Spar accepts ruling in long-running credit dispute

Wholesaler Spar has acknowledged the Supreme Court of Appeal’s (SCA) decision to dismiss its request for special leave to appeal in its long-running credit dispute with the Giannacopoulos group.

While the SCA ruling marks a legal setback, Spar said the case had provided valuable insights into its discretion over credit terms.

The dispute stems from the termination of the Giannacopoulos Group’s membership by the Spar Guild of Southern Africa in October 2019. After this, Spar adjusted the group’s credit and drop shipment terms, a move the KwaZulu-Natal high court later ruled was unreasonable.

After its initial appeal was dismissed, Spar sought reconsideration from the SCA, which also declined to hear the case.

Despite the unfavourable ruling, Spar said it respects the court’s decision and is satisfied to have reached a resolution. The company said the judgment offered clarity on how it can exercise discretion when setting credit terms for retailers.

Spar has not indicated whether it will alter its credit policies in response to the ruling. However, it has reiterated its commitment to fair and transparent business practices.

“Spar initiated the appeal to seek clarity on their discretion to adjust credit terms for retailers. While the SCA did not grant the leave to appeal, Spar respects the court’s decision and is pleased to have a definitive resolution,” it said.

“This outcome provides valuable guidance on the scope of discretion that can be exercised in adjusting credit terms. Spar remains committed to maintaining transparent and fair practices and will continue to keep its stakeholders informed about any significant developments,” it said.

The long-standing dispute saw Spar withdraw stock supply, credit, and brand licensing from the Giannacopoulos Group, which operates 23 Superspar and Spar stores and 22 Tops liquor stores, employing 2,800 people.

Spar cited violations of labour laws and attempts to bypass its trade model as reasons, but the franchisee claims these actions were driven by personal animosity and an attempt to seize its stores.

The SCA judgment was critical of Spar’s conduct, highlighting that its sudden credit restrictions were unjustified and seemed designed to force the Giannacopoulos Group out of business, especially during the peak festive season.

“Spar did not provide any evidence to show that the Giannacopoulos Group had or was likely to purchase excessive stock beyond its ability to sell.

“In any event, a default by the Giannacopoulos Group would lead to Spar executing on their security, an outcome which could lead to the Giannacopoulos

WHOLESALER SAYS IT VALUES INSIGHTS THE GIANNACOPOULOS CASE PROVIDES INTO ITS DISCRETION OVER CREDIT TERMS

Group losing its businesses,” the unanimous SCA judgment reads.

“To compound matters, the timing of the variation affected the peak festive season. Shortage in stock led to customer complaints and negatively impacted on the Giannacopoulos Group’s revenue.

“Taking all these facts into account, there is merit in the contention by the Giannacopoulos Group that the sudden alteration by Spar of the credit terms had no reasonable basis and was not executed for a legitimate purpose,” the judgment reads.

“One cannot resist the conclusion that the alteration of the credit and drop shipment terms was part of a concerted effort by Spar to throttle the Giannacopoulos Group out of its businesses, since it had failed to sustain the execution of the ex parte [without notifying the other party] orders and to terminate their membership from the guild [an entity established by Spar to facilitate, promote and regulate the Spar voluntary trading group system].”

This legal setback comes as Spar grapples with a R9bn debt burden, which it is attempting to reduce by selling assets and exiting its unprofitable Polish operation.

The company recently secured a R2bn bridge loan to fund its exit from Poland, which included a R2.7bn recapitalisation of the business.

The shortfall of R700m will be funded by the group itself.

On Monday, Spar’s share price was down 1.7% to R137.84. It has lost more than 5% since January 1.