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CTP Ltd. and Others v Argus Newspapers Ltd. and Another (215/95) [1996] ZASCA 145 (29 November 1996)

80 Reportability
Commercial Law
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Brief Summary

Restraint of trade — Enforceability of contractual restraints — Appellants sought to maintain an interdict against Argus Newspapers from publishing certain newspapers based on a prior agreement — Argus Newspapers applied to rescind the interdict, claiming material changes in circumstances due to a change in shareholding — Court a quo rescinded the interdict and ordered costs against the appellants — Appeal against this decision — Court held that the enforceability of the restraints was contingent on the parties' business affiliation, and changes in circumstances warranted a re-evaluation of the restraints' validity — The appeal was dismissed, affirming the rescission of the interdict based on the material change in circumstances.

Comprehensive Summary

Summary of Judgment


Introduction


The proceedings concerned an appeal to the Supreme Court of South Africa (Appellate Division) against a decision of the Witwatersrand Local Division (Heher J) which had rescinded an interdict previously granted by the Appellate Division against the publication of certain local/free newspapers by the Argus interests.


The appellants were CTP Limited, T D Moolman, N M Coburn, and M D W W Short. The first respondent was Argus Newspapers Limited. The second respondent was Omni Media Corporation Limited, being the name adopted by Argus Holdings Limited after a name change; it was joined because of a possible interest but did not participate in the litigation.


The procedural history was central. On 29 March 1995, the Appellate Division substituted an order interdicting and restraining Argus Holdings Limited and Argus Newspapers Limited from publishing specified newspapers (including the Southern Star/Focus and related titles), or any substantially similar newspapers. At the same time, leave was granted to Argus Holdings and/or Argus Newspapers to approach the Witwatersrand Local Division, on due notice and on good cause shown that circumstances had materially changed, for rescission or variation of the interdict.


Two days after the interdict was granted, Argus Newspapers launched such an application in the Witwatersrand Local Division. On 11 April 1995, Heher J rescinded the interdict and ordered the present appellants to pay the costs (including the costs of two counsel). The present appeal lay against the rescission and the adverse costs order.


The general subject-matter of the dispute was the continued enforceability, as a matter of public policy and restraint-of-trade principles, of reciprocal contractual restraints embodied in agreements regulating competition between the corporate group associated with CTP (the “Caxton group” in the judgment’s description) and the corporate group associated with Argus (the “Argus group”), in circumstances said to have changed materially after the interdict was granted.


Material Facts


The material facts were those bearing on whether circumstances had materially changed since March 1995 so as to justify rescission or variation of the interdict, and whether continued enforcement would be contrary to public policy when assessed at the time enforcement was sought.


The earlier Appellate Division judgment (March 1995) had proceeded on the basis that the parties (or their groups) had entered into reciprocal restraints as part of a restructuring of their businesses, and that the restraints were not “mere covenants against competition” but were designed to protect defined territories and preserve a commercial status quo. A factor noted in that judgment was the then-existing business association between the factions, reflected in shareholdings and interlocking interests.


The post-interdict changes relied upon by Argus Newspapers were, in substance, changes in ownership, corporate structure, and directorships. The result of those changes, as accepted as the practical position for purposes of the application, was that Argus Holdings divested itself of all its shares in Argus Newspapers; the shares were acquired by the Independent Newspaper Group of Ireland; Argus Newspapers became listed and was no longer the operating subsidiary wholly owned and controlled by Argus Holdings; and there were consequential changes in board representation, including that Coburn was no longer a director of Argus Newspapers, and that directors of Argus Holdings no longer sat on the Argus Newspapers board (and vice versa), with Moolman remaining a director of Argus Holdings but no longer able to influence Argus Newspapers because it was no longer a subsidiary.


A further undisputed feature of the new position was that Argus Newspapers’ remaining association with the appellants was limited to certain indirect minority shareholdings outside the Witwatersrand area, namely an indirectly held 33.3% in Highway Mail (Pty) Ltd, an indirectly held 37.5% in Zululand Observer (Pty) Ltd, and an indirectly held 25% in Capital Media (Pty) Ltd. These interests were in publications operating outside the Witwatersrand and did not compete with the interdicted publications.


The court also treated as material the background to the restraints. The restraints originated in the 1980 agreement, which created reciprocal restrictions on competition between the relevant interests and contemplated cross-directorships. They were retained and, in some respects, extended in the 1985 “Restraint Agreement” associated with the restructuring of Caxton’s local/free newspaper businesses. In 1988, Argus Newspapers (as Argus Holdings’ operating subsidiary) assumed the rights and obligations of Argus Holdings under the 1980 and 1985 agreements, and it was common cause that the appellants had accepted that assignment, thereby enabling enforcement against Argus Newspapers notwithstanding that Argus Newspapers did not itself hold shares in Caxton Ltd.


Legal Issues


The central legal question was whether the post-March 1995 changes amounted to materially changed circumstances, shown on “good cause”, such that the interdict restraining publication should be rescinded or varied.


That question required determination of whether, in the changed circumstances, continued enforcement of the restraints against Argus Newspapers (and thus the interdict) would be contrary to public policy. This was primarily an application of legal principles to facts, involving an evaluative assessment of the parties’ legitimate protectable interests and the public interest at the time enforcement was sought.


A further legal issue was whether the appellants were barred, by res judicata or estoppel flowing from the March 1995 judgment, from contending that the changes did not justify rescission. This depended on the interpretation of the earlier judgment and whether it contained a binding determination that restraints would only be enforceable while the parties remained “affiliated” in the earlier sense.


Court’s Reasoning


The Appellate Division approached the matter by first clarifying what the March 1995 judgment had and had not decided. It rejected the court a quo’s understanding that the earlier judgment amounted to a definitive, binding finding that, once the parties were no longer affiliated, there could be no protectable interest justifying enforcement. The court held that the “concessions” referred to in the earlier judgment were not concessions of fact but concessions of law, were not the subject of argument, and were common cause in the court a quo to the extent that no concession of the kind contended for had been made.


The Appellate Division emphasised that, in the earlier litigation, Argus Holdings and Argus Newspapers had not disputed the existence of a legitimately protectable interest; the only ground of attack had been that the restraints were contrary to public policy because they were indefinite in duration. Accordingly, the earlier judgment was understood as holding no more than that, given the circumstances then prevailing, indefinite duration was not contrary to public policy; but that if circumstances changed in future such that continued enforcement became contrary to public policy, the restraints would not be enforceable. This was linked to the general principle that restraint enforceability is assessed with reference to circumstances at the time enforcement is sought.


In that regard, the court treated the earlier order granting leave to approach the court on materially changed circumstances as an invitation to a later court to undertake a fresh evaluation if such change were alleged. It considered it improbable that the earlier court would have attempted to decide in advance, without full argument, what particular changes would make enforcement repugnant to public policy. On this basis, the court rejected Argus Newspapers’ reliance on res judicata and estoppel, holding that the appellants were not barred from arguing that the changes did not justify rescission.


Turning to the merits, the Appellate Division accepted that there had been changes in shareholding and board representation, but it considered that a preoccupation with corporate structure risked obscuring the “fundamental commercial realities” that had underpinned the restraints. The court restated those realities by reference to the historical purpose of the agreements: the Argus group had sought entry into a specialised field in which the Caxton group had established goodwill and expertise (local and separate free newspapers), and reciprocal restraints were negotiated as part of a commercial arrangement designed to manage and protect each side’s interests. The restraints were described as the product of negotiation between “astute businessmen” not in unequal bargaining positions, and as reciprocal restraints protecting legitimate interests rather than naked restraints.


The court’s application of these principles led it to reject the contention that the changed ownership of Argus Newspapers eliminated the appellants’ protectable interest. It reasoned that Argus Newspapers remained subject to the obligations and entitled to the rights assumed under the 1988 arrangement, and that the appellants, having accepted the assignment, retained their correlative rights against Argus Newspapers. The fact that Argus Holdings no longer controlled Argus Newspapers was not treated as a basis to relax enforcement; rather, it was characterised as a reason supporting continued enforcement, because Argus Newspapers—now outside Argus Holdings’ control and without participation in the joint venture profits—would have a greater incentive to exploit access previously obtained to the Caxton group’s methods and confidential information by competing in the restrained field.


In assessing whether public policy required discharge, the court stressed that restraints of this kind are not to be declared unenforceable simply because one party no longer wishes to remain in the relationship that gave rise to them. It held that before rescission is granted, it must be convincingly demonstrated that the public interest requires discharge. The court also noted that there was no attempt on the papers to lay a factual foundation for any alternative relief limiting the restraint to a court-fixed period; the case was advanced as one for rescission based on materially changed circumstances.


Finally, the court addressed reliance on language in the earlier judgment referring to a significant change in the “equilibrium” of interests. It rejected a literal reading that any tilt in the balance would suffice, explaining that the term was used descriptively to convey that a disturbance in the balance of interests might alter the enforceability assessment, not to establish a mechanistic test.


Outcome and Relief


The appeal was upheld, with costs including the costs of two counsel.


The order of the Witwatersrand Local Division was set aside and replaced with an order dismissing the rescission application with costs, including the costs of two counsel.


The first respondent was ordered to pay the costs of the application for leave to appeal, including the costs of two counsel. No order was made against the second respondent, as it was joined due to a possible interest and did not participate in the litigation.


Cases Cited


CTP Ltd and Others v Argus Newspapers Ltd and Another [1995] ZASCA 32; 1995 (4) SA 774 (A)


Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A)


Legislation Cited


No legislation was relied upon or cited as bearing on the matter.


Rules of Court Cited


No rules of court were cited.


Held


The Appellate Division held that the earlier March 1995 judgment did not contain a binding determination that the restraints would cease to be enforceable upon any change in affiliation between the parties, and that the appellants were not barred by estoppel or res judicata from contending that the restraints remained enforceable.


It further held that, despite changes in Argus Newspapers’ ownership and corporate relationships, Argus Newspapers remained bound by the contractual restraints, and the changes did not establish that continued enforcement of the interdict was contrary to public policy. The asserted changes did not constitute “good cause” for rescission within the meaning of the leave granted in March 1995.


LEGAL PRINCIPLES


A contractual restraint of trade is assessed for consistency with the public interest in light of the circumstances prevailing at the time enforcement is sought, and changes in circumstance may require a reappraisal rather than automatic termination of enforceability.


Where an interdict is granted with leave to seek rescission or variation on materially changed circumstances, a subsequent court must undertake a fresh evaluation of whether continued enforcement would be contrary to public policy, rather than treating earlier observations as conclusively determining the effect of any later changes.


Reciprocal restraints negotiated as part of a broader commercial restructuring, aimed at defining spheres of operation and protecting legitimate commercial interests, are not rendered unenforceable merely because corporate ownership or internal governance arrangements later change; a party seeking discharge must show, on the facts, that enforcement has become contrary to the public interest.


The mere invocation of characterisations such as “naked restraints against competition” is insufficient; the party seeking rescission bears the burden of demonstrating that materially changed circumstances justify discharge of the interdict on public policy grounds.

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[1996] ZASCA 145
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CTP Ltd. and Others v Argus Newspapers Ltd. and Another (215/95) [1996] ZASCA 145 (29 November 1996)

CASE NO. 215/95
IN THE SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between:
CTP LIMITED
First Appellant
MOOLMAN, TERRENCE DESMOND
Second Appellant
COBURN, NOEL MALCOLM
Third Appellant
SHORT,MEREDITH DAVID WILLIAM
Fourth Appellant
and
ARGUS NEWSPAPERS LIMITED
First Respondent
OMNI MEDIA CORPORATION LIMITED Second Respondent
COURT: Van Heerden, Nestadt, Eksteen, Marais et Scott JJA
HEARD
: 11 November 1996
DELIVERED
: 29 November 1996
JUDGMENT
MARAIS JA/
2
MARAIS JA:
On 29 March 1995 this Court substituted on appeal for an order made by the Witwatersrand Local Division an order interdicting and
restraining Argus Holdings Limited ("Argus Holdings") and Argus Newspapers Limited ("Argus Newspapers") from
directly or indirectly publishing their newspapers known as the "Southern Star/Focus", the "Sandton Star", the
"Eastern Star/Focus", the "Northern Star/Focus", the "Western Star/Focus", or any newspapers substantially
similar in nature and circulation. The successful appellants were CTP Limited ("CTP"), one Moolman, one Cobum, and one
Short. However, leave was granted at the same time to Argus Holdings and Argus Newspapers to apply jointly or severally to the Witwatersrand
Local Division for an order rescinding or varying the interdict "on good cause being shown that circumstances have materially
changed".
3
Argus Newspapers lost no time in so applying, citing as respondents CTP, Moolman, Cobum, Short and Omni Media Corporation Limited.
Omni Media Corporation Limited is the name to which Argus Holdings had in the meantime changed its name. For ease of reference and
because it was referred to in the earlier judgment of this Court as Argus Holdings, I shall continue to refer to it by that name.
The application was launched two days after this Court had delivered its judgment. In the result the matter was heard on 11 April
1995 and the Court a quo (Heher J.) rescinded the interdict and ordered CTP, Moolman, Coburn and Short jointly and severally to pay
the costs, including the costs of two counsel. It is against those decisions that CTP, Moolman, Cobum and Short now appeal, leave
to do so having been granted by the Court a quo.
The circumstances which existed when this Court
4
concluded in March 1995 that the granting of the interdict was appropriate and justified are set out in the judgment of the court
which has been reported
[1995] ZASCA 32
;
(1995 (4) SA 774)
, and I shall not repeat them. The gravamen of that part of the judgment which is relevant to the present appeal was that Argus Holdings
and Argus Newspapers had contracted not to do that which they were interdicted from doing and that the attack made by them upon the
enforceability of those contractual undertakings as being in unreasonable restraint of trade because they were to endure in perpetuity,
had to fail. More specifically, this Court held that the restraints in question were reciprocal and part of the consideration given
by each of the parties to them for the restructuring of their respective businesses; that their purpose was to preserve the commercial
status quo; that they were designed to protect comparable interests of the respective parties to the
5
restructuring by recognising and defining the areas in which each held sway and by prohibiting each from encroaching upon the other's
"territory"; and consequently that they were not "mere covenants against competition", and thus not contrary
to the public interest. It was said that "(e)ach side sacrificed part of its own competitive edge as a hedge against attack
from the other" (at page 784 D). A factor which had a material influence upon the outcome of the appeal was that the parties
to the litigation were business associates in the sense that they were so positioned vis-a-vis one another by virtue of shareholdings
that each faction stood to benefit by the trading success of companies in which they were jointly interested, yet they were also
in a position to compete with one another unless restrained from doing so. (See page 784 E). The only ground upon which the enforceability
of the restraints had been attacked as being contrary to
6
public policy, was their indefinite duration. Having indicated earlier in its judgment that that alone would not be inimical to public
policy (at page 783 I), the Court later returned to the issue and said at page 784 E:
"The two sets of parties, although business associates, were nevertheless in competition on opposite sides of the same line of
business. The purpose of the reciprocal restraints was to define each side's territory. Although the restraints binding the respondents
are indefinite, the appellants conceded in argument that this purpose would be served only while the parties continued to conduct
their respective businesses in association with each other; differently stated, that their protectable interest would only last for
as long as they remained so affiliated. In turn, the respondents conceded in argument that as matters stood at the time when the
Court a quo considered them, it could not be contended that the appellants lacked an interest worthy of protection. (Different considerations
may of course apply if circumstances should in future change.)
In short, the restraints, ostensibly indefinite in time, will not necessarily operate in perpetuity; and judged on the strength of
the interests served by the restraints at the time when their enforcement was sought, cannot be said to be against the public interest
and as such at variance with public policy."
7
The present application rested in broad upon the assertion that this Court had held, with binding effect upon the parties, that the
continued enforceability of the restraints would exist only for as long as the parties conducted their respective businesses in association
with one another or remained affiliated in the way in which they were at that time; that they were no longer so affiliated by reason
of Argus Holdings having sold its entire shareholding in Argus Newspapers to a third party who had no desire to maintain the business
association which had existed between Argus Newspapers and the appellants; and that it followed that circumstances had changed materially
within the meaning of this Court's order so that good cause had been shown for the discharge of the interdict.
Contrary to the view taken by the Court a quo, I do not understand the passage quoted from this Court's earlier judgment to
8
amount to a definitive and binding finding by the Court that absent any such affiliation to one another and regardless of the circumstances
in which that might occur, there would be no
legitimately protectable interest which could justify the enforcement
of the restraints. The concessions which it thought had been made
were not concessions of fact but concessions of law. They were not
the subject of any argument before the Court. (Indeed, it was common
cause in the Court a quo that no such concession had been made.)
The Court was not called upon to consider precisely what changes in
the association between the parties to that case would render
continued enforcement of the restraints repugnant to public policy, nor
was it called upon to consider whether a change in affiliation would
have that result irrespective of the circumstances in which it occurred.
The Court referred to the concessions of law thought to have been
9
made, merely to reinforce its primary conclusion that there was nothing objectionable to public policy in a perpetual restraint as
long as the then existing circumstances prevailed, that if circumstances did change, a reappraisal of the changed situation might
result in the continued enforcement of the restraints being regarded as contrary to public policy, and that, if that were to occur,
the restraints would not operate perpetually. All of which was no more than a logical consequence of the principle laid down in Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 898 D that the question whether a contractual restraint of this kind is in conflict with the public interest is to be assessed
in the light of the circumstances prevailing at the time when it is sought to be enforced. It is important to emphasise that in attacking
the enforceability of the restraints when that issue was first before this
10
Court, Argus Holdings and Argus Newspapers had not contended that there was no interest legitimately deserving of protection. It was
common cause that there was. The attack was confined to the contention that the perpetual duration of the restraints was contrary
to public policy. That was the only issue which had to be determined. As I read the decision of the Court, it amounted to no more
than this. Given the then prevailing circumstances, there was nothing contrary to public policy in the indefinite duration of the
restraint for so long as those circumstances endured, however long a period that might prove to be. However, if circumstances should
change to such an extent that the continued operation of the restraints would be contrary to public policy, then they would no longer
be enforceable. The Court catered for that possibility by granting an interdict of potentially unlimited duration, but at the same
time granting the
11
following additional order:
"Leave is granted to the respondents, jointly and severally, to approach the Court, on due notice to the other parties, and on
good cause being shown that circumstances have materially changed, for an order rescinding or amending the above order."
It is in the nature of things highly unlikely that the Court
would have been prepared to decide in anticipando what particular
changes in circumstance would result in the continued operation of the
interdict being contrary to public policy. Had it intended to embark
on so speculative an enquiry, it would not have done so without
requiring argument to be addressed to it before attempting to delineate
precisely what particular changes in circumstance would bring about
unenforceability of the restraint. For if it did not invite argument, the
result would be that the parties would be bound by its delineation of
those circumstances without having been heard. I cannot imagine that
12
any such thing was intended. I think it is obvious that the Court assumed that if it was alleged later that circumstances had so changed,
the court seized of the matter would embark upon a fresh evaluation of the situation in the light of the established principles of
law applicable to it.
Argus Newspapers' contention that the appellants are estopped by reason of the previous judgment of this Court and the doctrine of
res judicata from asserting that the changes which have occurred since in the relationship between itself, Argus Holdings, and appellants
are not such as to render the restraint unenforceable, must therefore fail.
The question which has to be answered therefore is whether such changes as have occurred in the relationship between the parties render
the continued operation and enforceability of the
13
restraint against Argus Holdings and Argus Newspapers contrary to public policy. The Court a quo concluded that the changes are of
such a nature that they do. In reaching that conclusion it set great store by the result of changes in shareholding and concomitant
changes in representation on the boards of directors which occurred. It is unnecessary to detail them in all their minutiae; it is
their result which impressed the Court a quo. What it amounted to was this. Argus Holdings divested itself of all its shares in Argus
Newspapers. The Independent Newspaper Group of Ireland acquired the shares and Argus Newspapers is now listed on the stock exchange
and is no longer the chief operating and wholly owned subsidiary company of Argus Holdings. Argus Holdings therefore no longer has
an association with or a beneficial interest in Argus Newspapers.
Coburn is no longer a director of Argus Newspapers.
14
While Moolman is still a director of Argus Holdings, he can no longer
influence what happens in Argus Newspapers because it is no longer
a subsidiary company of Argus Holdings. None of Argus Holdings'
other directors are on the board of Argus Newspapers. Nor are any of
Argus Newspapers' directors on the boards of either CTP or Argus
Holdings. While Argus Holdings holds some shares in Argus
Newspapers in trust for the benefit of option holders in terms of the
Argus Holdings Limited Share Option Scheme, it is not the beneficial
holder of those shares. Argus Newspapers' only remaining association
with appellants is confined to an indirectly held 33,3% equity holding
in the Highway Mail (Pty) Ltd ("Highway Mail") (a company
publishing weekly newspapers in Pinetown and areas in and adjacent
to Durban), an indirectly held 37,5% equity holding in the Zululand
Observer (Pty) Ltd ("Zululand Observer") (a company publishing a
15
weekly newspaper in Empangeni and neighbouring areas), and an indirectly held 25% shareholding in Capital Media (Pty) Ltd ("Capital
Media") (a company publishing certain free sheets in Pretoria). These interests were acquired, in the case of the first two
companies, in February 1984 prior to the 1985 agreement, and in the case of the third company, in November 1986. These shareholdings
relate to business interests in areas outside the Witwatersrand which is the only area within which Argus Newspapers distributes
the newspapers hit by the interdict. The latter newspapers do not compete with any of the publications of the three companies in
which Argus Newspapers has an indirectly held interest.
Counsel for Argus Newspapers contended that the changed situation contrasted materially with that which existed when the interdict
was sought and granted, so much so that there was no
16
longer any justification for the continued existence of the interdict. He submitted that what justified the enforcement of the restraint
when the matter was last before this Court were the following factors:
1.
The existence of Argus Holdings' equity interest in CTP's local and separate free newspaper and magazine business, which rendered
it pro tanto a joint venture.
2.
It was said that Argus Newspapers benefited as a consequence of Argus Holdings' equity interest in CTP. Argus Newspapers had been
designated by its parent company, Argus Holdings, as its chief operating subsidiary in the sphere of printing, publishing, and distributing
national and regional daily and weekly papers. I interpolate here that this aspect of Argus Holdings' business had initially been
the responsibility of a particular division of Argus Holdings but in 1988 Argus Newspapers was incorporated as a subsidiary company
and, as it was put in the founding affidavit filed by Argus Newspapers, that company "assumed the rights and obligations of
[Argus Holdings] (including the obligations in terms of the restraint provisions contained in the 1980 and 1985 agreements)".
Just how Argus Newspapers benefited is not made entirely clear by its spokesman, but that it did benefit is said to be common cause
in the heads of argument filed on its behalf. It was submitted in the heads of argument filed by the appellants (CTP et al) that
Argus Newspapers benefited from its participation in
17
the joint venture, first, by way of dividends from the three companies in which it indirectly held shares together with CTP (Highway
Mail, Zululand Observer and Capital Media), and secondly, by being able to preserve and protect its own goodwill and profits in the
field in which it operated by reason of its acquisition from its parent company, Argus Holdings, of the right to enforce the restraints
against the other group should it seek to intrude upon Argus Newspapers' sphere of operation. That seems to be so. 3. The cross directorships
which existed gave Argus Holdings and Argus Newspapers access to the operations of the other group in the local and separate free
newspaper and magazine businesses - an entr
e which would not normally have been available to a potential or would-be competitor.
The current position, on the other hand, is submitted to differ in the respects I have set out earlier in this judgment. Do these
differences mean that the appellants no longer have any legitimately protectable interest and that the continued existence of the
interdict would be contrary to public policy? In my view they do not.
Preoccupation with the structure and shareholdings and
18
commonality of directors of the various corporate entities which interacted with one another tends to obscure certain fundamental
commercial realities. I shall concentrate for the moment on the latter. When the 1980 agreement was concluded what I shall call the
Argus group were novices in the field in which, what I shall call the Caxton group, were established and experienced operators, namely,
the field of printing, publishing, and distributing local newspapers and separate and free newspapers. When the Argus group decided
to venture into that specialised field of activity it was apparently not confident enough of its ability to do so successfully on
its own, for it sought instead to conclude a contract with the Caxton group which would give it not only an entree into this particular
variety of publishing enterprise via participation in the fortunes of Caxton companies already active and proficient in the field,
but also an opportunity of familiarising itself
19
with the Caxton group's techniques and modus operandi in that field.
The Caxton group were only willing to provide that entr
e and to
allow participation by the Argus group in their activities at a price, and
against the giving of appropriate undertakings by the Argus group to
restrict any subsequent forays by its own companies into that particular
field of activity. Having purchased a stake in the fortunes of the
Caxton group, the Argus group required reciprocal undertakings to be
given by the Caxton group, the effect of which was to prevent
expansion of its activity in the publishing field without the consent
of the Argus Group. The Argus group was a large and powerful
publishing and printing group which had considerable expertise in the
field of producing, printing, and publishing national and regional daily
and weekly newspapers, but virtually none in the field of producing,
printing, publishing and distributing free or purely local newspapers of
20
the kind in which the Caxton group specialised. The Caxton group was a smaller printing and publishing group. It did not produce or
market national or regional daily or weekly newspapers. It produced free newspapers of the colloquially styled "knock and drop"
variety. These were essentially vehicles for advertisements and they were distributed mainly by placing them in private postboxes
in particular localities. It also produced local newspapers (as opposed to national or regional newspapers). Their raison d'etre
was the generation of income from the placing in those newspapers of advertisements. It was also involved in the publishing and acquisition
of magazines. A more detailed description of the activities of both groups will be found in the previous judgment of this Court at
pages 778 H - 779 B.
The Argus group had no established goodwill in any business of the kind conducted by the Caxton group. The Caxton
21
group did have such goodwill. It was inherent in the situation that if the Argus group was to be given entry to the Caxton group's
fold, it would not only share in the fortunes of the Caxton group, but would acquire an opportunity of familiarising itself with
every aspect of the Caxton group's modwa operandi in conducting this particular kind of activity, and that it might in due course
rival the Caxton group in expertise and then seek to compete with it. The Caxton group on the other hand would acquire no expertise
in that particular field which it did not already have. It was not in the business of producing, printing and publishing national
or regional daily or national weekly newspapers and the joint venture contemplated by the 1980 agreement did not comprehend either
direct or indirect participation by the Caxton group in the fortunes of the Argus group in that particular enterprise. Nonetheless,
the Argus group wanted to be assured that no
22
person or company in the Caxton group would enter the field in which the Argus group had traditionally operated or, if there had already
been an entry into that Geld, that it did not proliferate. It wanted to be assured too that the Caxton group would not extend its
own specialised activities to other areas without its consent. Restraints predicated upon the circumstances which existed in 1980,
and designed to achieve, inter alia, these ends, were embodied in clause 16 of the 1980 agreement.
Before quoting clause 16 a word of explanation is necessary. The abbreviation AP stands for Amalgamated Press (Pty) Ltd ("Amalgamated
Press"), a company in which all the shares were held by William Haigh Hills and William Edward Haigh Hills and/or companies
which they controlled. M & C stands for Moolman and Coburn. Amalgamated Press (50%) and Moolman and Coburn (50%)
23
held all the shares in a company known as Afmed (Pty) Ltd. Afmed (Pty) Ltd in turn held 51% of the shares in Caxton Limited. Nearly
all the shares in Caxton Limited were held by Moolman and Coburn and Amalgamated Press, with Moolman and Coburn holding more than
five times as many shares as Amalgamated Press. The resultant position amounted to Moolman and Coburn and the Hillses virtually owning
Caxton Ltd through their shareholdings in it and in companies which held shares in it, but with Moolman and Coburn having a substantially
greater participation than the Hillses.
That was the position prior to the entry of the Argus group into the picture in 1980 and clause 16 was designed to recognise and protect
the respective commercial interests which each of the groups had, by restraining each group from undermining the position of the
other in its respective Geld of operation. Their concern is easily
24
understandable. By reason of Argus Holdings' acquisition of
substantial equity in Afmed (Pty) Ltd, the parent company of Caxton
Ltd, they were thenceforth both to be participants in the failure or
success of Caxton Ltd. The 1980 agreement made provision for there
to be directors from the Caxton group on the Argus group's boards of
directors, and for directors from the Argus group to be on the Caxton
group's boards of directors. The presence of such representative
directors was stated to be essential to the existence of a quorum. It
would follow that the Caxton group's confidential information and
know-how would have to be shared with the Argus group. A
competing enterprise launched by the Argus group, prompted by an
ever growing confidence in its ability to stand on its own feet in the
Caxton group's field of activity, could damage the Caxton group.
Equally, an expansion of the Caxton group's activities in the
25
publication of local newspapers was inimical both to the Argus group's interest as a shareholder in Afmed (Pty) Ltd and, through it,
in Caxton Limited, and to its overall interest in preserving its goodwill as a publisher of regional newspapers which also covered
local areas. Those regional concerns would exist whether or not the two groups continued to operate in concert with one another through
the medium of Afmed (Pty) Ltd and Caxton Ltd. Once each was admitted to the fold of the other, the risk of subsequent harmful competition
would increase as each learnt more about the operations of the other, and the longer the association between them persisted, the
more would be learnt. If the Argus group were to seek to compete with Caxton Limited while the association between the groups persisted,
it could no doubt harm its own interest as a participant in the fortunes of Caxton Limited, but it was to be a minority shareholder
and it might regard
26
the harm it might suffer as a price worth paying for the profits it could
make while so competing. If it sought to so compete after the
association ceased, the potential damage to the Caxton group would be
no less and, the Argus group's interest in Caxton Limited having
ended, the Argus group would cause no harm to itself by so
competing. And so to clause 16 of the 1980 agreement.
"16 COMPETITION
AP for itself and the HILLS undertakes and warrants that it shall not itself or through any associated company except with the written
consent of M & C and ARGUS and save as hereinafter stipulated.
16.1
Publish any separate free newspaper (i.e. a newspaper for which the recipient does not pay) anywhere in the Republic of South Africa
or South West Africa, save however that this restriction shall not apply to and AP shall have the right so to publish any such free
newspaper in the areas presently described as the magisterial district of Germiston, Elsburg, Boksburg, Benoni (including Petit and
Brentwood Park), Brakpan, Springs, Sasolburg, Meyerton, Vanderbijlpark and Vereeniging;
16.2
Publish a new daily newspaper other than in the areas
27
presently described as the magisterial districts of Germiston, Elsburg, Boksburg, Benoni (including Petit and Brentwood Park), Brakpan,
Springs, Sasolburg, Meyerton, Vanderbijlpark and Vereeniging;
16.3
Commence any new publishing and/or advertising venture and/or related undertaking in the areas presently described as the magisterial
districts of Johannesburg, Verwoerdburg, Alberton, Kempton Park, Randburg, Sandton and Edenvale.
16.4
M & C undertake and warrant that they shall not either themselves or through any company or otherwise except with the written
consent of AP and ARGUS:
16.4.1 Commence any new publishing and/or advertising venture and/or become interested directly or indirectly whether as principals,
employees and shareholders in any such existing business in the areas presently described as the magisterial districts of Germiston,
Boksburg, Benoni (including Petit and Brentwood Park), Vanderbijlpark, Brakpan, Elsburg, Vereeniging, Sasolburg, Meyerton and Springs
save, however, that nothing herein contained shall prevent M & C from being or becoming interested in any manner in outdoor advertising,
hoardings and advertising signs on vehicular transport in
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any of the aforesaid areas and elsewhere. 16.4.2 Publish a new national or regional daily newspaper.
16.5
ARGUS undertakes and warrants that it shall not itself or through any company controlled by it or through any third party except with
the written consent of M & C and AP-
16.6
Publish a separate free newspaper (i.e. a newspaper for which the recipient does not pay) anywhere in the Republic of South Africa
or South West Africa; or
16.7
Publish a local newspaper in the areas presently described as the magisterial districts of Germiston, Elsburg, Boksburg, Benoni (including
Petit and Brentwood Park), Brakpan, Springs, Florida, Sasolburg, Meyerton, Vanderbijlpark and Vereeniging, Roodepoort, Krugersdorp
and Randfontein.
PROVIDED however that all the provisions of this Clause and its sub-clauses shall not be interpreted as a restraint on the ARGUS publishing
a national or regional daily newspaper, or a national or regional weekly newspaper, provided that such regional newspaper does not
circulate only or mainly in the areas described above in Clause 16.7."
What happened thereafter during the period 1980 to 1985
29
is conveniently summarised at pages 779 H to 781 B of the previous judgment of this Court and need not be repeated in greater detail
than in what follows. As a consequence of Hortors Trio Rand Ltd ("Hortrio") acquiring "for the benefit of its wholly
owned subsidiary, Horpak" the local and free (separate) newspaper businesses of Caxton Ltd and five of its subsidiary companies,
an agreement entitled "Restraint Agreement" was concluded in 1985 between Argus Holdings, Moolman, Coburn, Short, Caxton
Ltd, Afrmed, Modern Media Promotions (Pty) Ltd ("Modern Media"), Hortrio and Horpak. Modern Media was a company owned by
Moolman and Coburn. Moolman, Coburn, Afmed, and Argus Holdings were also parties to the 1980 Agreement. In due course Horpak changed
its name to CTP Ltd.
The position in 1985 is summed up by one Featherstone,
30
the deponent to Argus Newspapers' launching affidavit, in this way. The effect of the 1980 agreement was that Argus Holdings, whose
business was in national and regional daily and weekly newspapers, acquired through its shareholding in Afmed an interest in Caxton
Ltd's business in the local and separate free newspapers. "A close and inter-linked commercial relationship was arranged and
would continue to exist as between the parties to the 1980 agreement". In 1985 Caxton Ltd, Afmed and CTP were "closely
associated with" Argus Holdings and its subsidiary and associated companies. Argus Holdings owned all the shares in Argus Newspapers
and the affairs of the latter "were substantially intertwined with the affairs of [CTP]". "The effect of the 1985
agreement was that [Argus Holdings], through its shareholding in Afmed, acquired an effective direct and indirect shareholding of
about 50% of the equity in [CTP], and thereby an interest in Caxton's
31
local newspaper and separate free newspaper business". Coburn was a director of both CTP and Argus Newspapers and also a director
of Armed, Caxton Ltd, and CTP Holdings Ltd. Moolman was also a director of both CTP and Argus Newspapers and of Argus Holdings, Afmed,
Caxton Ltd, and CTP Holdings Ltd. Argus Newspapers, in its capacity as Argus Holdings' chief operating subsidiary, "had assumed
the rights and obligations of [Argus Holdings] (including the obligations in terms of the restraint provisions in the 1980 and 1985
agreements)".
The relevant terms of the 1985 agreement and their import are set out at pages 780 B - 781 B of this Court's previous judgment. It
suffices to observe that, far from the 1980 restraints being curtailed, they were retained and even extended in some respects.
When Argus Newspapers assumed all Argus Holdings'
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rights and obligations under the 1980 and 1985 agreements in 1988 there was no pre-existing connection in law between Argus Newspapers
and Caxton Ltd. Argus Newspapers was a subsidiary of Argus Holdings. Aigus Holdings held shares in Caxton Ltd but Argus Newspapers
did not. Despite the absence of any direct or indirect shareholding in Caxton Ltd by Argus Newspapers, this Court held both Argus
Newspapers and Argus Holdings bound to the restraints. Argus Holdings, through its shareholding in Afmed still has, to quote Featherstone
(at one time seconded by the Argus group to serve as CTP's managing director and now chief executive of Argus Newspapers), "an
effective direct and indirect shareholding of about 50% of the equity in CTP and thereby an interest in Caxton's local newspaper
and separate free newspaper business". Argus Newspapers still has no direct or indirect interest in Caxton's business save for
its
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indirect minority interests in the Highway Mail, the Zululand Observer, and Capital Media. What then has changed? All that has happened
is that a third party has acquired all the shares in Argus Newspapers. That has had some impact upon who sits on what board of directors
but it leaves fundamentally unaltered the contractual relationship between Argus Newspapers and Caxton Ltd. Argus Newspapers retains
the rights and remains subject to the obligations of Argus Holdings by reason of the 1988 agreement, and if it chooses not to assert
them, that does not mean that the appellants may not assert the rights against Argus Newspapers which they acquired by reason of
their acceptance of the assignment of Argus Holdings' rights and obligations under the 1980 and 1985 agreements to Argus Newspapers.
I should add that such acceptance was common cause.
The very fact that Argus Holdings no longer controls
34
Argus Newspapers is, in my view, a good reason why the enforcement of the restraints should continue. When Argus Newspapers was owned
and controlled by Argus Holdings, it was in Argus Holdings' interests to ensure that Argus Newspapers respected the restraints because
the participation of Argus Holdings in the profits of the joint venture with the Caxton group, and Argus Holdings' own interest in
having the reciprocal restraints which burdened the Caxton group observed, gave it an incentive to do so. Once Argus Newspapers was
free of Argus Holdings' control, and because it would not participate directly or indirectly in the profits of the joint venture
between Argus Holdings and the Caxton group, it would have an incentive and be in a position to exploit the entree which it had been
given to the Caxton group's methods and confidential business information, by competing with the Caxton group. But for its designation
while it was still a subsidiary
35
of Argus Holdings, as the latter's chief operating subsidiary, and the opportunities thereby created of gaining access to those methods
and that business information, Argus Newspapers would never have had access to those methods and that business information. Subjecting
it to an appropriate restraint was one way in which the Caxton group could protect itself against such exploitation in the event
of Argus Holdings disposing of its shares in Argus Newspapers. I see nothing which is contrary to the public interest in that.
It must be remembered that these restraints were negotiated by astute businessmen who were not in an unequal bargaining position.
They had legitimate reciprocal interests to protect and the restraints which they fashioned are not to be declared unenforceable
simply because one of the parties no longer wishes to remain a party to the business relationship which gave rise to the
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restraints. Before that is done, it must be convincingly demonstrated that the public interest requires that to be done. The bald
invocation of expressions such as "naked restraints against competition" takes the matter no further. No statute having
any bearing on the matter was relied upon in the papers filed by the appellants. The onus was upon the appellants to show that changed
circumstances justified the discharge of the interdict. That was what they had claimed. There was no attempt to provide any factual
foundation in the papers which could support an alternative claim for a declaration that the interdict should endure only for a particular
period of time to be fixed by the court, nor was there any such claim made.
The use by this Court in its earlier judgment of the words "should the equilibrium in the respective interests of the competing
parties undergo a significant change" at page 789 C of the judgment
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was relied upon by appellants. It was contended that this meant that any material change in circumstances which altered the balance
would suffice to entitle the appellants to a rescission of the interdict. I cannot agree. In my view, the use of the word "equilibrium"
was never intended to be taken so literally that any tilt in the balance would have that consequence. It was not used in a precise
scientific sense but simply to convey the notion that a future disturbance in the existing balance of interests (which were not necessarily
precisely equipoised even in 1980 and 1985) might alter the position.
1.
The appeal is upheld with costs, including the costs of two
counsel.
2.
There is substituted for the order of the Court a quo
the following order:
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"The application is dismissed with costs, including the costs of two counsel".
3.
First Respondent is ordered to pay the costs of the application for leave to appeal, including the costs of two counsel.
4.
No order is made against Second Respondent. (It was joined simply because of its possible interest in the matter, and did not participate
in the litigation.)
R M MARIAS
VAN HEERDEN JA) NESTADT JA) EKSTEEN JA) CONCUR SCOTT JA)

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