Spar’s bloody court odyssey

A fresh ruling at the Supreme Court of Appeal hands another victory to the Giannacopoulos family against Spar. Then there’s still a R2.1bn damages claim against the retailer – which could yet grow.
4 mins read

The Spar Group and one of its largest independent retailers, the Giannacopoulos Group have done battle in court 14 times since late 2019. The Giannacopoulos Group has won all 14 of those encounters – 11 in the high court and three in the Supreme Court of Appeal (SCA). 

The latest defeat for Spar was at the SCA, with judge Nolwazi Mabindla-Boqwana concluding last week that the retailer was trying “to throttle the Giannacopoulos Group out of its businesses”. She dismissed with costs Spar’s special leave to appeal an earlier decision by the high court.  

Spar CEO Angelo Swartz told Currency the group would not be appealing to the Constitutional Court. 

The whole thing dates back to 2019, when Spar tried to pull off a rather brazen attempt to grab ownership of some of the 45 Spar outlets owned by the Giannacopoulos Group. Armed with an ex parte ruling by the Pietermaritzburg high court, a team from Spar moved in and took control of several of the group’s stores. The Pietermaritzburg court had been told the Giannacopoulos Group had been ejected from the Spar guild, membership of which is a requirement for Spar’s independent retailers. The court was also told the Giannacopoulos Group was indebted to Spar. 

Two days later the ex parte ruling was overturned when the Giannacopoulos Group provided its version of the situation. It turned out its guild membership had been terminated by a kangaroo court, without input from the Giannacopoulos Group and, further, the group had no outstanding debts with Spar.  

The high court judge was evidently furious with Spar. “Having regard to both the duty of any applicant (for an ex parte ruling) to make the fullest possible disclosures and to be fair, I must conclude that (this) was a spectacular failure on the part of the Spar Group,” said judge Jody Kollapen. “If all of the facts relevant to the grant of relief had been placed before the court during the initial proceedings, the court would have come to a different conclusion.”  

He went on to say that litigation must be conducted with integrity. 

‘Not in good faith’ 

Seemingly undeterred by the court’s scalding indictment, within days the Spar group launched another assault on the Giannacopoulos Group, reducing its credit terms to a mere seven days and limiting the quantity of “drop shipments” the group could order. (Drop shipments are when the manufacturer/supplier delivers direct to the retailer.) 

That amendment of the credit and drop shipment terms was the subject of the latest SCA ruling. Spar appealed an earlier ruling by the high court which found in favour of the Giannacopolous Group’s argument that the sudden alteration by Spar of the terms had no reasonable basis and was not executed for a legitimate purpose.  

The confirmation of the high court ruling has clarified that Spar did not have unfettered discretion to alter the terms of its contract with the Giannacopoulos Group.  

As acting judge Barnard had said in the high court, “Spar’s discretion must be exercised reasonably and honestly because of the reciprocal nature of the trading model”. Spar failed to do this. 

Barnard questioned the timing of the reduction in credit available to the Giannacopoulos Group. In the court’s view it was an attempt by Spar to assume control of the Giannacopoulos Group’s business operations, which it had unsuccessfully sought through the earlier ex parte ruling. 

As for the limitation on drop shipment, the high court found that this “amounted to sabotage against the Giannacopoulos Group’s business”. 

In the SCA, judge Mabindla-Boqwana agreed with the lower court that the alteration of the Giannacopoulos Group’s credit terms “does not appear to have been done in good faith” as the group was comfortably able to meet its current liabilities. 

She added that another reason for the alteration of credit terms, advanced by Spar, concerned debits that were returned by Absa bank. “According to Spar, this demonstrated financial instability within the Giannacopoulos Group. However, the group contested this, explaining this was a once off occurrence not indicative of a pattern,” said the judge, before going on to describe how Absa’s actions had in fact been precipitated by Spar’s efforts to “perfect” the Giannacopoulos Group’s stores, including the wrongful termination of the group’s guild membership. 

(“Perfecting” works like this: much of Spar’s relationship with its retailers is structured around bonds, which are generated in exchange for funding it provides. But if Spar suspects a retailer is struggling, it will move swiftly to “perfect its bond” – identify the movable assets and claim ownership before the banks or any other creditor can get hold of them.) 

Dismissed with costs 

All in all, judge Mabinda-Boqwana’s damning finding was hardly surprising. “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 orders and to terminate their membership from the Guild.”  

Unsurprisingly she dismissed Spar’s special leave to appeal the high court decision, with costs. 

Swartz, who was appointed CEO of Spar in 2023, mid-way through this battle, told Currency: “I’m glad we’ve got certainty,” adding: “I want to move on now.” 

Harry Giannacopoulos is also happy the matter has been settled. He believes Spar wasted shareholders’ money by requesting a special appeal given the circumstances of the case. He told Currency the latest SCA ruling has made clear how vindictive Spar management has been to his family.  

However, it might be some time before anyone can move on, given the Giannacopoulos Group’s R2.1bn damages claim relating to the guild membership dispute and the destruction wreaked on its stores during the retailer’s controversial perfection bid in October 2019. There is even talk that that amount might be hiked. 

Right now, any amount would be uncomfortable for Spar, which recently announced it would be selling its head office in a bid to make even a small dent on its R9bn debt pile. 

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Ann Crotty

Winner of just about every financial journalism prize going, Ann has kept the business sector on its toes for years. Uncompromisingly independent, if there’s a shady executive pay plan out there or shenanigans a company is trying to keep hidden, Ann will find it.

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