THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case No: 1060/2015

In the matter between:

LOUISTEF (PTY) LTD

APPELLANT

and
CWA SNYDERS NO AS TRUSTEE OF:
LOUIS SNYDERS FAMILIE TRUST

FIRST RESPONDENT
THE CONTROLLER OF PETROLEUM PRODUCTS         SECOND RESPONDENT
MACROBERT INCORPORATED

THIRD RESPONDENT
Neutral citation:
Louistef v Snyders NO [2016] ZASCA 182 (29 November 2016)
Coram:
Lewis, Pillay, Zondi and Mocumie JJA and Fourie AJA
Heard:
14 November 2016
Delivered:

29 November 2016
Summary:
Petroleum Products Act 120 of 1977: sale of site licence issued in
terms of s 2D of the Act: whether site licence constituted a merchantable merx: held
to be a valid agreement of sale.

________________________________________________________________
ORDER
_______________________________________________________________
On appeal from: Gauteng Division of the High Court of South Africa, Pretoria
(Janse van Nieuwenhuizen J sitting as court of first instance):
1 The appeal is upheld with costs.
2 The order of the court a quo is set aside and the following substituted therefor:
‘(a) The application is dismissed with costs.
(b) The counter-application succeeds with costs.
(c) It is declared that the agreement of 26 March 2014 was legally and validly
concluded between the applicant and the first respondent and is not null and void.
(d) The applicant is ordered to pay the first respondent the amount of R1 million
plus R140 000 VAT against delivery of a valid tax invoice.’
_________________________________________________________________
JUDGMENT
_________________________________________________________________
Fourie AJA (Lewis, Pillay, Zondi and Mocumie JJA concurring):

[1] This appeal concerns the validity of a written agreement of sale (the
agreement) in terms of which the appellant, Louistef (Pty) Ltd (Louistef), sold a site
licence issued to it in terms of the provisions of the Petroleum Products Act 120 of
1977 (the Act), to the respondent, the Louis Snyders Familie Trust (the trust), for a
purchase consideration of R1 million.

[2] The trust subsequently took the view that the agreement was invalid and
unenforceable and launched application proceedings in the Gauteng Division of the
High Court, Pretoria, seeking a declaratory order to that effect. Louistef, on the other
hand, maintained that the agreement was valid and binding and as it had complied
with all its obligations thereunder, it opposed the application and sought, by means
of a counter-application, payment of the purchase price of R1 million.

[3] In the event, the matter was heard by Janse van Nieuwenhuizen J, who
upheld the trust’s application with costs and granted the declaratory order. The
counter-application was dismissed with costs. Louistef now appeals the whole of the
judgment and orders of the court a quo, which appeal is with the leave of that court.
The second respondent, the Controller of Petroleum Products contemplated in s 3(1)
of the Act (the Controller), and the third respondent, MacRobert Incorporated, the
former attorneys of the trust, were cited as parties, but they abided the decision of
the court a quo and have not participated in this appeal.

[4] The background facts giving rise to the litigation are largely common cause:
The trust is the registered owner of certain immovable property situated at Brits,
North West Province (the site), which Louistef had hired from the trust since 1991.
Louistef conducted a Toyota motor vehicle dealership at the site which included,
inter alia, a fuel filling station. The lease had been renewed from time to time, finally
until 31 May 2014. With effect from 17 March 2006, the Petroleum Products
Amendment Act 58 of 2003 (the Amendment Act) introduced a new dispensation
regarding the licencing of retail activities concerning petroleum products. The
relevant statutory provisions will be discussed in more detail hereunder, but for
present purposes it would suffice to record that on 9 October 2008, a ‘site licence’
and a ‘retail licence’ were issued to Louistef in terms of the Act, as amended,
authorising it to retail prescribed petroleum products at the site. Louistef continued to
conduct the business of a filling station at the site under the new dispensation until
15 May 2014.

[5] During November 2013, MacRobert Incorporated, on behalf of the trust,
commenced negotiations with Louistef with a view to obtaining the transfer of the site
licence held by Louistef, to enable the trust to apply for a retail licence authorising it
to conduct the business of a filling station at the site. These negotiations culminated
in the conclusion of the agreement on 26 March 2014, which provided for the sale of
Louistef’s site licence to the trust for a purchase price of R1 million. Louistef took the
necessary steps to effect the transfer of the site licence, with the result that, on 14
May 2014, the Controller issued a site licence in the name of the trust. When
Louistef ceased to conduct the business of a filling station at the site on 15 May
2014, the trust set in motion the process to acquire a retail licence to enable it or its

nominee to retail petroleum products at the site. However, on 26 June 2014, the
trust’s present attorneys addressed a letter to Louistef stating that the agreement
was ‘invalid and unlawful’. The letter recorded that the trust objected to the payment
of the agreed purchase price which had by then been deposited into the trust
account of MacRobert Incorporated.

[6] It is rather difficult to discern the trust’s cause of action from the affidavits filed
and the submissions made on its behalf. Shorn of unnecessary verbiage, it appears
that its case was based on common mistake, namely that both of the parties
mistakenly believed that the res vendita, ie the site licence, constituted a
merchantable merx, whilst this was not the case. This mistake rendered the
agreement impossible of performance, with the result that it was void ab initio.

[7] In adjudicating upon the validity of the agreement, it is necessary to first have
regard to the relevant provisions of the Act, as amended. The Act initially did not,
apart from price regulation, prescribe any method of control over the retailing of
petroleum products in South Africa. However, the amended Act now provides for,
inter alia, the issuing of licences by the Controller to persons involved in the
manufacturing and sale of certain prescribed petroleum products. ‘Regulations
Regarding Petroleum Products Site and Retail Licences, GN R286, GG 28665, 27
March 2006’ (the regulations) were simultaneously promulgated under the Act,
prescribing, inter alia, the procedures to be followed for the obtaining of licences. Of
particular importance in this appeal are the newly created categories of a ‘site
licence’ and a ‘retail licence’.

[8] Section 1 of the Act defines a ‘site’ as ‘premises on land zoned and approved
by a competent authority for the retailing of prescribed petroleum products’. A ‘site
licence’ is not defined in the Act, but the regulations define it as ‘a licence issued to a
person who holds land or has permission from the owner of the land to develop a
site for the purpose of retailing petroleum products’. A retail licence in terms of the
Act is defined as a licence to conduct the business of a retailer, namely, the sale of
petroleum products to an end-consumer at a site. It is important to note that a site
licence and a retail licence are interlinked – a site licence application may only be
accepted by the Controller where a corresponding valid retail licence application has

been lodged for that site (regulations 5(1) and 15(4)), and a site licence remains
valid for so long as there is a corresponding valid retail licence and the licenced
activity (a filling station in this instance) remains a going concern (s 2B(3)(b) and (c)
of the Act, read with regulation 30(1)(c)).

[9] Any person who wishes to apply for a site licence has to do so in terms of
s 2A(4) of the Act, read with regulation 13(1). Such a person has to be the owner of
the relevant land or someone who has the written permission of the owner of the
land. A person who wishes to apply for a retail licence, in terms of s 2A of the Act,
read with regulation 15, has to be the owner of the business concerned.

[10] Section 2D of the Act, however, contains transitional licencing provisions
which provide that any person who, at the time of the commencement of the
Amendment Act holds and is in the process of developing a site or retails prescribed
petroleum products, shall be deemed to be the holder of a licence for that activity, on
condition that an application is made within six months for a site or retail licence, as
the case may be. Section 2D(1) provides that, for purposes of this section, ‘hold’
means to own or lease land. As recorded above, Louistef as the lessee who had
been conducting the business of a filling station at the site, made application for the
necessary site and retail licences in terms of s 2D of the Act and both licences were
issued to it on 9 October 2008. Therefore, at the time of the conclusion of the
agreement, Louistef was the lawful holder of a site licence in respect of the site, as
well as a retail licence entitling it to conduct the business of a filling station at the
site.

[11] There is a significant difference between the requirements that an applicant
has to meet when applying for a site licence in terms of s 2A of the Act, and those
that govern the application for a site licence in terms of the transitional provisions of
s 2D of the Act. In the case of the former, more onerous requirements are prescribed
by the regulations, including, inter alia, the following:
(a) The submission of an environmental management plan and proof that financial
provision has been made for the rehabilitation of the site upon cessation of the
retailing activities (regulations 14(b)(i) and (ii)).

(b) The obtaining of a record of decision of the environmental authorities permitting
retailing operations on the site (regulation 13(1)(d)(ii)).
(c) Proof that proper notice by way of publication was given for public participation
purposes (regulation 4).
(d) Proof that there is a need for the site and that the site will promote the licensing
objectives stipulated in s 2B(2) of the Act. These include objectives such as
promoting an efficient petroleum industry, facilitating an environment conducive to
efficient and commercially justifiable investment, creating employment opportunities,
ensuring countrywide availability of petroleum products at competitive prices and
promoting access to affordable petroleum products by low-income consumers.

[12] On the other hand, the requirements for a site licence under the transitional
licencing provisions of s 2D of the Act, are substantially less. The mere production of
formal documentation such as the relevant lease agreement and documents of
identification, as well as declarations regarding the retailing operations conducted on
the site, are required (regulation 13(2)).

[13] The regulations also deal with the transfer of licences. Regulation 22(7) states
that a retail licence is not transferable. A site licence, however, is freely transferable
and regulation 12 deals, inter alia, with the transfer of a site licence which had been
issued in terms of s 2D of the Act. As recorded above, this is the section of the Act in
terms of which the site licence was issued to Louistef on 9 October 2008. Regulation
12(3)(a) requires the lodging of an application for transfer of a s 2D site licence
within six months ‘of change of ownership or lease’. In such event the site licence
has to be transferred to the new owner or new lessee, as the case may be.

[14] What is envisaged by regulation 12, read with regulation 15(4), is the
continuation of the licenced retail activity at the site pending the transfer of the site
licence within six months of the new owner or lessee taking ownership or possession
of the site. For the site licence to be transferred it obviously has to be extant. Had the
agreement providing for the transfer of Louistef’s site licence to the trust not been
concluded, the site licence would have expired upon the termination of Louistef’s
lease or any earlier termination of the filling station business. In such event the trust
would have been obliged to apply de novo for a site licence in terms of s 2A of the

Act. The trust would then have been obliged to comply with the more onerous
requirements referred to in para 11 above. As pointed out by Louistef, this would not
only have been the more onerous route to take, but the trust would then also run the
risk of its application being refused.

[15] Counsel for the trust submitted that the site licence did not constitute a
merchantable merx as it only creates legal rights in favour of a land owner.
Therefore, the submission continued, a site licence is inseparable from the land and
as the trust was at all relevant times the owner of the site, Louistef derived no legal
rights from its site licence. In view of this, the site licence could not have constituted
a valid res vendita for purposes of the agreement of sale, thereby rendering the
agreement void ab initio.

[16] There is no merit in this submission. It is clear from the above provisions of
the Act that the site licence confers a personal right upon the holder thereof which
entitles the holder to enter the site and to prepare it for the purpose of retailing
petroleum products at the site, upon the granting of a retail licence. There is certainly
no room for the conclusion that the site licence confers rights upon the land owner
only and not the holder of the licence. The granting of a site licence constitutes a
delectus personae whereby the applicant for the licence is personally granted the
right to exploit the site for the purpose of retailing petroleum products upon the
granting of a retail licence.

[17] A site licence bears a close similarity to a liquor licence as to which this court
said in Aquatur (Pty) Ltd v Sacks & others 1989 (1) SA 56 (A) at 64H-I:
‘A liquor licence, it has been stated in decisions of this court, is a purely personal statutory
privilege granted to a particular person under the liquor laws to sell liquor at particular
premises. Its grant involves the exercise by the licencing authorities of a delectus personae
so that the licensee cannot transfer or otherwise deal with the licence unless authorised
thereto in terms of the Act, which provides for the strict supervision of the grant, transfer and
removal of licences.’

[18] Louistef as the licensee was the person to whom the privileges attaching to
the site licence had been granted. The site licence had a commercial value, not only

to Louistef, but also to the trust, particularly as the transfer thereof resulted in the
trust not having to follow the more onerous and risky route of an application for a site
licence in terms of s 2A of the Act. Therefore the site licence constituted a
merchantable merx, which is described in G Glover Kerr’s Law of Sale and Lease 4
ed (2014) at 36 as:
‘The thing [merx] may be movable or immovable, corporeal or incorporeal. It must be
capable of being the subject matter of a private legal transaction (in other words, it must not
be a res extra commercium).’

[19] It follows, in my view, that the site licence was an asset of Louistef, which it
could sell and transfer with the consent of the Controller. In this regard too it is
apposite to compare it with a liquor licence, of which the following remarks of Van Zyl
JP (Jones J concurring) in Solomon v Registrar of Deeds 1944 CPD 319 at 325,
were approved by this court in Slims (Pty) Ltd & another v Morris NO 1988 (1) SA
715 (A) at 724J-725A and 737E-G:
‘[A] liquor licence is not merely a privilege but is a right which has a potential commercial
value which may sometimes be very considerable. And it is a right which is alienable and
can be sold.’

[20] In Shoprite Checkers (Pty) Ltd v MEC for Economic Development, Eastern
Cape & others [2015] ZACC 23; 2015 (6) SA 125 (CC), the main judgment of the
court held that a grocer’s wine licence is ‘property’ for purposes of s 25(1) of the
Constitution. Madlanga J (albeit in a judgment dissenting on a different issue) put it
as follows (para 143):
‘By comparison, the grocer’s wine licence is something in hand: it grants the holder an
entitlement to sell wine under certain specified circumstances . . . also, a grocer’s wine
licence holds objective commercial value: its very raison d’être is to trade in accordance with
its conditions. The licence is transferable, albeit subject to that being sanctioned by the
authorities. As an item with objective economic value, the transfer may even be for a
valuable consideration . . . All these point to the grocer’s wine licence being property for
purposes of s 25(1).’
In my view, the same holds true mutatis mutandis for a site licence issued under the
Act.

[21] For all the above reasons, and particularly in view of the finding that the site
licence constituted a merchantable merx, it follows that the parties did not labour
under any mistake at the time of the conclusion of the agreement. The agreement is
accordingly valid and enforceable. Therefore, the appeal should succeed.

[22] In the result, the following order is made:
The appeal is upheld with costs.
The order of the court a quo is set aside and the following substituted therefor:
‘(a) The application is dismissed with costs.
(b) The counter-application succeeds with costs.
(c) It is declared that the agreement of 26 March 2014 was legally and validly
concluded between the applicant and the first respondent and is not null and void.
(d) The applicant is ordered to pay the first respondent the amount of R1 million
plus R140 000 VAT against delivery of a valid tax invoice.’

_____________________
P B Fourie
Acting Judge of Appeal

APPEARANCES:
Counsel for Appellant:

J H Dreyer SC

Instructed by:

Coetzer and Partners, Pretoria

Hill McHardy & Herbst Inc,

Bloemfontein
Counsel for First and
Second Respondents:
B G Savvas

Instructed by:

Venn & Muller Attorneys, Pretoria

J L Jordaan Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

29 November 2016

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form
part of the judgment.

Louistef v Snyders NO [2016] ZASCA 182 (29 November 2016)

The Supreme Court of Appeal (SCA) today upheld an appeal regarding the
sale of a site licence issued in terms of the Petroleum Products Act 120 of
1977. The high court held that the site licence did not constitute an item which
could be the subject matter of an agreement of sale. The SCA, however, held
that the site licence constituted a merchantable item which could be sold and
accordingly held that the agreement of sale was valid and enforceable.