In the battle between Pick ‘n Pay and Masstores for exclusive rights to trade as a supermarket in a shopping complex the Constitutional Court, in holding for Masstores, has set out the limits for this type of delictual claim.

Pick ‘n Pay sued Masstores directly because their method of trading allegedly infringed Pick ‘n Pay’s exclusive right to trade as a supermarket in the complex, found in its lease with Hyprop. It was an unlawful competition case.

Unlawful competition

Unlawful competition cases usually claim an infringement of another party’s goodwill. Interference with another party’s contractual relations is not prima facie unlawful. The courts must be presented with evidence of the degree or intensity of fault of the interference.

In this case Pick ‘n Pay had lost its exclusivity but Masstores had not usurped that exclusivity. Pick ‘n Pay could still trade and still have whatever rights it might have against Hyprop under its lease.

Any form of competition poses a threat to a rival business. But not all competition or interference with property interests will constitute unlawful competition. The Bill of Rights protects the right to property but also protects the right to freedom of trade. Courts acknowledge the need for protection of free competition as an important policy consideration when assessing the unlawfulness of competitive conduct.

Third party infringements of contractually derived rights

As a general proposition, there is no legal duty on third parties not to infringe contractually derived exclusive rights to trade. The question is whether the particular circumstances justify protection. In the present case there were no particular circumstances because Pick ‘n Pay could enforce their rights against Hyprop under their lease and there is no need to extend the concept of wrongfulness to allow a direct action between the two tenants.

A delictual claim may be available in these circumstances if there were evidence that Masstores had used or exercised its own rights in an unreasonable manner, for instance grounded in malice or as an abuse of rights. There was no such evidence in this case. Pick ‘n Pay’s claim was dismissed.

Two other interesting issues arose:

  • Firstly, the Constitutional Court suggested that if Pick ‘n Pay wanted to protect its rights it should obtain a negative personal servitude and not merely a personal right under the lease. The chances of shopping complex owners giving a personal servitude to one tenant do not seem to be likely.
  • Secondly, the court pointed out that the principles discussed also affect restraint of trade cases. We are reminded that in a restraint of trade case there must be proof of interference with a protectable right. For example, there could be proof that the new employer with a restraint binding between the employee and a former employer interfered with a protectable right such as the former employer’s right to protect its goodwill. In the absence of a protectable interest like goodwill a restraint will not be enforced against the contracting party or the third party who assisted in or induced the breach.

[The case is Masstores v Pick ‘n Pay Retailers]