Heerden and Neethling - that the competitor who delivers the best or fairest performance should achieve victory - can only be properly applied where the activities of competitors are comparable and the playing fields are even. Jafta J's minority judgment observed that the distinction between real and personal rights, while relevant to the question of who is directly bound by a right, does not determine whether an interdict may be granted to protect that right against third party interference.

This case is significant for clarifying the limits of the delict of interference with contractual relations in South African law, particularly in relation to exclusive trading rights. The judgment establishes that: (1) contractual exclusivity rights do not automatically attract protection against third parties under the law of delict; (2) the delict of interference with contractual relations requires more than mere deprivation of contractual benefits - there must be usurpation of rights or other aggravating factors; (3) the distinction between rights in rem (real rights) and rights in personam (personal rights) remains fundamental - personal contractual rights are generally enforceable only between contracting parties; (4) the policy underlying the law of unlawful competition favors free competition rather than the protection of monopolistic or exclusive trading arrangements; (5) wrongfulness in delictual claims for interference with contractual relations must be positively established, not presumed; (6) the intensity and nature of fault (including motive to cause harm) may be relevant to the wrongfulness enquiry; and (7) parties seeking to protect exclusive trading rights against the world should negotiate for real rights (like negative servitudes) rather than personal contractual rights. The case demonstrates the Court's reluctance to extend delictual liability in ways that might undermine freedom of contract and commercial competition.