Lessee’s business demise

In Brentmark (Pty) Ltd and Another v Puma Energy South Africa (Pty) Ltd [2021] 4 All SA 106 (WCC), delictual damages for pure economic loss caused to a plaintiff by defendant’s alleged causal negligence. No established legal precedent for the claim asserted, but conduct fell short of the standards of decency and fairness that informs the substantive law of contract.

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Civil procedure -Delictual damages arising from conduct of lessor which resulted in demise of lessee’s business: In Brentmark (Pty) Ltd and Another v Puma Energy South Africa (Pty) Ltd [2021] 4 All SA 106 (WCC), a service station operated by the first plaintiff (Brentmark) sold petroleum products supplied to it by the defendant (Puma). An adjoining convenience store was operated by the second plaintiff (OK). The premises on which the plaintiffs’ businesses were conducted was leased for the owner (Caledonian) by a company (Brent Oil) from which Brentmark sub-leased the property. Brent Oil later changed its name to Puma. The convenience store business was conducted by OK in terms of a further sub-lease the ‘BrentOK sub-lease’ concluded between it and Brentmark. Brent Oil (and subsequently Puma) was not a party to the BrentOK sub-lease, while OK was not a party to the dealer agreement or the Brentmark sub-lease.

Dissatisfied with the allegedly onerous terms of the dealer agreement and Puma’s refusal to revise such terms, Brentmark entered into a sale agreement in respect of the service station and OK in turn sold the convenience store. In terms of the Brentmark sub-lease, Puma’s consent was needed for the sale of the filling station. Its refusal to furnish consent was alleged by Brentmark to constitute a breach of contract, and Brentmark gave notice of cancellation of the agreement. However, subsequent discussions between the parties led to the termination of the agreement being postponed until 31 January 2019. According to Brentmark, Puma took certain commercial steps that ultimately led to the demise of its filling-station business, forcing it to close the filling-station business. The convenience store business of OK was similarly forced to close. The plaintiffs sued Puma for damages for breach of contract.

Puma filed a notice in terms of r 23(1) raising an exception to the particulars of claim, averring that they were both vague and embarrassing, and/or lacked averments necessary to sustain their causes of action.

Gamble J held that in order to succeed with the exception, Puma had to persuade the court that on every interpretation, which OK’s claims against it could reasonably bear, no cause of action was disclosed. It also had to show that the claims were bad in law.

The exception related to delictual damages for pure economic loss occasioned to a plaintiff by a defendant whose causal negligence has allegedly resulted in such loss. Puma contended that OK had failed to make out a case that Puma’s breach of the dealer agreement with Brentmark, a contract to which it claimed OK was a stranger, was wrongful to the extent that Puma should be held liable to OK for damages in delict.

The court held that in a case such as the present, where there was no established legal precedent for the claim asserted by OK, the court would be required to consider whether the claim so advanced met the relevant policy considerations such as indeterminate liability, blameworthiness, and vulnerability to risk. The court found the alleged conduct of Puma to fall short of the standards of decency and fairness that informs the substantive law of contract and did not measure up to the behaviour to be expected of a party in its position.

The exception was dismissed.

Merilyn Rowena Kader
Legal Editor at LexisNexis