Grainco (Pty) Ltd v Van Der Merwe and Another (17437/2013) [2014] ZAWCHC 107; [2014] 3 All SA 683 (WCC); 2014 (5) SA 444 (WCC) (11 July 2014)

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[2014] ZAWCHC 107
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Grainco (Pty) Ltd v Van Der Merwe and Another (17437/2013) [2014] ZAWCHC 107; [2014] 3 All SA 683 (WCC); 2014 (5) SA 444 (WCC) (11 July 2014)

THE
HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 17437/2013
DATE:
11 JULY 2014
In
the matter between:
GRAINCO
(PTY)
LTD
.......................................................................
APPLICANT
And
JACOBUS
ALEWYN VAN DER MERWE
..........................
FIRST
RESPONDENT
JOHANNES
JACOBUS KITSHOFF
..............................
SECOND
RESPONDENT
PERDIGON
(PTY) LTD THIRD RESPONDENT
Coram
:
ROGERS J
Heard:
18 JUNE 2014
Delivered:
11 JULY 2014
JUDGMENT
ROGERS
J:
Introduction
[1]
The applicant (‘GrainCo’ or
‘New GrainCo’) seeks to restrain the first respondent
(‘Van der Merwe’),
the second respondent (‘Kitshoff’)
and the third respondent (‘Perdigon’) from (I summarise)
soliciting
its customers, passing off Perdigon as being associated
with GrainCo, unlawfully interfering in GrainCo’s contractual
relations
and publishing injurious falsehoods.
[2]
The application was issued on 22 October
2013 in long form. The main founding affidavit ran to 63 pages plus
184 pages of annexures.
The main answering affidavit, filed on 12
December 2013, was 150 pages plus 217 pages of annexures. On 19
February 2014 the applicant
filed its replying affidavit, in the
circumstances an admirably terse document of 32 pages plus a further
43 pages of annexures.
[3]
The matter came before me on 18 June 2014.
Mr AIS Redding SC, leading Mr T Dalrymple, appeared for GrainCo, and
Mr J Newdigate SC,
leading Mr HC van Rensburg, appeared for the
respondents.
The
facts
[4]
Since many of the matters traversed in the
papers are irrelevant to the arguments, I shall attempt to compress
the factual background.
[5]
Van
der Merwe and Kitshoff established an agricultural trading and
logistics business in May 2000 through a company referred to
in the
papers as Old GrainCo. The business succeeded and grew. The main
shareholders of Old GrainCo were family trusts associated
with Van
der Merwe and Kitshoff respectively. Their precise shareholding is
not stated in the papers. However, to judge by the
amalgamation
agreement referred to hereunder, an equity financier called Thembeka
Capital (Pty) Ltd held 25,1% of Old GrainCo,
the family trusts
associated with Van der Merwe and Kitshoff held 34,95% each (about
69,9% in total), and the remaining 5% was
held by two other
shareholders.
[1]
[6]
In terms of an agreement executed on 15
February 2007, Old GrainCo sold its business and all its assets to
BKB Ltd (‘BKB’)
with effect from 1 October 2006. The sale
included the businesses conducted as divisions of Old GrainCo as well
as Old GrainCo’s
shares in a subsidiary. Goodwill
(‘
klandisiewaarde
’
)
was one of the assets listed in the schedule of assets sold. The
purchase price was R28450430. BKB was to discharge the price
by
paying R4 million in cash to creditors of Old GrainCo and by issuing
shares to Old GrainCo for the balance of the price. It
was recorded
that Old GrainCo would, immediately upon implementation, be placed in
liquidation and its assets distributed to its
shareholders . (The
agreement was styled an ‘amalgamation agreement’ with
reference to s44 of the Income Tax Act 58
of 1962.)
[7]
The amalgamation agreement was implemented
and Old GrainCo liquidated, as a result of which the family trusts of
Van der Merwe and
Kitshoff collectively obtained, by way of a
distribution from Old GrainCo, an 8,86% shareholding in BKB.
[8]
BKB immediately on-sold the business and
assets to New GrainCo (the applicant) on loan account for the same
price.
[9]
It was envisaged that Van der Merwe and
Kitshoff would take up employment with New GrainCo though this was
not mentioned in the
amalgamation agreement and was not a condition
to which it was subject. Service contracts between New GrainCo and
them were executed
in August 2007 with effect from 1 July 2007. Van
der Merwe was employed as GrainCo’s managing director and
Kitshoff as the
head of its trading division. They were both
appointed as directors of GrainCo.
[10]
Clause 12 of the amalgamation agreement was
headed ‘Restraint of Trade’. Clause 12.1 contained
various definitions relevant
to the other sub-clauses. Nothing turns
on these definitions save to mention that the defined ‘restraint
period’ was
the period from the effective date (1 October 2006)
to the fifth anniversary of the closing date. In the event, the fifth
anniversary
was 30 June 2012.
[11]
In terms of clause 12.2 Old GrainCo, Van
Der Merwe and Kitshoff agreed with BKB that none of them would do any
of the following,
directly or indirectly:
’
12.2.1during
any of the years of the restraint period be interested in any entity
which is interested in any competitive activity
in the territory or
themselves be interested in any competitive activity in the
territory;
12.2.2 during any of
the years of the restraint period do anything referred to in 12.2.1
outside the territory which has the effect
of causing BKB prejudice
in the territory;
12.2.3 during any of
the years of the restraint period directly or indirectly canvass any
customer and/or client of BKB for or on
behalf of any entity in which
they are interested, or on their own behalf;
12.2.4
at any time disclose the confidential information.’
[12]
In terms of clause 12.3 Old GrainCo, Van
der Merwe and Kitshoff agreed with BKB that none of them would,
either for their own account
or as representative or agent of any
entity in which they were interested, persuade, induce, encourage or
procure any BKB employee:
’
12.3.1to
become employed by or interested, directly or indirectly, in any
entity which is interested in a competitive activity;
12.3.2 to terminate
such employee’s employment with any of BKB [
sic
]; or
12.3.3 to furnish
any information or advice acquired by the hired employee as a result
of his employment with any of BKB [
sic
], to any unauthorised
person.’
[13]
In clause 12.4 Old GrainCo, Van Der Merwe
and Kitshoff acknowledged that the restraints were reasonable as to
subject matter, period
and territory and that the agreement was
concluded on the basis that BKB would be entitled to the benefits of
the restraints. Clause
12.5 provided for severability in respect of
the various components of the restraint. Clause 12.6 recorded that
the restraints
were to ‘be given the widest possible
interpretation’.
[14]
Clause 12.8 provided that the provisions of
clause 12 would be capable of acceptance and enforcement by BKB’s
successor-in-title.
Clause 15 stated, more generally, that the
agreement would also be for the benefit of and binding upon the
‘successors in
title and permitted assigns’ of the
parties or any of them. Although counsel did not refer to these
clauses in argument,
New GrainCo was clearly the successor-in-title
to BKB and the assignee of its rights and obligations.
[15]
The service contracts concluded by Van der
Merwe and Kitshoff made clause 12 of the amalgamation agreement
applicable to their employment.
The service contracts were for a
period of five years and expired on 30 June 2012, simultaneously with
the restraints contained
in clause 12. Van der Merwe and Kitshoff
concluded new service contracts with effect from 1 July 2012. Those
contracts were of
indefinite duration. The contracts referred again
to clause 12 of the amalgamation agreement though in the event clause
12 had
by then ceased to be operative. GrainCo did not contend in
these proceedings that Van der Merwe or Kitshoff were, after 30 June

2012, bound by the restraints contained in clause 12 of the
amalgamation agreement or in their service contracts.
[16]
The businesses of GrainCo and its
subsidiaries grew and prospered for several years but came under
increasing financial strain in
2012. Tension developed between BKB’s
board (in particular the latter’s managing director, Mr W
Edmayr) and Van der
Merwe over the management of GrainCo’s
affairs. Van der Merwe considered that GrainCo’s current
trading model could
not succeed without significant capital support
from BKB, which the latter was unwilling to provide. Various
proposals were mooted,
which included a possible sale of BKB’s
business to Senwes Ltd (negotiations to that effect eventually
failed), the possible
acquisition by Van der Merwe of GrainCo’s
trading business, and a restructuring and scaling-down of GrainCo’s
trading
operations. If Van der Merwe was to acquire the trading
business, he wanted Kitshoff to join him. During January 2013 Van der
Merwe
raised the possibility of his being phased out as an employee
of the business.
[17]
Van der Merwe and Kitshoff presented
various scenarios to Edmayr and the GrainCo board on 5 March 2013.
Edmayr subsequently took
the view that at this meeting Van der Merwe
had given notice of his resignation with effect from 31 March 2013.
Van der Merwe disputes
this.
[18]
‘
Brainstorming’ regarding the
possible acquisition by Van der Merwe and Kitshoff of GrainCo’s
trading business continued
for several weeks. According to the
respondents, these discussions came to a halt on about 18 March 2013.
BKB’s non-executive
chairman, Mr Chris Louw, flew down from
Port Elizabeth and joined Edmayr in a meeting at GrainCo’s
offices in Paarl on 19
March 2013. When Van der Merwe joined this
meeting, he was told by Edmayr that BKB’s plan now was that
Grainco’s trading
and logistics businesses would be scaled down
and the company would embark upon a process in terms of s189A of the
Labour Relations
Act to consult with employees who might be
retrenched pursuant to the proposed restructuring. The s189A process
was to be headed
by BKB’s human resources manager, Ms Karen
Posthumus.
[19]
Posthumus, who was based in Port Elizabeth,
arrived in Paarl on 25 March 2013 to begin the process of
consultation. It emerged that
Van der Merwe was not regarded as an
affected employee because Edmayr said he had already resigned.
Kitshoff, on the other hand,
was an affected employee, ie he was
notified that due to restructuring his employment with GrainCo might
possibly be terminated.
Among other affected employees were Joe
Roberts (a senior trader), Anthea Emslie (chief of logistics) and
Andre Hamann (internal
accountant and head of bank finance).
[20]
The respondents say that, with a
scaling-down and retrenchment on the cards, Van der Merwe had
discussions with Posthumus and BKB
about the possibility that he
would open a trading business which could employ retrenched staff
members. Edmayr did not support
this. Smit, according to the
respondents, was ambivalent. At that stage Van der Merwe thought he
was still subject to a restraint
of trade. In late March 2013 he took
legal opinion and was advised that he was not so bound.
[21]
Although Van der Merwe disputed Edmayr’s
assertion that he had resigned, he decided not to contest the matter
because he believed
that BKB was intent on forcing him out. He thus
regarded his employment with GrainCo as having terminated on 31 March
2013. This
accords with the applicant’s case as to the date of
termination. Mr Hendrik Vermooten, previously employed elsewhere in
the
BKB group, succeeded Van der Merwe as GrainCo’s managing
director. (Vermooten made the founding affidavit.) Edmayr informed

staff of this change by way of a circular dated 3 April 2013.
[22]
Van der Merwe says that upon his departure
he started actively planning his new trading venture.
[23]
On 30 April 2013 Kitshoff, Roberts, Emslie
and Hamann gave notice of their resignations. They were required to
work out one month’s
notice. They thus worked at GrainCo until
the end of May 2013. They all joined Van der Merwe’s new
trading venture, which
opened its doors on 1 June 2013. The vehicle
for the new business was Perdigon.
[24]
Kitshoff, Roberts, Emslie and Hamann left
GrainCo by way of resignation, not retrenchment. Interactions between
BKB’s management
and Kitshoff during April 2013 indicated that
he might be retrenched or offered a reduced remuneration package.
Kitshoff was ambivalent
about the merits of GrainCo’s proposed
new trading model. It seems, though, that by late April 2013 GrainCo
was expecting
Kitshoff to remain as the head trader in accordance
with his existing service contract.
[25]
Roberts, who was a trader, had requested
GrainCo’s management during April 2013 to offer him a
retrenchment package, given
that the restructuring was directed
primarily at the trading division. GrainCo did not, however, offer
him a package, from which
one may infer that the company wished him
to stay.
[26]
I accept as a fact that Kitshoff, Roberts,
Emslie and Hamann resigned from GrainCo because Van der Merwe had
communicated to them
that he intended to start a new trading business
and would offer them positions. Roberts, Emslie and Hamann had
service contracts
containing a one-year restraint of trade. The
respondents say that during the s 189A process GrainCo’s
position was
that employees affected by the restructuring would be
released from their restraints. The respondents say that they
believed this
to apply not only to employees who were retrenched but
also to those who (like Roberts, Emslie and Hamann) chose to resign.
GrainCo
denies that there was a general dispensation and alleges that
the respondents were guilty of inducing Roberts, Emslie and Hammond

to breach their contractual restraints.
[27]
Three other GrainCo employees also joined
Perdigon. These persons had been retrenched by GrainCo, and the
latter accepts that in
their case the restraints of trade were
waived.
[28]
At the end of July 2013 another GrainCo
employee, Tharine Pijl (group financial manager), resigned. She was
also subject to a one-year
restraint. She commenced employment with
Perdigon on 1 November 2013, about a week after the application was
launched.
[29]
GrainCo alleged in its papers that Van der
Merwe, Kitshoff, Hamann and Pijl all gave misleading reasons to
GrainCo, when departing,
as to their future intentions. There are
factual disputes on these allegations.
[30]
It is difficult to ascertain from the
papers to what extent GrainCo’s trading and logistics
operations underwent changes in
consequence of the proposed
restructuring and s 189A process. From a letter which Smit wrote
to Posthumus on 17 April 2013
(with copies to Edmayr and Vermooten),
it appears that the substantial down-scaling which Edmayr had
communicated to Van der Merwe
on 19 March 2013 had come as a surprise
to Smit and did not carry the latter’s approval. In its
replying papers the applicant
says that there was, in the event, no
material down-scaling. By the end of the process GrainCo only had
nine fewer employees than
before.
[31]
On the other hand, the minutes of s189A
discussions on 29 April 2013 indicate that, according to Vermooten,
GrainCo would be revising
its trading model in order to focus as ‘a
medium trader in niche markets trading’. In an email from
Posthumus to Solidarity
(the trade union) on 10 May 2013, the former
said that future trading business would be conducted primarily with
blue-chip clients.
According to the respondents, Van der Merwe and
Kitshoff had dinner with Vermooten on 12 June 2013, on which occasion
Vermooten
told them that all his restructuring targets had been
achieved as a result of voluntary resignations, staff moving to
Perdigon
and one retrenchment, as a result of which GrainCo’s
salary bill had been substantially reduced. Vermooten also allegedly

said that GrainCo would reposition itself in the market and focus on
storage, handling and back-to-back trading transactions.
[32]
The reference to back-to-back trading
transactions is briefly the following. GrainCo traded as an
intermediary between producers
and processors. If GrainCo’s buy
and sell transactions were back-to-back, it would be protected from
movements in market
prices and its main risk would be the credit risk
of the purchaser (the processor). Back-to-back trading transactions
where the
purchaser is a blue-chip customer carry very low credit
risk. Prior to 2013 GrainCo’s trading model had not involved
back-to-back
transactions. Risk was instead hedged by way of futures
contracts on SAFEX. However, if there were substantial movements in
price
the intermediary (here, GrainCo) could be called upon to make
margin calls. This, according to the respondents, was why GrainCo

required substantial capital, which BKB was unwilling to provide.
They say that, whereas GrainCo has now become a niche back-to-back

trader with blue-chip customers, Perdigon is operating on a
risk-based model.
[33]
The injurious falsehoods concern statements
allegedly made by Van der Merwe and Kitshoff to customers as to
GrainCo’s changed
business model.
The
main issues
[34]
Because the five-year period specified in
clause 12 of the amalgamation agreement and in the service contracts
of Van der Merwe
and Kitshoff came to an end in June 2012, the
applicant cannot and does not rely, for relief, on the express
restraints of trade.
[35]
Certain issues raised in the papers have
fallen away because the applicant’s counsel at the hearing did
not persist with them.
These are the following:
(I) that the
respondents infringed the ‘GrainCo’ trade mark allegedly
owned by the applicant;
(ii) that Van der
Merwe and Kitshoff should be interdicted because they are allegedly
abusing confidential information acquired
by them while they were
directors and senior employees of GrainCo.
[36]
The issues which remain can be summarised
as follows:
(I) whether the sale
of Old GrainCo’s business (including its goodwill) to BKB gave
rise to an implied prohibition against
the canvassing of former
customers and the effect in that regard of the express restraint
clause; and if so,
(ii) whether the
implied prohibition applies to all of New GrainCo’s customers
as at 1 June 2013 (as per the list annexed
as ‘NOM1’ to
the notice of motion) or only to those persons who were customers of
Old GrainCo as at 1 October 2006
(the effective date of the
amalgamation agreement); and, in the latter event, whether the
applicant is entitled at this late stage
to relief confined to
customers as at 1 October 2006, given that this was not the basis on
which it brought the application;
(iii) whether the
respondents (as distinct from Old GrainCo) are bound by the implied
prohibition;
(iv) whether, by
virtue of the on-sale of the business by BKB to New GrainCo (the
applicant), the latter can enforce the implied
prohibition;
(v) whether the
respondents were guilty of passing off Perdigon’s business as
being associated with GrainCo’s business,
having regard in
particular to the fact that Perdigon’s corporate documentation
made reference to the name GrainCo;
(vi) whether the
respondents unlawfully interfered in GrainCo’s contractual
relations, particularly by offering employment
to Roberts, Emslie,
Hamann and Pijl in circumstances where those employees were allegedly
subject to one-year restraints;
(vii) whether the
respondents disseminated injurious falsehoods concerning GrainCo to
customers, in particular as to the scope of
GrainCo’s current
operations and ambitions.
[37]
In the founding papers the applicant
claimed interim interdicts in the alternative to final interdicts if
there should be disputes
of fact. Although the alternative of interim
relief was addressed in the applicant’s heads of argument, Mr
Redding did not
deal with it in oral argument, though he did not
abandon it. In my view it would not be appropriate to contemplate
granting interim
relief at this late stage. Perdigon has been
conducting business for more than a year. The application was
launched in October
last year. No steps were taken to obtain an
urgent hearing for the obtaining of interim relief. In any event, and
in regard to
the main relief claimed (para 1.1), my conclusion is not
affected by factual disputes.
The
canvassing of GrainCo’s customers (para 1.1 of the notice of
motion)
Introduction
[38]
The first four issues summarised above
concern the relief claimed in para 1.1 of the notice of motion.
GrainCo’s contention,
based on the principle laid down in
Trego
v Hunt
1896 AC 7
and acted upon in
A
Becker & Co (Pty) Ltd v Becker & Others
1981
(3) SA 406
(A), is that the seller of a business inclusive of its
goodwill is subject to an implied prohibition not to diminish the
goodwill
by canvassing the customers of the sold business and that in
the present case the operation of the implied prohibition is not
excluded
by the restraints contained in clause 12. The implied
prohibition, GrainCo submits, continues in force despite the fact
that the
restraints in clause 12 expired on 30 June 2012. (For
convenience, I shall refer to the implied prohibition referred to in
the
foregoing cases as the implied
Trego
prohibition.)
[39]
The respondents’ answer is that
Becker
is
distinguishable. In particular, clause 12 in the present case, unlike
the restraint in the
Becker
case,
is sufficient to exclude the implied
Trego
prohibition. The respondents submit
that, in any event, the applicant (New GrainCo) was not the purchaser
in terms of the amalgamation
agreement (the purchaser was BKB) and
that none of the respondents were sellers (the seller was Old
GrainCo). If there were an
implied
Trego
prohibition, GrainCo is not entitled to
enforce it and none of the respondents is bound by it.
[40]
Although Van der Merwe and Kitshoff started
the Perdigon business shortly after leaving GrainCo, it is necessary
throughout to bear
in mind that we are not concerned with an employee
restraint triggered upon the termination of the employee’s
service. We
are concerned with an implied prohibition (against the
canvassing of former clients) which was allegedly a legal incident of
the
sale of Old GrainCo’s business to BKB as at 1 October 2006.
In relation to the sale of the business, Old GrainCo, Van der
Merwe
and Kitshoff bound themselves to a five-year restraint. Van der Merwe
and Kitshoff only started the Perdigon business in
June 2013. Old
GrainCo thus obtained the full benefit of the five-year restraint, in
that for five years (and more) it was free
from competition on the
part of Van der Merwe and Kitshoff. Not only was it free from
competition on their part but it had their
active participation (as
senior employees) in the generation of its profits (even though the
amalgamation agreement itself did
not requires them to take up
employment with New GrainCo). By all accounts the business in New
GrainCo’s hands expanded and
good profits were earned in the
succeeding financial years, including the financial year ended 30
June 2012. It was thereafter
that the New GrainCo operations, and
particularly the trading business, began to take financial strain.
[41]
It may be helpful, as an aid in the reading
of what follows, to summarise my essential conclusions:
(I) If it were not
for the authority of
Becker
, the correctness of which in my
respectful view may warrant reconsideration, I would find that the
express restraint in clause
12 excluded the operation of the implied
Trego
prohibition.
(ii) However I am
bound by
Becker
. I thus consider that I am bound to find that,
because the express restraint in the present case was wider than the
implied prohibition
and thus not inconsistent with it, the implied
prohibition was not excluded.
(iii) The benefit of
the implied prohibition passed from BKB to New GrainCo upon the sale
of the business by the former to the latter.
(iv) However, the
implied prohibition only bound the seller of the goodwill, namely Old
GrainCo. Van der Merwe and Kitshoff were
not bound by the implied
prohibition. They were permissibly subjected to an express restraint
but that restraint expired in June
2012.
(v) But for the
finding in (iv), I would have granted an interdict but in more
limited form than claimed. In particular, I would
have found that the
implied prohibition applied only to customers, ie purchasers of
GrainCo’s goods and services, and not
to its suppliers and
brokers; that the customers in respect of whom the implied
prohibition related were customers of the Old Grainco
business as at
1 October 2006, not as at 30 June 2013 as claimed in the notice of
motion; and that the interdict should be qualified
to exclude, from
its operation, customers who had ceased trading with GrainCo and were
unlikely to resume trading with GrainCo
as well as customers with
whom GrainCo had elected to cease trading. I would also have limited
the interdict to canvassing and
would not have included ‘dealing
with’ the customers.
Transfer
of the benefit of the implied prohibition
[42]
I now consider these matters in more
detail. Point (iii) may be disposed of shortly. If the respondents
are bound by an implied
Trego
prohibition, I would reject a
contention that GrainCo is not entitled to enforce it. The implied
prohibition would be an advantage
of the purchased business, in the
same way that a restraint of trade (whether as against employees or
the seller of a business)
is an advantage of the purchased business.
The advantage conferred by the implied prohibition would, like the
advantage conferred
by express contractual restraints, be part of the
goodwill of the business in the hands of the purchaser. If the
purchaser on-sells
the business together with its goodwill, these
advantages pass to the new purchaser by way of cession of the right
to enforce the
restraints (
Botha &
Another v Carapax Shadeports (Pty) Ltd
[1991] ZASCA 134
;
1992
(1) SA 202
(A) at 211H-214G).
[43]
The onward sale of the business by BKB to
GrainCo expressly included goodwill and all rights pertaining to the
business. In terms
of clause 3.3 all rights and obligations under
BKB’s business contracts as defined were deemed to be ceded and
assigned to
GrainCo; and in terms of clause 4.1 ownership of the
business and its assets would be deemed on the effective date to have
passed
to and vested in GrainCo.
[44]
In any event, clause 15 of the amalgamation
agreement has the effect that the terms of the agreement, which would
include any terms
implied therein as a matter of law, are enforceable
by New GrainCo as the successor-in-title and assignee of BKB.
The
authorities on the implied prohibition
[45]
Before considering the other issues which
arise on this part of the case, it is necessary to examine more
closely the legal basis
for the implied prohibition. The leading case
in this country is
Becker supra
.
Judgements were delivered by Muller JA and Van Heerden AJA (as he
then was). Both judgements represent the decision of the court,

because three of the Judges of Appeal concurred in the judgment of
Muller JA, and Muller JA and Van Heerden AJA each endorsed the

other’s judgment (see at 414H and 416H).
[46]
The facts of that case were that with
effect from 1 March 1972 the second defendant, a company owned by the
first defendant, Becker,
sold its business to the plaintiff. The
assets sold included the goodwill of the business. In the same
transaction, Becker sold
the shares in another trading company, which
also had goodwill, to the plaintiff. Clause 12 of the sale agreement
recorded that
the company had customers throughout South Africa and
that they were the personal customers of Becker himself. The company
and
Becker gave a non-compete undertaking, to endure for five years
from the effective date, ie until 1 March 1977. The restraint
incorporated
a prohibition against carrying on any business in
competition with the business sold to the plaintiff and a prohibition
against
soliciting custom for any restrained business. Becker and the
company acknowledged that the restraints were reasonable and were

reasonably required by the plaintiff in protection of the businesses
bought and sold in terms of the agreement.
[47]
Becker and the company observed the
restraint until 1 March 1977. Upon the expiry of the five-year
period, Becker and the company,
allegedly under the guise of the
third defendant (another entity controlled by Becker), began
canvassing persons who were customers
of the businesses at the date
of the sale. The plaintiff instituted an action for an interdict to
prevent Becker and his companies
from canvassing the former clients.
At the close of the plaintiff’s case the defendants sought
absolution from the instance
on the basis that any implied
prohibition against canvassing was excluded by the express restraints
in clause 12 of the sale agreement
and that the defendants, having
complied with those restraints, were free after five years to compete
with the plaintiff and to
canvass the former clients. The trial judge
granted absolution on this basis but his decision was reversed by the
Appellate Division.
[48]
In my view, the following principles can be
distilled from the two judgments in the Appellate Division:
(I) A person who
sells a business inclusive of its goodwill is not, in the absence of
an express prohibition, precluded in general
from competing with the
purchaser.
(ii) Such a seller
is, however, precluded from competing by canvassing persons who were
customers of the business at the time of
the sale.
(iii) The said
prohibition arises not as a tacit term but as a term implied by law
as one of the
naturalia
of a contract for the sale of a
business incorporating goodwill.
(iv) The
justification for the implied term is that, as a matter of public
policy, a seller who has been paid for goodwill should
not be allowed
to undermine the value of what he has given by canvassing former
customers.
(v) The implied
term, like other
naturalia
of a contract, may be excluded by a
contrary term in the contract.
(vi) However, the
inclusion in the sale of agreement of an express restraint against
competition will not exclude the implied term,
even though the
express restraint may overlap with the implied term (overlap in the
sense that the express restraint would generally
incorporate, but
typically go beyond, a prohibition against canvassing former
clients).
[49]
Although the Appellate Division was
concerned with the question whether absolution from the instance
should have been granted by
the trial court, the judgments appear to
have left no scope for the defendants to argue at the trial that they
were not bound by
the implied prohibition.
[50]
The Appellate Division in
Becker
placed reliance on the decision of the House of Lords in
Trego
v Hunt supra
and the judgment of a
United States court in
Bergum v Weber
288 P 2d 623
(1955).
Trego
did not involve the sale of a business.
There Mrs Trego had taken in Mr Hunt as a partner for seven years on
the basis that the
goodwill of the business, which she had inherited
from her late husband, would belong to her
.
After several years Mr Hunt began
secretly to copy details of customers, apparently with a view to
setting up a competing business.
The court regarded Mr Hunt as being
in the same position as the seller of a business because he had
agreed that the goodwill would
remain with Mrs Trego. The partnership
agreement did not impose any express restraint on Mr Hunt so the
inter-relationship between
an express restraint and the implied
prohibition did not arise for consideration. The House of Lords held
that, by concluding a
partnership agreement in terms whereof the
goodwill was recognised as belonging to Mrs Trego, Mr Hunter was
subject to an obligation
not to undermine the goodwill by canvassing
clients of the business.
[51]
In
Bergum
there was a sale of business coupled
with an express non-compete undertaking of one year. The District
Court of Appeal held that
there was an implied promise not to deprive
the purchaser of the fruits of his bargain and that this was not
negatived by or inconsistent
with the express promise not to open a
competing business for one year (see the summary of the case quoted
by Muller JA at 415A-B
and by Van Heerden AJA at 420C-421B).
[52]
In regard to the impact of the express
restraint against competition, Muller JA in
Becker
approved a submission by the plaintiff
that ‘the sale of the goodwill and the restraint of trade were
entirely separate provisions,
and the sale of goodwill is not in any
way tied up with the wording of the restraint clause’ (at
416A-B). He was unpersuaded
that the parties had intended that the
only restraint on the defendants would be the one provided for in
clause 12 (416B-C).
[53]
Van Heerden AJA approved the approach in
Bergum
as
to the effect of an express restraint, namely that, in order for the
express restraint to exclude the implied term, the express
term ‘must
relate to the same subject matter as the covenant, which except for
it, would have been implied’, ie the
express covenant ‘must
be inconsistent with the one which the law would imply’. In
Bergum
the
court concluded that the express non-compete clause and the implied
prohibition did not deal with the same subject matter and
were not
inconsistent: ‘The implied covenant is as to an obligation
assumed by the [seller]; the express covenant is a restriction
on a
right which, under the contract, he would have retained except for
that covenant’ (
Becker
at
420H-421B, quoting from
Bergum
).
Van Heerden AJA considered the same to be true of the express
restraint in
Becker
(at 421H-422A). I offer the following translation from Afrikaans of
the relevant passage in Van Heerden AJA’s judgment:
‘
If
a sale contract does not contain such a term [ie an express restraint
against competition], the seller is at liberty to compete
with the
purchaser, subject only to his obligation not to canvass his former
clients. It is thus unnecessary to circumscribe this
obligation
expressly. If the buyer, however, wants to protect himself also
against indirect competition, express provision must
be made for such
a term. It is true that there is automatically wrapped up in the
[express] prohibition a prohibition also against
direct intrusions on
the goodwill, but I do not find in that consideration an
inconsistency between the operation of the [express]
prohibition and
the applicability of the mentioned
naturale
after
the expiry of the [express] prohibition. At most, the prohibition and
the implied term [‘
die
regsgevolg
’
]
overlap for the period specified in the prohibition…’
[2]
[54]
I
respectfully suggest that the conclusion in
Becker
and
its approval of
Bergum
are
matters which might warrant reconsideration by the Supreme Court of
Appeal (‘SCA’). In the judgment of the court
a
quo
in
Becker
,
FS Steyn J said the following:
[3]
‘
I
further hold the view that the inclusion of a restraint of trade
clause in an agreement by which a business is sold, precludes
the
possibility of finding an implied term in such an agreement that the
vendors sold the goodwill of the business subject to another
and
special condition that he may never again make use of his personal
business connection with customers whose customer connection
with the
business sold constituted an important element of the goodwill sold.
The restraint of trade clause is the result of the
parties involved
in the sale directing their attention to the whole question of the
preservation of the goodwill sold for the benefit
of the purchaser
and the restrictive covenant agreed upon by the parties is
necessarily the bargain they decide to strike between
themselves, and
that arrangement shall be binding as between purchaser and seller
even if it is contrary to any rule which might
have been operative if
the parties had not entered into an agreement on the subject.’
The learned judge
went on to say that counsel had been unable to refer him to any
authority, in England or South Africa, where such
a restriction had
been implied in the face of an express restraint of trade clause.
[55]
I
must say that the view of the learned trial judge makes good
commercial sense and appears to me most likely to represent the
common intention of the parties to a business sale agreement with a
typical non-compete clause. It appears to me, if I may respectfully

say, to be unrealistic and legally unsound to assert that the
restraint clause and the sale of the goodwill are ‘entirely

separate provisions’ and that the sale of the goodwill is ‘not
in any way tied up with the wording of the restraint
clause’.
So far from being unrelated, goodwill is the very thing to which the
parties are applying their minds when they
negotiate a restraint
clause in the context of the sale of a business. Time and again one
will see in the authorities, here and
in other Commonwealth
jurisdictions, that, where restraint clauses in business sales are
attacked as being an unreasonable restriction
on competition, the
centre of attention in the justification debate is whether the
restraint was reasonably necessary to protect
the goodwill sold.
[4]
[56]
It
is also to be borne in mind, in this regard, that goodwill is by no
means limited to the connection with existing customers (which
is the
subject of the implied
Trego
prohibition). This was recognised in
Trego
itself.
Lord Herschell, in his speech, referred to a definition in an early
case by Lord Eldon to the effect that goodwill is ‘nothing
more
than the probability that the old customers will resort to the old
place’.
[5]
Lord Herschell
said that this was far too narrow a definition. He referred with
approval to a later definition that goodwill meant
every positive
advantage in carrying on the business, whether connected with the
premises or with the name of the firm or with
any other matter,
carrying with it the benefit of the business.
[6]
He said that, on this basis, a wider implied prohibition than merely
canvassing former clients might have been justified when goodwill
was
sold (at 19). It might have been held, he suggested, that the seller
was
‘
not
entitled to derogate from his grant by seeking in any manner to
withdraw from the purchaser the customers of the old business,
as he
would do by setting up a business in such a place or under such
circumstances that it would immediately compete for the old

customers.’
On the state of the
English authorities, however, he thought that it was too late to
adopt that view and that the implied prohibition
had by judicial
precedent been confined to the act of canvassing former customers (at
19-20).
[57]
Lord MacNaghten expressed a similar view.
Goodwill was the ‘whole advantage, whatever it may be, of the
reputation and connection
of the firm, which may have been built up
by years of honest work or gained by lavish expenditure of money’.
He did not think
that the ordinary person would suppose that a person
might sell the goodwill of his business ‘and then set to work
to withdraw
from the purchaser the benefit of his purchase’. On
this view, a wider implied prohibition might have been justified.
However,
the authorities, which Lord MacNaghten said were then too
late to question, showed that a person who has sold goodwill ‘may

do much to regain his former position, and yet keep on the windy side
of the law’ (at 24). Nevertheless, there was an implied

prohibition against actively canvassing former clients.
[58]
The wide nature of the concept of goodwill,
as stated in
Trego
,
has frequently been repeated, with or without reference to that
particular case. It is unnecessary to heap up citations. It suffices,

in this country, to refer to what Harms JA said in
Caterham
Car Sales & Coachworks Ltd
v
Birkin Cars (Pty) Ltd
[1998] ZASCA 44
;
1998 (3) SA 938
(SCA) para 15, namely that goodwill is ‘the totality of
attributes that lure or entice clients or potential clients to
support
a particular business’.
[59]
I
mention the nature of goodwill as described in
Trego
and
frequently thereafter, because it shows that a restraint of trade in
a business sale agreement is indeed directed at protecting
the
goodwill of the sold business. The goodwill is not confined to
connection with existing customers, and the acts which might

undermine the goodwill are not confined to the canvassing of former
customers. But for the state of authorities in England in 1895
when
Trego
was
decided, the House of Lords, it appears, would have thought that a
wider prohibition, consistent with the typical restraint
of trade,
was justified as an implied term of the sale of a business with
goodwill. Indeed, a stricter view of the implied prohibition
has
apparently been adopted in some American decisions (see
Williston
on Contracts
3
rd
Ed
[7]
Vol 14 §1640 at p119
and footnote 9).
[60]
The goodwill of the business thus comprises
more than the connection with existing customers; it includes all
those attractive features
which may cause existing and new customers
to patronise the business (see the reference to ‘potential
customers’ in
Caterham Car Sales
supra
; see also to similar effect
Weinberg v Mervis
1953
(3) SA 863
(C) at 870, holding that protected goodwill included
potential patients of a sold medical practice, and
Commercial
and Industrial Holdings (Pvt) Ltd & Another v Leigh-Smith &
Others
1982 (4) SA 226
(ZSC) at
232H-233A, emphasising the prospect of expanded profit). A person who
buys a business and bargains for an express restraint
wants to secure
for himself a reasonable period during which he can, without
competition from the seller, exploit the attractive
features of the
business so as to earn profit from existing and new customers. An
express restraint, which would typically contain
a general
prohibition against competition in the same line of business, is
directed at protecting these sources of profit from
competition by
prohibiting all acts of competition, including but not limited to
active canvassing of former and new customers.
[61]
An
express restraint of trade in the context of the sale of the business
can, as with an express restraint in the employment context,
be
attacked as an unreasonable restriction on competition (in regard to
English law, see Heydon
The
Restraint of Trade Doctrine
(1971)
at 189-199,
Chitty
on Contracts
31
st
Ed Vol para 16-076 and Peel
Treitel
The Law of Contract
13
th
Ed para 11-068; in regard to American law, see
Williston
op cit
§1641 and
Farnsworth
on Contracts
3
rd
Ed (2004) §5.3 Vol 2 at 29-31). In principle, the same sorts of
considerations arise in determining whether the restraint
is
enforceable or not, though the law is more liberal than with
restraints on employees. Even so, and as with employment restraints,

the particular restraint might be shown to be unreasonable in the
ambit of commercial activity restrained, geographic extent or

temporal duration.
[8]
The
question is whether the restraint as bargained for is a reasonable
incident of the purchase of the goodwill. As stated by the
authors of
Chitty
supra
in
para 16-094 (my underlining):
‘
In
the case of the traditional categories of covenant to which the
[restraint of trade] doctrine relates, the expression “the

interest of the covenantee” connotes the proprietary or quasi
proprietary interest of an employer in his trade secrets and
trade
connections and of a purchaser of a business in the goodwill of the
enterprise he has acquired.
It is the
protection of such interests which furnishes the sole justification
for a restraint and the restraint must therefore be
no
more
than is reasonably necessary for that protection
.’
[62]
The position is the same in the United
States. In
Farnsworth on Contracts
op cit
the
author says that such restraints are held justified by the buyer’s
need to protect the value of the goodwill purchased
with the sale of
the business. A restraint is frequently necessary to make the
goodwill a transferable asset, ie if it were not
permissible to
bargain for and impose a restraint, purchasers would be reluctant to
buy businesses together with their goodwill
(Vol 2 §5.3 at 22).
[63]
At
the risk of stating the obvious, it is not permitted to buy
monopoly.
[9]
So a court will not
enforce a restraint, even in the context of the sale of goodwill, if
the restraint goes further than is reasonably
required to protect the
goodwill for which the purchaser has paid. If, as was suggested by
Muller JA in
Becker
,
the express restraint and the sale of the goodwill are unrelated, on
what basis is the express restraint then to be justified?
[64]
In
Bergum
the
basic principle on which the court acted was that ‘the law
implies in every contract a covenant that neither party will
do
anything that will deprive the other of the fruits of his bargain’
(para 4). However, a vendor of a business who sets
up in competition
immediately after selling the business, who publishes general
advertisements as to his trade, and who deals with
former customers
who approach him (which they might well do if he has built up a
reputation) is undoubtedly acting in a manner
which can be said to
deprive the purchaser of the fruits of his bargain (as
Trego
recognised), yet all of this the vendor
may do. The purchaser of a business has a protectable interest to
prohibit this form of
competition just as he has a protectable
interest to prevent competition in the form of canvassing former
customers, hence the
permissibility of a reasonable restraint. When
it comes to assessing the impact of an express restraint on the
applicability of
a limited implied prohibition, I do not think one
can justify the survival of the implied prohibition on the ground
that the implied
prohibition, unlike the (rest of the) express
restraint, prevents the vendor from depriving the purchaser of the
fruits of his
bargain.
[65]
I would thus respectfully suggest for
consideration that where, in the sale of a business with goodwill,
the purchaser has bargained
for an express protection against
competition for a specified period, the parties should generally be
taken to have exhaustively
regulated the protection they intended the
purchaser to have in relation to the goodwill. It is not consistent
with the express
restraint to have an implied term which continues,
after the expiry of the express restraint, to protect, through a
prohibition
of some though not all of the acts which were prohibited
by the express restraint, part of the very goodwill protected by the
express
restraint.
[66]
In advancing this view for possible
consideration by the SCA in due course (whether in this matter or in
another where it arises
for decision), I may mention that, to the
best of my research, the observation of Steyn J in the court
a
quo
in
Becker
,
to the effect that there appeared to be no authority in England where
the implied
Trego
term
had been held to operate in the face of an express restraint, is as
true in 2014 as it was in 1979. The learned authors of
Chitty
op cit
state as a general proposition
that the implied
Trego
prohibition
applies where there is no express restraint (para 16-119; see also
Farnsworth on Contracts supra
§5.3
Vol 2 at 22-23).
[67]
The leading earlier case, the correctness
of which formed the focus of attention in
Trego
and which was authoritatively approved
in that case, was
Labouchere v Dawson
(1871-2) 13 Eq 322.
That was the sale
of a business and its goodwill without an express restraint. The
plaintiff’s argument in
Labouchere
,
which Lord Romilly MR in essence accepted, was put thus (at 324-325):
‘
It
is true that you sold it [the business] without binding yourself not
to carry on the same business, yet you did sell it expressly

including the goodwill, that goodwill being the probability of the
old customers going to the new firm to which you have sold the

business. The question is, may you go to those very persons and try
to prevent their giving their custom to the new firm? It is
very true
you have not entered into an express covenant that you will not do
that; but there is an implied covenant to that effect,
for a person
cannot sell a thing and destroy the value of it.’
[68]
The view of goodwill acted upon in
Labouchere
,
as reflected in the quoted contention, and thus of the implied
restraint, was thought in
Trego
to
be somewhat narrow and it was indicated that, but for
Labouchere
and similar authorities, a wider
implied restraint might have been adopted, which would then have been
closer to a typical non-compete
clause. But the point to emphasise
from
Labouchere
is
that the implied term was conceived as operating by virtue of the
absence of an express restraint.
[69]
In
Pearson
v Pearson
(1884)
27 Ch D 145
, decided not long before
Trego
,
the English Court of Appeal held that, where goodwill was sold but
the agreement expressly stated that the vendor was entitled
to
compete in the same line of business, any covenant which the law
would otherwise imply against canvassing former clients was

inoperative. This conclusion was reached despite the fact that the
express right to compete was stated in general terms without

reference to canvassing.
[10]
Where there is a general express restraint against competition for a
specified period, there is surely,
ex
contrariis
,
a general right to compete upon the expiry of that period.
[70]
Ordinarily
a contract for the sale of the business of any substance would
contain an express restraint. However, there are occasions
where
there is no express restraint and in such cases the implied
Trego
prohibition
has been held to operate.
[11]
But in
KRG
Insurance Brokers (Western) Inc v Shafron
[2007]
CanLII 79
(BCCA) the British Columbia Court of Appeal said, with
reference to
Trego,
that an express provision dealing with competition ousts the implied
term (para 30). In
Mid
Island Track and Crane Ltd v Simian Cartage Inc
[2011]
CanLII 677
(BCSC), a case involving an oral sale, the court said that
it was precisely where there was no express restraint that the law
implied
the non-canvassing prohibition (para 50).
[71]
In another Canadian case,
Unisource
Canada Inc v Enterprise Paper Co Ltd & Others
[1999]
CanLII 6553
(BCSC), Paris J, after reviewing authorities in Canada,
England, Australia and the United States, concluded that the implied
Trego
prohibition,
whether conceptualised as one arising from an implied covenant or as
an independent equitable obligation, had to be
consistent with the
‘factual matrix’ of the sale and that any such obligation
as might otherwise arise ‘must
give way in the face of an
express clause in the agreement dealing with the same subject
matter’.
[72]
There are similarities between the facts of
Unisource
and the present case. The shareholders of a company, Messrs Mulhern
and Plumb, had caused their company, Smith Paper Ltd, to sell
its
paper distribution business to an American company during 1990. A
subsidiary of the latter took over the business. It was envisaged

that Mulhern and Plumb would continue in employment with the new
owner, which they did, Mulhern being appointed as its president.
The
sale agreement contained an express restraint clause in terms whereof
Mulhern was prohibited, during his employment with the
new owner and
for a period of two years after the termination of such employment,
from carrying on any competing business in the
same geographical
marketing area, including without limitation ‘the direct or
indirect solicitation of the business of any
of the Company’s
customers with respect to the products sold and services performed by
the Company’. There was also
a prohibition against inducing or
encouraging employees to leave the company. The sale agreement was
silent on Plumb’s right
to compete.
[73]
After several years Mulhern became
disenchanted with the new controllers of the business, and it was
agreed that he would retire
early, which he did on 30 April 1992.
Plumb also became unhappy and resigned in March 1994. In mid-1994
Mulhern acquired a controlling
interest in another paper distribution
company. Plumb and several other disenchanted employees joined
Mulhern’s company.
[74]
Paris J, after the review of authorities
and broad conclusions mentioned previously, and after considering
various background circumstances,
came to the conclusion that the
implied
Trego
prohibition
was contrary to the express restraint, viewed in its context. He said
the following (paras 52-53):
’
52.
Everybody on both sides of the deal fully “expected” that
Mulhern would stay on indefinitely… The non-competition
clause
was inserted to deal with the possibility that he might nonetheless
leave and go into business again. Therefore, it must
be taken that
the parties directed their minds to that issue. Alco [the purchaser]
gauged the various factors and decided, having
taken legal advice,
that two years after leaving their employ would be a reasonable
period of time for a non-competition clause,
including the elements
thereof specifically set out relating to customers and employees.
After that the plaintiff would be on its
own. It would have had time
to build up its own goodwill… and the plaintiff would be free
to get back into business in an
unrestricted way. In my view that was
what was in the contemplation of the parties.
53. It is argued…
that it is obvious that if Alco had known that Mulhern would go back
into business they would never have
bought Smith and therefore the
Court must imply an obligation on his part not to do so, or at least
not to depreciate the goodwill
of the business by soliciting his old
customers or hiring his ex-employees. But the latter proposition does
not necessarily follow
from the former. It seems to me that a buyer
under such circumstances assumes a risk which it presumably does its
best to calculate.
It cannot be certain that in future the vendors
will not go back into business because the law simply will not permit
that a person
be prevented indefinitely from working in his usual
occupation. That is a principle at least as fundamental as that a
vendor must
not depreciate the asset he has sold. In my view,
therefore, in the circumstances the parties must be taken to have
considered
that factor and dealt with it in the non-competition
clause.’
[75]
If there are relatively few Commonwealth
cases dealing with the applicability of the implied
Trego
prohibition to a case where there is an
express restraint, I venture to suggest that it is because it would
only rarely occur to
business people that the express restraint was
not exhaustive.
[76]
Even in the United States the courts do not
seem uniformly to have observed
Bergum
.
In
Unisource supra
Paris
J referred to several cases which had followed
Bergum
,
even to the point of suggesting that the implied prohibition was not
only in perpetuity but operated ‘irrespective of any
term in
the contract’ (see paras 30-31). On the other hand, Paris J
mentioned (in para 41) a subsequent decision by the Appellate

Division of the Supreme Court of New York,
Titus
& Donnelly Inc v Alfred B Poto
614
NYS 2d 10
(1994), where the following was said:
‘
Plaintiff’s
reliance upon
Mohawk Maintenance Co v
Kessler
52 NY 2d 276
,
437 NYS 2d 646
,
419 NE 2d 324
, wherein an implied covenant was imposed upon the
seller of the business to permanently refrain from soliciting former
customers
after the sale of a business and its goodwill is misplaced.
The unlimited implied restrictions set forth therein are
inapplicable,
where, as here, the parties, Poto and Titus,
specifically negotiated and expressly agreed to impose a less onerous
restriction
upon the seller, Poto, after the sale, and to thereby
forego the implied covenant recognised in
Mohawk
,
by entering into an express non-competition agreement which was of
limited duration, restricting solicitation of employees and
customers
by Poto only through February 28, 1993.’
[77]
There are also other decisions in the
United States which appear to reflect a less unyielding approach than
in
Bergum
and
Mohawk.
Thus
in
MGM Court Reporting Service Inc v
Greenberg & Others
(1989) 74 NY 2d
691
the plaintiff had purchased the defendant’s shares in a
company which conducted a law reporting enterprise. In terms of the

sale agreement the defendant was prohibited from performing services
for three named clients of the business for five years. It
was held
by the Appellate Division of the Supreme Court of New York that this
express restraint excluded the operation of the implied
covenant
(even though the express restraint was broader than the implied
covenant, not being limited to canvassing). And in
First
American Title Insurance Company of New York Inc v Benchmark Title
Agency LLC
(2008) 48 AD 3d 327 the
Appellate Division of the same court said, in affirming the lower
court’s decision:
‘
The
restrictive covenants not to compete or solicit, set forth in the
contract of sale, had expired. Furthermore, the expressly
negotiated
covenant not to compete superseded the normally implied common-law
covenant, particularly where, as here, the customers
are generally
identifiable, and enjoining solicitation of former clients after the
negotiated time period would be tantamount to
preventing defendants
from acting as a title insurer in Westchester County.’
[12]
[78]
In this country, the only later decision of
the Appellate Division or SCA in which the principle in
Becker
has played a significant part is
Van
der Watt & Another v Jonker & Others
[2011] ZASCA
140, to which I was also referred. I would respectfully suggest,
however, that
Van der Watt
is
not in truth an application of
Becker
,
at least not to its full extent. In
Van
der Watt
, persons who had formerly been
associated in business agreed on a parting of the ways, on the basis
that the Van der Watts would
retain a business operating in
Randfontein while Jonker would retain various businesses known as the
Agri group. Jonker agreed
to pay the Van der Watts R2 million as part
of the fair and equitable settlement of the commercial divorce. In
terms of the separation
agreement, the Van der Watts were subject to
a 10-year restraint in the geographical areas serviced by the Agri
businesses while
Jonker was subject to a 10-year restraint within a
radius of 80 km from Randfontein.
[79]
The Van der Watts breached the restraint.
The precise form of the restraint is not quoted in the SCA’s
judgment but its tenor
can be gleaned from the interdict granted by
the court
a quo
,
in terms whereof the Van der Watts and the entities through which
they were acting were restrained, for a period of 10 years,
from
being involved in a business which involved the trading, storage,
handling, sale, marketing or distribution of fuel, oil and/or
related
products in the areas serviced by Jonker and the Agri group
companies
.
The
Van der Watts were also restrained for 10 years from providing
financial support or acting as a consultant, adviser or agent
of any
person or entity conducting business in these respects (see para 2 of
the SCA’s judgment). The Van der Watts appealed
the interdict
but their appeal was dismissed.
[80]
It appears from para 6 of the SCA’s
judgment that on the papers and in argument the litigants had
approached the enforceability
of the 10-year restraint along
conventional lines, contending respectively that a protectable
interest on the part of Jonker and
the Agri group was absent or
present. In its judgment, however, the SCA said that the appeal stood
to be decided ‘on a somewhat
different basis to the one
advanced by the parties and decided by the high court’. Prior
to the hearing in the SCA, that
court drew the parties’
attention to the
Becker
decision.
In his judgment, Madjiet JA said that the matter fell squarely within
the
Becker
principles
(para 10).
[81]
I must respectfully observe that what was
said in
Becker
is
that, in the absence of an express restraint, a person who sells a
business with goodwill is
not
restrained from competing with the purchaser of the business; the
only implied prohibition is against canvassing the former customers

of the business, and this prohibition was held in
Becker
to be unrelated to the express restraint or at least not inconsistent
with it.
Becker
was
not concerned with the enforceability of an express non-compete
restraint because in that case Becker and his companies had
complied
with the five-year restraint. All that was in issue was the existence
of an implied prohibition against canvassing enduring
beyond the
five-year restraint.
[82]
It is difficult to see, therefore, how the
principle in
Becker
could
be said to have disposed of the question of the enforceability of the
10-year non-compete restraint in
Van der
Watt
. Jonker and the Agri companies
were seeking to enforce a wide express non-complete clause travelling
way beyond the implied prohibition
adopted in
Becker
.
Although the Van der Watts had among other things canvassed the Agri
businesses’ customers, the interdict sought and granted
was not
confined to such conduct. The interdict granted by the court
a
quo
and upheld by the SCA enforced the
non-compete clause in its totality.
[83]
I do not suggest that the express restraint
in
Van der Watt
should
not have been enforced. Madjiet JA quoted in para 10 the wide
definition of goodwill given by Harms JA in
Caterham
Car Sales
. The court’s ultimate
conclusion was that the 10-year restraint was a reasonable one (para
14). If the 10-year restraint
was reasonable (and it was for the Van
der Watts to show that its enforcement would be contrary to public
policy), that was because
it reasonably protected the whole goodwill
of the Agri businesses and not merely the value of existing customer
connections. That
seems to be in essence the basis on which the
restraint was held by the SCA to be enforceable.
[84]
Even where there is not an express
restraint of trade, the implied
Trego
term is not free from difficulty. Does
it operate in perpetuity? This question was not pertinently addressed
in
Trego
or
Becker
;
and it did not arise in
Van der Watt
because in the latter case the
applicants only sought to enforce an express 10-year restraint. No
temporal limitation was mentioned
in
Trego
or
Becker
.
If, in the latter case, the Appellate Division had thought that the
implied prohibition was limited in point of time, the court
would
perhaps have been mentioned it, because by the time the latter court
upheld the appeal, nearly nine years had elapsed from
the date of the
sale.
[85]
Nevertheless,
one might have thought that the component of goodwill protected by
the implied term, namely the existing customer
connection at the time
of the sale, would typically diminish over time and that the goodwill
of the business in the hands of the
purchaser might start to be
characterised by the later endeavours of the purchaser rather than
the earlier endeavours of the seller.
If, as the judgment of Van
Heerden AJA in
Becker
reflects,
the prohibition operates as an implied term founded on considerations
of policy, the critical eye with which our law assesses
restraints on
competition should, I might have thought, be allowed to play its part
in determining the scope of the implied prohibition.
It is open to
debate whether a restraint in perpetuity against canvassing of former
clients would pass muster if assessed along
conventional lines
applicable to restraints of trade.
[13]
[86]
It may also be difficult to determine who
are ‘customers’ for purposes of the implied prohibition.
This difficulty was
mentioned by Lord Davey in his speech in
Trego
.
He also said that, in argument, he had been struck ‘with the
vagueness and difficulty of applying the injunction’
granted in
the early leading case which the House of Lords endorsed (
Labouchere
v Dawson supra
). He observed that the
injunction might ‘operate most unequally’ because, in a
business of a special character, it
might practically prevent the
seller from carrying on business at all, whereas in a business of a
different character the prohibition
might have very little effect.
But he concluded that
Labouchere
should be followed and that the difficulties ‘should not
prevent us from meting out such scanty measure of protection to
the
purchaser of goodwill as the circumstances permit of’. The
question of who were ‘customers’ for purposes
of an
injunction was one of fact, to be decided when it arose according to
the circumstances of the case (at 29).
[87]
If the implied term is shaped by
considerations of policy, and if on this basis it is not necessarily
perpetual and does not necessarily
apply to all the commercial
relationships to which the seller has been privy in the old business,
the question of onus would require
consideration. In the case of an
express restraint of trade, it is now well established in our law
that the onus rests on the restrained
party to show that the express
clause is unenforceable as an unreasonable restraint against
competition. That is so, however, because
there is no doubt as to
what the parties agreed. On general principle, the onus rests on a
party who asserts that enforcement of
the contract would, despite the
maxim
pacta servanda sunt
,
be contrary to public policy. The implied prohibition, although
operating as a partial restraint of trade, stands on a different

footing. It is not, in accordance with the analysis in
Becker
,
founded on consensus but operates by law unless expressly excluded.
If the scope of the term which the law implies (with respect
to
duration and affected commercial relations) is determined by the
facts of the case (ie the nature of the business and the character
of
the goodwill), it would seem, in accordance with principle, that it
would be for the enforcing party to establish the scope
of the
implied prohibition.
Exclusion of
implied prohibition in present case
[88]
I defer for the moment the question as to
whether, if there is scope for an implied prohibition at all, Van der
Merwe and Kitshoff
would be bound by it. Unless the implied
prohibition was excluded by the terms of the amalgamation agreement,
Old GrainCo would
at least have been bound by the implied
prohibition. If the implied prohibition was, by virtue of the terms
of the amalgamation
agreement, excluded in the case of Old GrainCo,
it would also have been excluded in the case of Van der Merwe and
Kitshoff.
[89]
It will be apparent from what I have
already said that, if I were permitted to approach this case free
from the authority of
Becker
,
I would have found that the express restraint provisions of clause 12
of the amalgamation agreement excluded an implied
Trego
prohibition, which would have rendered
it unnecessary to determine the scope of any term which should be
implied in the absence
of an express restraint.
[90]
However, I am bound by the decision in
Becker
.
Although, strictly speaking, the question of the exclusion of the
implied term is a mixed question of fact and law relating to
the
interpretation of the particular contract, the approach in
Becker
to the express restraint clause which
featured in that case leaves little scope, as I see it, for a
contention that an ordinary
non-compete clause excludes the operation
of the implied prohibition. There was nothing unusual about the
express restraint clause
in
Becker
,
though commercial contracts often have more elaborate provisions. It
will almost always be the case that the non-compete clause
would
include in its scope, but travel beyond, the implied
Trego
prohibition.
Becker
says, or comes very close to saying,
that the implied prohibition can be excluded only if the restraint
clause adds (or if the contract
somewhere else says) that, after the
expiry of the specified period, the seller may actively canvass the
business of former clients.
In my experience, at the bar and on the
bench, I have never seen a restraint clause like that.
[91]
Mr Newdigate, who for obvious tactical
reasons put his case not on the basis that
Becker
was wrong but that it was
distinguishable, submitted that the implied prohibition was excluded
because the canvassing of customers
was expressly addressed in clause
12.2.3 of the amalgamation agreement. I do not think, applying
Becker
fairly in accordance with its true
import, that I can accept this distinction (though Mr Newdigate’s
submission would receive
direct support from the decision of the
Canadian court in
Unisource supra
).
The restraint period was five years. There was a general prohibition
against being interested in any ‘competitive activity’,

defined as meaning ‘an activity which is similar to or the same
as the businesses conducted by’ BKB and its subsidiaries
as at
the effective date, the signature date and the closing date. The
prohibition against canvassing during the restraint period
appears
merely to emphasise an aspect of the more general prohibition.
[92]
Importantly, though, the express
prohibition against canvassing during the five-year period is
directed at all customers and clients
of BKB. This would include
persons who became customers or clients of BKB (and later of GrainCo)
after the effective and closing
dates. As will appear hereunder, the
implied
Trego
prohibition
is in my opinion limited to persons who were customers of the sold
business at the date of the sale of the business.
[93]
It follows that the prohibition in clause
12.2.3 is an express restraint which incorporates within its scope,
but travels beyond,
the implied
Trego
prohibition. The wider restraint is on
general principle legitimate, because goodwill includes the potential
of the business to
attract new custom. Based on the reasoning in
Becker
,
the fact that there is an express restraint which includes, within
its broader language, the active canvassing of former customers
is
not a basis for finding that the implied term is excluded. In
Becker
there was a general prohibition on
conducting business in competition with the sold business and also a
prohibition from being associated
with or engaged in the soliciting
of custom for a competing business. Clearly these prohibitions
included, but went beyond, a prohibition
against soliciting the
customers of the sold business as at the date of the sale. Although
the express prohibition on soliciting
custom for a competing business
was not limited to the soliciting of former customers of the sold
business, the soliciting of such
customers would undoubtedly have
been within the scope of the express prohibition against soliciting
and it is in relation to such
customers that the purchaser would no
doubt been most anxious to prevent soliciting.
Are
Van der Merwe and Kitshoff bound?
[94]
The next question is whether Van der Merwe
and Kitshoff are subject to the implied prohibition. I think the
answer is no. As will
appear from my consideration of the remaining
issues relating to the implied prohibition, I would, but for the
negative answer
to this question, have granted relief against Van der
Merwe and Kitshoff, though in more limited terms than claimed. I
would also
then have granted relief against Perdigon on the basis
that Van der Merwe and Kitshoff are its controlling mind and that it
is
their vehicle for perpetrating the violation of the prohibition.
[95]
The reasoning in
Trego
and
Becker
rests on the basis that the seller,
having parted with the goodwill and received payment for it, is as a
matter of policy limited
to a certain extent in undermining the value
of what he has sold. The implied prohibition is, in accordance with
Becker
, an
implied term arising from the sale of the goodwill. As a matter of
principle, therefore, it is difficult to see on what basis
the
implied term can apply to anyone other than the seller. An implied
term is by definition a term which the law implies into
a main
contract. In the case of the implied
Trego
term, the type of contract which gives rise to the implication is a
contract for the sale of goodwill. The implied term cannot
exist
in
vacuo
; it must be an adjunct to a main
contract.
[96]
In
Trego
,
Mr Hunt was a direct party to the partnership agreement by which the
goodwill was to vest in Mrs Trego. He was treated as being
in the
same position as if he had sold the goodwill to her. The Commonwealth
cases in which the implied
Trego
term
has been enforced have all, to the best of my research, been cases
where the party bound by the implied prohibition is the
seller. There
are cases where the implied prohibition has been held to apply also
to the sale of shares in a company which owns
a business having
goodwill. But in those cases, too, one is dealing with an implied
prohibition binding on the seller, though in
the case of shares the
seller would only indirectly have been the owner of the goodwill.
[97]
Whether the position is the same in the
United States I cannot confidently say. In
Williston
on Contracts supra
the author makes the
general statement that the implied prohibition is ‘binding on
the personal representatives, assigns and
successors of the seller’
(Vol 14 §1640) and in footnote 10 he cites two cases which
apparently support this view. I
have not been able to obtain a copy
of the first case. The second,
Ferris v
Pett
(1919) 2 ALR 768 (RI), would
not be authority for the view that the implied prohibition binds a
‘representative’,
if by that term is intended, for
example, a director or senior manager of a company which sells its
business. In
Ferris
the
plaintiff, who was an optician, was appointed as the administrator
(what we would call executor) in the estate of his deceased
father-in
law. The latter was a doctor whose services had included testing eyes
and prescribing spectacles. The plaintiff sold
the deceased’s
practice together with its goodwill to the defendant but then began
to solicit customers of the deceased’s
practice for his own
practice as an optician. The defendant halted payments under the
sale, alleging that the plaintiff was in
breach of the implied
prohibition. So in that case the person allegedly bound was the
seller.
[98]
Be that as it may, the present matter must
be decided in accordance with our own law. Here, the seller was Old
GrainCo. The seller
bound itself to an express restraint in clause
12. Although it was envisaged that Old GrainCo would be liquidated
shortly after
implementation, that company would, for as long as it
existed, have been bound (on the basis of
Becker
)
by the implied prohibition. Van der Merwe and Kitshoff were not the
sellers of the business. The business vested in Old GrainCo,
not
them.
[99]
Apart from the fact that the transaction
was not one for the sale of the shares in Old GrainCo, Van der Merwe
and Kitshoff were
in any event not the shareholders of Old GrainCo.
Family trusts with which they were associated owned 69,9% of the
shares in Old
GrainCo. The trusts were not parties to the
amalgamation agreement. There was, furthermore, no evidence that the
family trusts
were the
alter egos
of
Van der Merwe and Kitshoff respectively. There is no reason to
believe that the trusts were not genuine trusts in terms whereof

which the trustees were bound to hold the assets (including the
shares in Old GrainCo) on trust for the purposes set out in the

relevant trust deeds. One might suppose, though there is no evidence
to this effect, that Van der Merwe and Kitshoff respectively
were
included in the range of persons who were discretionary income
beneficiaries, and perhaps discretionary capital beneficiaries,
of
the trusts, but this does not allow one in law to blur the
distinction between Van der Merwe and Kitshoff in their personal

capacities on the one hand and the trustees of the two trusts on the
other. It was the latter who, pursuant to the liquidation
of Old
GrainCo and the distribution of the latter’s assets, received a
portion (though not the whole) of the consideration
paid by BKB for
Old GrainCo’s business.
[100]
It may be said that, although Van der Merwe
and Kitshoff were not the sellers of the business, its success and
its goodwill had
been brought about by their efforts as directors and
senior employees of Old GrainCo. That is true, and on that account
the purchaser
might reasonably have insisted (as it did) on a
restraint of trade which bound them, and no doubt the express
restraint would have
been found to be a reasonable one in the context
of the transaction as a whole (see, for example,
Farnsworth
on Contracts supra
§5.3 Vol 2 p 23
where the learned author, in dealing with the American law, cites in
footnote 16 a case to this effect; and
there are similar cases in the
Commonwealth where restraints on key employees associated with the
sold business have been regarded
as akin to vendor restraints rather
than employee restraints).
[101]
However, the implied
Trego
prohibition cannot exist merely because
Van der Merwe and Kitshoff agreed to be bound by an express restraint
of trade. I have found
no authority for the proposition that such a
prohibition can be an implied term of an express restraint of trade
contract
per se
.
Suppose that Van der Merwe and Kitshoff had not been parties to the
amalgamation agreement at all, as would have been the case
but for
the inclusion of clause 12. How then could it be said that they were
bound by an implied term of the amalgamation agreement?
If that be
so, I do not see how they could become bound by an implied term,
which would otherwise not have been applicable to them,
merely
because they agreed to bind themselves to the express restraint in
clause 12.
[102]
The
Becker
judgment insists that the implied
prohibition arising from the sale of goodwill and the express
restraint (if any) are distinct
matters. On that analysis, the
implied prohibition cannot be an incident of the express restraint.
The implied prohibition, on
the
Becker
analysis, owes its justification to something apart from the express
restraint. For reasons which I have already explained, I consider

that distinction to be open to question but, for as long as it is
maintained, the express restraint cannot be the basis for an
implied
prohibition. And if the distinction is jettisoned, the basis for
finding that the express restraint does not exclude the
operation of
the implied prohibition falls away.
[103]
In
Manousakis
& Another v Renpal Entertainment CC
1997
(4) SA 552
(C) a full bench of this court rejected a submission that,
on grounds of public policy, a person who was actively involved in
the
affairs of the sold business could not open or support or
participate in a competing business (at 560A-D).
[104]
I am aware that in
Becker
the plaintiff sued not only the seller
of the jewellery business (the second defendant company) but Becker
himself. However, the
point now under consideration did not receive
attention either in the court
a quo
or
in the Appellate Division. In that case the second defendant company
still existed and was sued in the proceedings, unlike the
present
case where Old GrainCo has long since ceased to exist. More
importantly, the subject of the sale was not only the business

conducted by the second defendant company but also the shares owned
by Becker personally in another jewellery trading company,
A & Z
Wholesale Jewellers (Pty) Ltd (see at 410B-C). The restraint of trade
clause recorded that the customers of the seller
were Becker’s
personal customers and that he was the beneficial owner of the entire
issued share capital of the selling company
and of A & Z
Wholesale Jewellers (Pty) Ltd. As I have already mentioned, there is
authority in other jurisdictions for the
proposition that the sale of
shares in a company which owns goodwill may give rise to an implied
Trego
prohibition,
at least where the seller owns all the shares in the company or a
majority stake. On that basis, there were sales both
by Becker
personally and by the second defendant company which attracted the
operation of the implied prohibition.
[105]
In
Van der
Watt
a point was raised on behalf of
the Van der Watts that Jonker could not enforce the restraint because
the goodwill of the Agri businesses
vested in the Agri companies, not
in Jonker personally (para 7). The SCA rejected this contention, not
on the basis of who could
enforce and who was bound by an implied
Trego
prohibition, but on the basis that Jonker had contracted for the
express restraint in his personal capacity. It was said that his

‘protectable interest’ arose from this restraint
agreement itself. The restraint was enforced by the party in whose

favour the restraint was expressly imposed and against the parties
against whom it was expressly imposed.
[106]
It might perhaps be possible, on
appropriate facts, for a purchaser, who has purchased a business from
a company, to establish a
tacit contract between himself and the
representatives of the company in terms whereof the representatives
in their personal capacity
will be bound by some or other restraint.
That is a very different matter from a term implied by law. It was
not alleged or proved
in the present case that there was any such
tacit contract between BKB/New GrainCo on the one hand and Van der
Merwe and Kitshoff
on the other. I would have thought that the
express terms of the restraint by which Van der Merwe and Kitshoff
agreed to be bound
would be incompatible with a tacit contract
containing an additional prohibition in perpetuity.
[107]
On this basis, I would dismiss the relief
sought in para 1.1 of the notice of motion. However, and in case this
matter should go
further, I consider it appropriate to explain why,
but for this point, I would have granted relief to the applicant,
though not
in the precise terms claimed. Under the remaining headings
relating to this part of the relief, I make the assumption, contrary

to my conclusion, that Van Der Merwe and Kitshoff are bound by an
implied
Trego
prohibition.
[108]
Before considering these further matters, I
should mention here that Mr Redding on behalf of the applicant
submitted that, even
if Van der Merwe and Kitshoff were not
contractually bound by an implied term, they were subject to a
similar restraint on delictual
principles relating to unlawful
competition. That was not the case advanced in the founding papers
and in any event I think it
is unsound.
[109]
Unless the purchaser of the goodwill
bargains for a restraint binding not only on the seller but on
persons actively involved in
the sold business, the latter are free
to compete with the purchaser and to do so in all respects. Here, as
it happens, the purchaser
(BKB) did bargain for a restraint binding
on Van der Merwe and Kitshoff, and it was subsequently incorporated
also into the employment
contracts between New GrainCo on the one
hand and Van der Merwe and Kitshoff on the other. They complied with
the restraint for
the specified period. I do not understand how, in
the face of the express restraint in the amalgamation agreement and
subsequently
in the service contracts, there can be scope for an
independent legal duty to refrain, after the period of the restraint,
from
taking part in a particular form of competitive activity, namely
active canvassing of customers of the sold business.
Customers
– as at what date?
[110]
If Van der Merwe and Kitshoff were bound by
an implied
Trego
prohibition,
it would only prohibit the canvassing of persons who were customers
of Old GrainCo as at 1 October 2006. In
Becker
the interdict sought by the purchaser
related only to persons who were customers as at the date of the sale
(see at 412G). Although
the purchaser did not ask for more, it is
clear from the reasoning in the Appellate Division that the implied
prohibition would
not extend beyond those customers. What Van Heerden
AJA added was that the prohibition would not be inoperative in
respect of a
particular former customer merely because the latter had
ceased to trade with the business. The seller would only be entitled
to
canvass such former customer if he was no longer trading with the
sold business and if it appeared that he would not resume trade
with
the sold business (at 419B-C). This is presumably on the basis that
the historic connection with an inactive customer who
does not intend
to resume relations with the company is not part of the company’s
goodwill.
[111]
It is not entirely clear to me whether the
learned Judge of Appeal had in mind former customers who had ceased
trading with the
business prior to the date of the sale or former
customers who ceased trading with the business after the date of the
sale. I think
his reasoning is applicable to both. Be that as it may,
what is beyond doubt is that the implied prohibition only applies to
a
person who either was a subsisting customer at the date of the sale
of the business or who had been a customer prior to the sale
of the
sold business. The implied prohibition does not apply to a person who
only became a customer after the sale of the business.
[112]
This limitation on the scope of the implied
prohibition has, to the best of my research, been uniformly observed
in Commonwealth
jurisdictions. Typically the customers whom the
seller may not canvass are referred to as ‘former customers’.
This
is entirely in keeping with the justification for the implied
prohibition. The implied prohibition is directed at protecting an

existing customer connection forming part of the sold goodwill. I
repeat that goodwill is by no means confined to existing customer

connection, since goodwill incorporates attractive features which can
be expected to generate new custom. However, whether for
sound
reasons or not, the English decisions culminating in
Trego
,
and
Becker
in
this country, have confined protection to the component of goodwill
comprising existing customer connection.
[113]
The matter can be tested in this way. If a
business with goodwill were sold and no express restraint of trade
were stipulated, the
seller could the same day set up in business in
competition with the purchaser. The only thing he could not do is
canvass the existing
customers of the sold business. This means that,
immediately after the sale, the seller could start canvassing all
potential customers
other than the existing customers of the sold
business. In the nature of things, the universe of other potential
customers comprises
all persons who were not customers of the sold
business at the time of the sale. Now if that is so, I do not see how
the customers
whom the seller is prohibited from canvassing can
expand over time to include later customers merely because the seller
did not
set up in competition the next day but only, say, a year or
two later.
[114]
It follows that, on the premise that Van
der Merwe and Kitshoff are bound by an implied prohibition, the
relief available to GrainCo
would have to be confined to customers as
at 1 October 2006. The relief actually claimed by GrainCo is framed
with reference to
a list of customers of GrainCo as at 30 June 2013
(‘NOM1’ to the notice of motion). Relief in that form is
not permissible.
[115]
I do not agree with Mr Newdigate, though,
that this in itself non-suits the applicant. The allegations in the
founding papers repeatedly
made reference to the value of existing
customer connections at the date of the sale. The nature of the
business appears to be
such that many customers are likely to have
been with the business for some years. In the absence of amendment, a
court might not
grant an applicant wider relief than claimed. In the
present case, by contrast, one would be cutting down the relief
claimed. Since
the applicant chose to formulate its relief with
reference to customers named in ‘NOM1’, I do not think it
would be
appropriate to grant a generalised interdict referring to
all customers of the business as at 1 October 2006 (since this might
include persons not listed in ‘NOM1’). One could,
however, permissibly grant an interdict limited to the canvassing
of
all such persons on the list as were customers of the business as at
1 October 2006.
[116]
Mr Newdigate says that this was not the
case which the respondents were called upon to meet. I do not accept
that objection. I repeat
that the applicant asserted the value of the
goodwill as at the date of the sale and referred to the value of the
customer base
as it then existed. The respondents did not attempt to
justify their active canvassing of customers on the basis that they
were
only targeting persons who had not already been customers of the
business at the time of the sale. The distinction between existing

customers at the date of the sale and new customers won by GrainCo
after the sale was not mentioned anywhere in the papers.
Customers
– scope of commercial relations
[117]
I have said that the implied prohibition in
this case, if applicable at all, would be limited to ‘customers’
of the
business as at 1 October 2006. I have not yet considered who
exactly would be regarded as ‘customers’ for this
purpose.
A trader conducting business typically has various types of
commercial relations: he may buy goods from suppliers as stock or for

use as fixed assets; he may obtain professional and other services to
assist him in the conduct of his business; he may use brokers
and
intermediaries; and he may sell goods and services to customers. The
value of all of these relations may be said to be incorporated
within
goodwill. In certain lines of business, sources of supply may be
critical to the success of the business.
[118]
Nevertheless, it is clear from
Trego
and
Becker
that the implied prohibition does not
protect the whole of the goodwill nor does it prohibit any act which
undermines goodwill apart
from canvassing. The implied prohibition in
those cases is formulated with reference to customers, which I take
to be persons to
whom the business supplies goods or services for
consideration. In the absence of clear authority, I am not prepared
to find that
the implied prohibition extends beyond customers in this
sense. In particular, I would not find in the present case that Van
der
Merwe and Kitshoff, if otherwise bound by the implied
prohibition, were precluded from actively canvassing suppliers of
produce
or other goods and services or from actively recruiting
brokers to help them in their business (provided the brokers did not
become
their agents for actively canvassing former customers).
[119]
‘
NOM1’ is described in the
founding affidavit as a list of ‘customers/producers’ as
at 1 June 2013. ‘Producers’
presumably refers to persons
who sell agricultural produce to GrainCo. They would not be within
the ambit of ‘customers’
as I conceive it.
[120]
In the answering affidavit, Van der Merwe
attached a print-out from the website of South African Grain
Information Services (‘SAGIS’)
with a view to showing
that various ‘clients’ in ‘NOM1’ were also
listed on the SAGIS website. He said
that the various role players in
the industry were listed by their designations as ‘commercial
silo owners’, ‘end
consumers’, ‘harbour silo
owners’, ‘processors’, ‘traders without
premises’ and ‘traders
with premises’. Although Van
der Merwe made these allegations with a view to showing that the
identity of clients was not
a confidential matter, it does suggest
that ‘NOM1’ travels beyond customers in the conventional
sense.
[121]
If I were to grant relief, I would thus
qualify the order by specifying that the respondents are only
prohibited from actively canvassing
those persons listed in ‘NOM1’
who were customers to whom Old GrainCo sold goods or services as at 1
October 2006.
Customers
– GrainCo’s various divisions
[122]
The respondents criticised the founding
papers for not specifying the departments of GrainCo with which any
particular named customer
did business. I do not think that this
criticism is justified. The implied prohibition would apply to all
customers (in the sense
I use that term) of Old GrainCo as at 1
October 2006. It does not matter whether the person was a customer of
the trading business
or of some other division of Old GrainCo.
Customers
with whom GrainCo no longer trades
[123]
Another criticism raised by the respondents
is that, pursuant to the restructuring of its business, GrainCo has
indicated that it
no longer wishes to do business with various of the
entities which it lists as its customers. It appears that the
respondents may,
in the event, have misapprehended the extent of the
actual restructuring. It is nevertheless not easy to discern from the
papers
precisely what has changed.
[124]
The respondents’ criticism highlights
another aspect of the implied
Trego
prohibition which presents difficulty. What if GrainCo has chosen to
cease doing business with some of the persons who were customers
of
the business as at 1 October 2006? If GrainCo wishes to deal with
some of the listed persons but not with others, it might nevertheless

find it advantageous to enforce the implied prohibition in respect of
all of them so as to make Perdigon’s life as difficult
as
possible. And what if GrainCo currently deals with a listed customer
but decides, a year or two after an interdict has been
granted, to
cease dealing with the customer? Again, it may suit GrainCo to hold
Perdigon to the interdict to neutralise its force
as a competitor in
general.
[125]
In
Becker
,
Van Heerden AJA was of the view that there would be no implied
prohibition in respect of former customers who did not intend to

resume trade with the sold business (419C). On a parity of reasoning,
I do not think the implied prohibition can apply in respect
of former
customers with whom the purchaser has chosen to discontinue trading.
It would not be consistent with public policy to
permit the purchaser
of a business to restrict the seller’s right to compete for
such former customers, even by active solicitation.
[126]
The manner in which Van Heerden AJA
formulated the qualification at 419C suggests that he regarded the
onus as resting on the seller
to show that the former customer was
unlikely to resume trade with the purchaser of the business. In the
present case, the parties
did not in their affidavits undertake in
any detail the exercise of identifying those customers who were and
were not affected
by the GrainCo restructuring. Where the question is
whether a currently inactive customer is likely to resume trade with
the business,
one might say that evidence of the customer’s
future intentions is as much available to the seller of the business
as the
purchaser (though the seller might be accused of solicitation
in violation of
Becker
if
he were to contact the customer in order to find out). It is
different where the question is whether the purchaser of the business

has chosen to cease trading with certain customers. That is a matter
within the purchaser’s knowledge. While this would not

necessarily affect the incidence of onus, it is a factor to be borne
in mind in determining whether, in motion proceedings, there
is
bona
fide
dispute of fact.
[127]
The respondents have dealt in great detail
with the restructuring decision as they understand it and with
subsequent events and
communications which they say confirm that
things have changed at GrainCo. They have, against this background,
asserted that GrainCo
has indicated that it no longer wishes to do
business with its full former customer base and intends rather to
concentrate on niche
blue-chip customers. I think that is enough to
create a material dispute of fact.
[128]
I therefore cannot assume that each and
every customer on ‘NOM1’ is someone with whom GrainCo
intends to continue trading.
However, this is, once again, a matter
which can I think be dealt with by way of an appropriate
qualification to the interdict.
The applicant has asserted (though
this is factually disputed) that ‘NOM1’ lists all
customers and producers as at
1 June 2013 with whom it ‘has
traded on an ongoing basis’. The interdict as granted could
refer to all customers on
the list who were customers of Old GrainCo
as at 1 October 2006 and with whom the applicant intends to continue
trading.
[129]
I accept that an order in this form would
create scope for material factual disputation in the future as to
whether a particular
customer is one whom the respondents may
actively canvass. However, once one accepts in principle the
appropriateness of the implied
Trego
prohibition, these sorts of
difficulties are unavoidable, as Lord Davey observed in
Trego
itself. The question as to what
constitutes active canvassing is itself not free from difficulty. If
all the major processors in
a particular district purchase produce
from GrainCo and are thus existing GrainCo customers, the respondents
might be precluded
from communicating with them directly (by visits
or telephonically or by correspondence) but the respondents could
apparently place
a general advertisement in a local newspaper which
was likely to be read by all of the processors; the respondents could
set up
a physical office in that district with signboards indicating
the business they wish to conduct (see
Labouchere
supra
at 325-326). The mere fact that
there was communication between the respondents and a former customer
would not show that the interdict
had been breached: Once a customer
learnt from an advertisement or from another participant in the
industry that the respondents
were in business and once that customer
took the first step to communicate with the respondents, the latter
seemingly would be
free to continue communicating with the customer.
It might be virtually impossible for the applicant to ascertain how
trading relations
between Perdigon and one of GrainCo’s former
customers came about.
[130]
The qualification that Van Heerden AJA
recognised in
Becker
would
also give rise to potential factual disputation after the grant of
the interdict, because, regardless of the form of the interdict,
the
seller could not be precluded, as I read Van Heerden AJA’s
judgment, from actively canvassing a customer who is unlikely
to
resume trade with the sold business. If the purchaser sought to
enforce the interdict or take out contempt proceedings, the
seller
could assert that the customer in question no longer fell within the
terms of the interdict and the facts would then need
to be
determined.
[131]
If the question arose as to whether a
particular customer could still be regarded as a
bona
fide
customer (ie one with whom GrainCo
wished to deal), the question could, objectively, be determined.
Inferences might be drawn from
the length of time for which there
have been no trading transactions. Internal business plans might also
shed light on the matter.
[132]
If it were said that all of this is
commercially impractical, I would be inclined to agree. That is a
strong reason in policy for
treating the express restraint as
covering the ground.
Prohibition
on ‘dealing with’ former customers?
[133]
The formulation of para 1.1 of the notice
of motion goes beyond soliciting/canvassing. It seeks to prohibit the
respondents from
‘dealing with’ GrainCo’s
customers. Mr Redding accepted, I think, that this went too far. He
said that the interdict
against ‘dealing with’ the
customers should be viewed as an adjunct to the interdict against
canvassing former customers,
in the sense that the respondents should
be interdicted from dealing with former customers whom they have
canvassed in violation
of the
Trego
prohibition.
[134]
I am doubtful whether an interdict could
permissibly be granted prohibiting Perdigon from trading with former
customers who have
already switched their business to Perdigon, even
if the switch occurred pursuant to unlawful canvassing of the
customers by the
respondents. If the customers are already trading
with Perdigon, they would have an interest in relief which prohibited
Perdigon
from continuing to trade with them. In any event, the
implied prohibition does not prevent the seller of a business from
dealing
with former customers, only from canvassing them. If the
respondents have already successfully (though unlawfully) canvassed a
former customer, the appropriate remedy would be damages. In short,
if the interdict were otherwise granted, it should not include
an
interdict against ‘dealing with’ former customers.
Passing
off (para 1.2 of the notice of motion)
[135]
I intend to deal with the remaining causes
of action somewhat more briefly, in keeping with limited attention
devoted to them in
argument.
[136]
The focus of the passing-off complaint was
the use by Perdigon of corporate documentation which included the
name GrainCo. The respondents’
explanation is that Van der
Merwe and Kitshoff had since 2002 jointly owned an investment company
called Grainco Investments (Pty)
Ltd (‘GIPL’) through
which they purchased immovable property and listed and unlisted
shares. At the time they established
GIPL, the agricultural
businesses later sold to BKB was still conducted by Old GrainCo.
There was nothing sinister, therefore,
in GIPL’s historical
name.
[137]
When they set up the new agricultural
trading business after leaving New GrainCo, they decided to use their
existing company, GIPL.
In terms of the
Companies Act 71 of 2008
GIPL
was obliged to place its full corporate name on its letterhead and
commercial documentation. The company was thus reflected
in such
documentation as Grainco Investments (Pty) Ltd t/a Perdigon. The
respondents pointed out that, in GIPL’s name, the
‘c’
in Grainco’ was in the lower case, unlike the name of the
applicant (a point of little significance, to my
mind). They also
said that the name ‘Perdigon’ had received greater
prominence (this is of greater significance). The
respondents
asserted that they had no desire to be associated with the applicant,
particularly since (so they averred) it was well
known in the
marketplace that the applicant had suffered a downturn in its
financial fortunes and that its trading business was
struggling.
[138]
The respondents say that, when they started
the new business, they intended to change their company’s name
to its present
name, Perdigon (Pty) Ltd, but could not use that name
as the full corporate name until the name-change had been registered
with
the CIPC. Reservation of the new name was confirmed by the CIPC
on 10 June 2013, just a week after the new business opened its doors.

On 18 July 2013 the respondents received confirmation from the CIPC
that the name-change had been registered on 21 June 2013. The

respondents then arranged for corporate documentation to be revised.
They could not, however, recover commercial documents which
were
already in the marketplace and which reflected the old name.
[139]
The
applicant alleged in its founding affidavit that as at September and
October 2013 the first respondent was still using silo
certificates
with the name ‘Perdigon t/a Grainco Investments’. Van Der
Merwe responded to these allegations by stating
that the documents
annexed were not actual silo certificates but so-called ‘screen
shots’ from the website of a service
provider, ECS. He says
Perdigon had applied to open an account with ECS under the name
Perdigon
[14]
and that the name
reflected on the screen shot was an error on the part of ECS. When,
after the service of the application, the
respondents learnt of the
error, they took steps to have it corrected, which happened on 21
November 2013.
[140]
I do not think it is an answer to a
passing-off claim to say that one was obliged to reflect a particular
name on one’s corporate
documentation because that was the
company’s name. There would be a passing-off if the use of the
existing corporate name
constituted a representation calculated to
deceive members of the public into believing that Perdigon’s
goods and services
were connected with GrainCo’s business, in
the sense that there was a reasonable likelihood that members of the
public would
be deceived into so thinking (
Reckitt
& Colman SA (Pty) Ltd v SC Johnson & Son SA (Pty) Ltd
1993
(2) SA 307
(A) at 315A-C). If the use of the corporate name was
calculated to deceive, Perdigon’s controllers should have used
a different
corporate vehicle or Perdigon should not have commenced
business until its name had been changed.
[141]
It is also not an answer to a passing-off
claim to say that one did not intend the misrepresentation to deceive
members of the public.
At least insofar as the remedy of an interdict
is concerned, it suffices that a misrepresentation has been made
which is calculated
to deceive (‘calculated’ in the sense
that, objectively speaking, there is a reasonable likelihood that
members of
the public would be deceived). Even the proposition, that
a court should not be astute to find that there is no reasonable
likelihood
of confusion where the competitor was intent on deceiving,
has been questioned (
John Craig (Pty)
Ltd v Dupa Clothing Industries (Pty) Ltd
1977
(3) SA 144
(T) at 157H-158A; cf
Reckitt
& Colman supra
at 318A-C).
[142]
There must, however, at least be an
intention to make a representation (ie a conscious or voluntary act).
In the present case, I
do not think that the respondents, after they
received confirmation of the change of name on 18 July 2013 and
changed the corporate
documentation, intended that their company and
its business should be described in any way as being ‘Grainco’
or any
variant of that name. The fact that by then some customers
were in possession of corporate documentation reflecting the old name

cannot justify an interdict, which is aimed at apprehended injury in
the future. In regard to the ECS screenshots, the respondents’

version, which I must on the
Plascon-Evans
rule accept, is that they did not
authorise ECS to display Perdigon’s name in the way which ECS
did.
[143]
In support of the passing-off claim, the
applicant also made reference to the content of Perdigon’s
website. The homepage
stated, among other things, that ‘at
Perdigon, we cherish the existing long-term relationships that we
have built over many
years with our clients’. However, the
website very prominently stated the name Perdigon and did not mention
the name GrainCo.
I do not think a new company whose employees have
built up relationships with customers during prior employment are
precluded from
saying so.
[144]
Similarly, I do not think objection can be
taken to what was said, on the ‘People’ part of the
website, regarding Van
der Merwe’s employment history,
including as managing director of GrainCo. What was said was true. It
would have been obvious
to the reader, furthermore, that Van der
Merwe was no longer employed by GrainCo.
[145]
In short, I do not consider that anything
said on the website constituted a representation that Perdigon was
associated with GrainCo
or the successor to its business.
[146]
The applicant complained that Perdigon had
established its office in the Paarl CBD directly opposite GrainCo’s
head office.
This would not in itself indicate an attempt by Perdigon
to associate itself with GrainCo. In any event, Van der Merwe
explained
in the answering affidavit that he selected the location
because GrainCo itself was due to move during July 2013 to a new BKB
development
on the outskirts of Paarl. (It appears that this might
not in the event have occurred, at least not by the time the
application
was launched in October 2013.)
[147]
I thus do not think that GrainCo has
established that, at the time the application was launched on 22
October 2013, there was a
reasonable apprehension of continuing
misrepresentations calculated to deceive. I therefore do not need to
go into the evidence
of the likelihood of confusion and of actual
confusion in the earlier period, save to observe that it is not
particularly strong.
Unlawful
interference in contractual relations
[148]
Although
unlawful interference in contractual relations was dealt with in the
founding affidavit,
[15]
no
relief in respect thereof is claimed in the notice of motion.
[149]
On the assumption that any relief could be
claimed, I need only mention the following. In relation to supposed
interference in contractual
relations between GrainCo and its
customers, it was not alleged or shown that the respondents were
attempting to induce GrainCo’s
customers to breach existing
contracts. What is alleged is that the respondents are attempting to
get customers to switch loyalties.
Customers could notionally
terminate contractual relations with GrainCo by allowing existing
contracts to lapse or by giving lawful
notice of termination.
[150]
In
regard to the offering of employment to employees whose service
contracts with GrainCo contained a one-year restraint, GrainCo
did
not join the employees in question and seek an order preventing them
from working for Perdigon. The latter could not, in the
absence of
the joinder of the employees in question, be interdicted from
continuing to employ those persons. To the extent that
the
respondents induced Roberts, Emslie, Hamann and Pijl to leave
GrainCo, that is water under the bridge. All of them had resigned

from GrainCo by the time the application was launched. The one-year
restraints applicable to Roberts, Emslie and Hamann (if they
were
enforceable) expired at the end of May 2014, and the one-year
restraint applicable to Pijl (again if enforceable) would expire
at
the end of August 2014.
[16]
I
need express no opinion on the question whether, during the course of
the restructuring process, GrainCo waived the restraints
in respect
of any of these employees. If GrainCo has any remedy, it must now lie
in damages.
Injurious
falsehood (para 1.5 of the notice of motion)
[151]
The last cause of action is the alleged
dissemination of injurious falsehoods. The evidence of this is thin
and disputed. Only two
incidents were alleged.
[152]
The first one is based on an averment
allegedly made by Mr Jordaan of Tiger Brands, a customer of GrainCo,
during a visit which
Smit and Vermooten paid him on 14 August 2013.
Jordaan enquired whether it was correct that in future GrainCo would
be concentrating
on storage and handling and would only do trade to
support that and whether the logistics division would cease to
operate. Smit
and Vermooten told Jordaan that this was incorrect and
that GrainCo would be continuing with its trading business as usual
and
that the logistics business would not be closing. Jordaan told
them that his enquiry was based on what Van der Merwe had told him
a
few weeks previously.
[153]
In his answering affidavit, Van der Merwe
pointed out that no confirmatory affidavits by Jordaan had been
filed. He stated that
he had not spoken with Jordaan since
establishing Perdigon and commencing business on 1 June 2013 and that
Perdigon had not done
any business with Tiger Brands. He added that
on his understanding it was in any event untrue that GrainCo’s
trading division
would continue as usual.
[154]
Nothing more was said by the applicant on
the question of injurious falsehoods in the replying papers.
[155]
The first complaint of injurious falsehood
has not been made out. The evidence on which it is based is
inadmissible and there is
in any event a dispute of fact.
[156]
The other complaint relates to a meeting
which Smit and Vermooten had on 15 August 2013 with Messrs du Preez
and Haasbroek of Grainvest,
a registered SAFEX broker. Vermooten says
that, ‘against the background of what they indicated they had
heard from Van der
Merwe’, SAFEX’s representatives
enquired whether GrainCo would no longer be trading as it
traditionally had done and
would be drastically scaling down and
concentrating mainly on storage, handling and milling. Smit and
Vermooten assured Grainvest
that this was not the case.
[157]
Again,
no confirmatory affidavit by Du Preez or Haasbroek was filed. Van der
Merwe said in his answering affidavit that he is personally
well
acquainted with Du Preez. His conversation with Du Preez concerning
GrainCo’s future plans took place, he says, while
he was still
employed with GrainCo and was in accordance with the instructions
from Edmayr to communicate the position to customers.
[17]
[158]
This complaint has thus also not been made
out.
Conclusion
[159]
It follows from everything I have said that
the application must be dismissed with costs, including those
attendant on the employment
of two counsel.
ROGERS
J
APPEARANCES
For Applicant:
Mr AIS Redding SC and Mr T Dalrymple
Instructed
by:
Minde
Schapiro & Smith Inc (A Pepler)
Tyger
Valley Office Park II
Cnr.
Old Oak & Willie van Schoor Roads
Cape
Town
For Respondent:
Mr J Newdigate SC and Mr HC Jansen van Rensburg
Instructed
by:
De
Klerk & Van Gend Inc.
3
rd
Floor, ABSA Building
132
Adderley Street
Cape
Town
[1]
In
terms of clause 6.1 of the amalgamation agreement, Thembeka was to
receive 25,1% of the shares issued in satisfaction of the
purchase
price, while the family trusts of Van der Merwe and Kitshoff and two
other shareholders (defined in the agreement as
the 'Other
Shareholders') were to receive the balance of the consideration in
the proportion set out in annexure ‘C’
to the agreement.
Annexure ‘C’, on my understanding, sets out the
percentages in which the remaining 74,9 of the
equity consideration
would be divided among the four ‘Other Shareholders', which I
assume was
pro
rata
to
the proportions in which they held the remaining 74,9% in Old
GrainCo.
[2]
I
have taken the liberty, in the above translation, of changing
‘
naturalium’
to
‘
naturale’
,
on the basis that the use of the former expression must have been an
oversight. The correct neuter form of the substantive adjective
naturalis
is
naturale
while the plural is ‘
naturalia’
(see,
eg, Van der Merwe
et
al Contract General Principles
4
th
Ed at 246).
[3]
The
judgment is not reported but I have procured a copy of it from the
records of the SCA.
[4]
In
South Africa and Zimbabwe:
New
United Yeast Distributors (Pty) Ltd v Brooks & Another
1935
WLD 75
at 83-84;
Forman
v Barnett
1941
WLD 54
at 60;
Arlyn
Butcheries (Pty) Ltd v Bosch
1966
(2) SA 308
(W) at 309-310;
Brenda
Hairstyles (Pty) Ltd & Others v Marshall
1968
(2) SA 277
(O) at 280D-281D;
Diner
v Carpet Manufacturing Co of SA Ltd
1969
(2) SA 101
(D) at 105A-109D;
Commercial
and Industrial Holdings (Pvt) Ltd & Another v Leigh-Smith &
Others
1982
(4) SA 226
(ZSC) at 232E-238C;
Basson
v Chilwan & Others
1993
(SA) 742 (A) at 777F-I. In England:
Nordenfelt
v Maxim Nordenfelt Guns and Ammunition Co Ltd
[1894]
AC 535
at 552;
Baldwins
(Ashby) Ltd v Maidstone
[2011]
EWHC B12
(Merc) paras 7-10;
Chitty
on Contracts
31
st
Ed paras 16-117 – 16-118; Peel
Treitel
The Law of Contract
13
th
Ed para 11-068. In Australia:
Bacchus
Marsh Concentrated Milk Co Ltd (In Liquidation) v Joseph Nathan &
Co Ltd
[1919]
HCA 18
; (1919) 26CLR 410 at 440-441;
Re
Lloyd’s Ships Holdings Pty Ltd & Another v Davos Pty Ltd &
Others
[1987]
FCA 70
, particularly paras 42, 64, 94 and 125-128, where the express
restraint was found to be unreasonable and unenforceable and where,

as a result of such finding, the court enforced, in place of the
invalid express restraint, a more limited implied
Trego
prohibition;
Fisher
& Others v GRC Services Pty Ltd & Others
[1997]
QSC 215.
In Canada:
Western
United Insurance Brokers Ltd v Macdonald
1994
CanLII 2344 (BCSC).
[5]
Cruttwell
v Lyle
(1810)
17 Vesp 335 at 346 (also in Revised Reports Vol 11 at 101).
[6]
Per
Wood
VC in
Churton
v Douglas
(1859)
Johns 174 at 188.
[7]
I
cite the Third Edition (1972) as the Fourth (1990) is unfortunately
not readily available to me.
[8]
In
the context of the sale of a business, there is authority in England
that the ambit of commercial activity restrained and the

geographical extent of the restraint are more significant factors in
the reasonableness assessment than duration, so that a restraint

might be imposed for the lifetime of the seller (
Connors
Bros Ltd & Others v Connors
[1940]
4 All ER 179
(PC) at 195A-C, cited with approval by Van Heerden J
(as he then was) in support of a 10-year restraint in
Diner
v Carpet Manufacturing Co of SA Ltd
1969
(2) SA 101
(D) at 109B-C: ‘If a restraint is considered
reasonable as to area it seems seldom in the case where the goodwill
is concerned
that the restriction will be held unreasonable because
of restriction as to time’). Whether that accords with modern
notions
of public policy may be open to debate - see the
reservations expressed by Georges JA in
Commercial
and Industrial Holdings
footnote
6
supra
at
237E-H. See also Heydon
op
cit
at
198: ‘The test for duration ought to depend on however long it
will take for the seller’s connexion with his customers
to
fade away’ but adds that the courts have ‘tended to be
kind to covenantees’ though ‘there is little
coherence
in the decisions’. The ‘fading-away’ view of
duration was mentioned in
Re
Lloyd’s Ships Holdings Pty Ltd & Another v Davos Pty Ltd &
Others
[1987]
FCA 70
in
support of a 10-year restraint (para 78). See also, in the United
States,
Farnsworth
op cit
§5.3
in Vol 2 at 30-31 and footnote 40 and
Williston
op cit
Vol
14 §1640 at p 132 footnote 10.
[9]
Cf
Manousakis
& Another v Renpal Entertainment CC
1997
(4) SA 552
(C) at 561D: ‘The purchaser of goodwill may not,
even by means of a contractual restraint agreed to by the seller,
eliminate
competition as such'
per
Friedman JP with reference to
Basson
v Chilwan & Others
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 771D.
[10]
As
pointed in Heydon
The
Restraint of Trade Doctrine
(1971)
at 177 footnote 15,
Trego
did
not overrule
Pearson
on
this point
[11]
See,
for example, the Canadian cases of
Jiffy
People Sales (1966) Ltd & Others v Eliason & Others
(1975)
58 DLR (3d) 439 (BSSC),
JLR
Holdings v Wisenberg
[1978]
CanLII 1414
(ONCA) and
Mid
Island Truck and Crane Ltd v Simian Cartage Inc
[2011]
CanLII 677 (BCSC).
[12]
See
also
North
Atlantic Instruments Inc v Fred Haber & Another
[1999] USCA2 349
;
(1998)
188 F3d 38
para 50 (this is part of a dissenting judgment –
the majority judges determined the case against the defendants on a
different
basis).
[13]
See
footnote 8 above. See also
Williston
op cit
Vol
14 §1641 at p 119 footnote 6 regarding the implied
Trego
prohibition:
‘It has been suggested that this implied restriction exists
only for such reasonable time as to give the old
customers an
opportunity to attach themselves to the purchaser's business:
Suburban Ice Mfg. Co. v Mulvihill, 21 Oh App 438,
153 NE 204
, but in
general the courts have not dealt with this point, probably because
the old customers are considered as attached to the
business
transferred to the vendee until they voluntarily sever that
connection.'
[14]
See
account application at record 581-582: ‘Business name:
Perdigon’.
[15]
See
paras 153-159 in relation to two customers and paras 160-169 in
relation to former employees of GrainCo who were subject to
one-year
restraint of trade.
[17]
Some
support for this contention is to be found in Edmayr's email to
senior staff on 26 March 2013 [record 490], in which he said
that
Van der Merwe and he had agreed that Van der Merwe and his team
would speak to customers while communication with the press
would be
handled by Edmayr. He said that he would say (ie to the press) the
following: ‘Given the volatile markets and
the excessive
working capital requirements in the trading division of GrainCo we
have reviewed our position in the market. We
are accordingly looking
at the business and there could be some restructuring and
downscaling. We are however committed to the
establishment and
growth of our agri and food processing division (of which Gritco and
our sugar business are the start) and
will be looking at
opportunities.' The
s 189A
letter and presentation to staff of
the same date [record 496-498] said that three of the business
divisions, namely Logistics,
Trading and BKB Asia, were not
performing optimally and were having an adverse impact on the
business operation as a whole. BKB
thus proposed to reduce and/or
discontinue the operation of these divisions.