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Monday Sep 29, 2014

Court grants Pick n Pay exclusive property lease

Massstores has been interdicted by the high court from interfering with the contractual relationship between Pick n Pay and listed property fund Hyprop by operating a general food supermarket at the CapeGate Shopping Centre in Brackenfell in Cape Town.

In a judgment handed down in the Gauteng Provincial Division of the High Court sitting in Pretoria on Friday, Judge Johan Louw said Pick n Pay had succeeded in proving that it was entitled to a final interdict against Masstores, a division of listed retailer Massmart.

Judge Louw agreed with a submission by David Unterhalter, counsel for Pick n Pay, that a clause in Pick n Pay's lease operated to prevent Masstores from combining its existing Game general merchandise business with the business of a general food supermarket that sold both perishable and nonperishable foods.

He said the exclusivity right contained in this clause of Pick n Pay's lease agreement were directly connected to its rights in terms of the lease and obliged Hyprop, the landlord, not to permit any business listed in the clause to be carried out in the mall during the currency of Pick n Pay's lease.

Judge Louw added that Hyprop had accepted that it was bound by this obligation. He said Masstores was trading as a supermarket in the centre and a clause in its lease prohibited it from trading as a general food supermarket. Masstores was therefore in breach of this clause in its lease agreement.

The interdict application was lodged after Hyprop advised Checkers, but not Pick n Pay, of Masstores's intention to introduce a FoodCo into the Game store in the centre in September last year. Checkers obtained an interim interdict barring FoodCo's operation pending an action to be instituted for final relief.

The interim interdict was discharged in April by agreement between Masstores and Checkers, resulting in Pick n Pay lodging the current application for an interdict.

The application followed Masstores being temporarily prohibited by the high court in June from opening or operating a FoodCo outlet in the Game store at the Liberty Midlands Mall in Pietermaritzburg, until arbitration proceedings on this issue were finalised.

Members of the SA Reit Association asked the Competition Commission in July to provide clarity on exclusivity clauses because it believed these clauses, particularly in shopping centre contracts with grocery retailers, were anticompetitive and undesirable.

However, Dov Green, the chairman of the association's legal and competition committee, said at the time that its members had not decided whether to offer assistance to the commission or to lay a formal complaint.

The association, which represents all members of the listed real estate investment trust sector, believed grocery retailers were using exclusivity clauses in their fight to restrict competitors from growing their market share.

Roy Cokayne
Business Report


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