Pick n Pay face R38m lawsuit in Mauritius

Posted On Monday, 29 September 2014 10:57 Published by
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Pick n Pay is facing a R38m lawsuit in Mauritius where it stands accused of dodgy business practices over a failed store in the north of the holiday island.

Alain Rey

The owners of the Mont Choisy shopping centre, in papers filed in the Supreme Court of Mauritius in June, accuse Pick n Pay of: Failing to pay rent of about R560000 a month for more than a year; Closing the store after just 13 months, despite having signed a 10year lease; Supplying sub-standard and limited product lines, including stale vegetables and "bad meat"

Favouring its two other Mauritius stores, which have also since closed, over the Mont Choisy branch; Driving away other tenants at the mall because of its "lacklustre performance"; and Abruptly closing the store on January 1 this year after having e-mailed the mall's owners only the afternoon before to inform them of the decision.

Alain Rey, CEO of the shopping centre owners, Mall of Mont Choisy Ltd, said dealing with Pick n Pay was an "atrocious nightmare". " This is one of the most shocking acts of illegal behaviour of a South African conglomerate in Mauritius," Rey said this week. According to court papers, the Mall of Mont Choisy's claim against Pick n Pay for damages and lost income includes about R10-million in rent and interest and R19-million for additional store fit-out costs incurred at the South African retailer's request.

Another R8.7-million is for loss of rental from other potential tenants, and R360000 in damages for allegations which Pick n Pay is said to have made against the owners. The company is also claiming unspecified future lost earnings. The mall's owners claim that, at a meeting in December last year, Pick n Pay made a compensation offer equivalent to R3.2-million a figure they rejected as inadequate. Pick n Pay refused to comment on the court action, saying the matter was sub judice. It did not provide copies of its responding court papers.

The matter is scheduled to be heard on October 6. The Sunday Times understands Pick n Pay will argue that the Supreme Court does not have jurisdiction in the dispute and that it should rather go to arbitration. According to the Mall of Mont Choisy, it decided to develop the shopping centre near Grand Baie, a tourist and residential area, in May 2010. Several other companies, including Shoprite and a large Mauritian retailer, were apparently interested in being the anchor tenant but an agreement was signed with Pick n Pay because of its reputation and experience.

The agreement, the mall owners say, was for a 10-year lease with a notermination clause. It was signed in April 2011. " The company would never have considered borrowing and investing in a convenience centre, indeed would never have obtained the necessary finances from the banks to do so, if it was not for the security of a knowledgeable, successful and serious anchor tenant, with the guarantee of a 10-year without-termination contract," the court papers state.

The company borrowed the equivalent of R154-million to finance the development. Construction started in March 2012 and was completed that November. The mall, including the 3000m² Pick n Pay, opened the following month. But, almost from day one, the mall owners claim Pick n Pay offered a sub-standard service. "There was a downward spiral in the footfall attending Pick n Pay, and consequently the centre," the papers say.

In its first month of operation, according to figures in the court document, an average of 775 people shopped at the Pick n Pay daily. But the figure had dropped to about 400 at the end of its first year of operation. Over the same period, monthly turnover at the store declined from an opening-month high of R5.4-million to R1.69-million.

Then at 4.23pm on December 31 last year, the retail giant dropped a bombshell the store was closing the next day. This, said the court papers, was proof of "the bad faith which Pick n Pay showed all along". A replacement tenant had not been found and Pick n Pay's equipment was still inside the store.

Last modified on Monday, 29 September 2014 14:12

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