Grainco (Pty) Ltd v Van der Merwe (20693/2014) [2016] ZASCA 42; [2016] JOL 35605 (SCA) (30 March 2016) per Plasket AJA (Ponnan, Wallis, Mbha and Mathopo JJA concurring):

The SCA disallowed the appeal from the judgment of Rogers J in Grainco (Pty) Ltd v Van Der Merwe  (17437/2013) [2014] ZAWCHC 107; [2014] 3 All SA 683 (WCC); 2014 (5) SA 444 (WCC) (11 July 2014).  The appellant failed in its attempt to prevent former shareholders of a company that was sold, including the goodwill, from soliciting business from, canvassing, enticing, drawing away or dealing with a long list of people and entities, or attempting so to do.  Although there exists an implied prohibition against a seller canvassing customers of sold business the prohibition only binds the actual seller.

Excerpts without footnotes

[2]        The issue that arises for decision in this appeal is whether, when a business is sold as a going concern, inclusive of its goodwill, the implied prohibition against the canvassing of customers binds anyone other than the seller.  Rogers J, in the court below, found that the respondents were not the sellers of the business and not bound by the implied prohibition.  He dismissed the application to interdict them from canvassing customers of GrainCo on this basis and refused other relief not germane to this appeal. 

. . . . .

The issue

[23]      During the course of the proceedings in the court below, the implied prohibition against the canvassing of clients was referred to as the Trego prohibition.  This was a reference to the leading English case of Trego & another v Hunt in which Lord Macnaghten set out the basis for the prohibition and its contours when he stated:

‘And so it has resulted that a person who sells the goodwill of his business is under no obligation to retire from the field.  Trade he undoubtedly may, and in the very same line of business.  If he has not bound himself by special stipulation, and if there is no evidence of the understanding of the parties beyond that which is to be found in all cases, he is free to carry on business wherever he chooses.  But, then, how far may he go?  He may do everything that a stranger to the business, in ordinary course, would be in a position to do.  He may set up where he will.  He may push his wares as much as he pleases.  He may thus interfere with the custom of his neighbour as a stranger and an outsider might do; but he must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value.  He must not make his approaches from the vantage-ground of his former position, moving under cover of a connection which is no longer his.  He may not sell the custom and steal away the customers in that fashion.  That, at all events, is opposed to the common understanding of mankind and the rudiments of commercial morality, and is not I think to be excused by any maxim of public policy.’

[24]      While Trego concerned a partnership, rather than the sale of a business, the principle enunciated in it – that the seller of goodwill is prohibited from taking it back by canvassing for the old business’ customers – was accepted as correct in Becker. 

. . . . .

[27]      That being so, the principle can only be invoked in relation to a seller of a business.  It is clear from clauses 2 and 3 of the amalgamation agreement that the only parties to the sale of old GrainCo were it and BKB.  Unlike in the Becker  matter, in which Becker was a party to the sale of the business, both personally and in a representative capacity, Van der Merwe and Kitshoff were not parties to the sale in this case.  They could accordingly not be bound by an implied term of the agreement.  The appeal must therefore fail.

Leave to appeal

[28]      In the course of his judgment in the court below, Rogers J dealt at length with the Becker case and with what he considered to be flaws in its approach to the relationship between the implied prohibition against interfering with the goodwill of the sold business and the express restraint of trade that bound Becker.  He suggested that the conclusion in Becker in this respect ‘might warrant reconsideration’ by this court.

[29]      The issue that appears to have consumed a great deal of the attention of Rogers J was one that could only have become relevant if he had found that Van der Merwe and Kitshoff were parties to the amalgamation agreement.  As he had made a finding to the contrary – and quite correctly so – there was no reason that I can discern for him having to address the correctness of Becker, much less give this court ‘the opportunity of mending its earlier judgment’.  It is an issue that this court would not have had to consider and if it did have anything to say on it, it would have been obiter.  Entirely academic issues such as this should not be forced upon this court.