Van de Pol v Silbermann and Another

• Jurisdiction: South Africa
• Citation: 1952 (2) SA 561 (A)

Van de Pol v Silbermann and Another
1952 (2) SA 561 (A)

1952 (2) SA p561

Citation	1952 (2) SA 561 (A)
Court	Appellate Division
Judge	Greenberg JA, Van den Heever JA, and Hoexter JA
Heard	March 10, 1952; March 11, 1952
Judgment	March 28, 1952

Flynote : Sleutelwoorde A

Contract — Legality — Restraint of trade — Seller of shares in Cape companies imposing restraint for the protection of seller's Transvaal business — Restraint reasonable inter partes - Validity of — Severability of clauses when one unenforceable — Question raised but not decided.

Headnote : Kopnota

B Respondents, S and G, had instituted action in a Local Division claiming an order directing appellant, V, to deliver to them 100 shares in the S. Co. and one share in the G. Co., against payment of £551 which they tendered, in terms of a written agreement which provided: '1. In C consideration of the undertaking herein contained of S and G, who are the interested parties in the S. Co., that they will, in the manner set out below, preserve for V the business interest which he has by reason of his foundation and control of the S. Co., V undertakes to sell and deliver on 30th June, 1950, to S and G, who undertake to buy, 100 shares in the S. Co., together with one share in the G. Co., for the sum of D £551 cash against transfer. 2. S and G undertake (a) that no other persons than themselves and V shall, for a period of 38 months, be admitted as shareholders to such companies; and that they will retain the full and unfettered personal direction and control of the companies during this period; (b) that neither of the companies shall during the 38 months be interested indirectly or directly in any . . . concern having as one of its objects to conduct . . . any business anywhere in E the Union which is similar to that carried on either to-day or in the future by the said companies; (c) that neither company will sell, barter or exchange or deliver any product or merchandise relating to the business of such companies to any person or business (other than those excepted from time to time by V) situate in the Transvaal Province or to any person or business, wherever situate, through whom or through which F such products or merchandise, on the information of V, may reach the Transvaal. 3. As long as S and G abide by and perform the terms above set out and protect his interests as shareholder and responsible director, V engages that he will not avail himself of his permanent directorship of S. Co. to participate in the conduct of S. Co.'s affairs.' At the trial appellant V had relied on two defences: (a) that G the covenants in restraint of trade were invalid and, since they were a material and indivisible part of the consideration for V's promise to sell the shares, that the entire agreement was unenforceable by S and G; (b) alternatively, if the agreement was valid, that S's breach of clause 2(c) disentitled S and G to delivery of the shares. No evidence was adduced on behalf of V and on these issues judgment was given in favour H of G and S with costs. In an appeal it appeared that the object of the restraint was not to render effective the main transaction in the agreement, viz. the sale of shares by V to S and G, but to safeguard V's Transvaal business which was similar to that of the S. Co. and the G. Co. in Cape Town. The appellant V relied for defence (b) on breaches of clause 2(c) constituted by sales which he alleged took place of goods to persons who, to the knowledge of S, intended to send these goods to the Transvaal and did so send them.

Held, that the restraint in this case was not unenforceable on the ground that it was a restraint of a kind which the Court would in no circumstances enforce.

1952 (2) SA p562

Held, further, that S and G had discharged the onus on them of proving that the restraint was reasonable inter partes, it being reasonably necessary for the protection of V in relation to his Transvaal business, and the terms of the restraint having been freely agreed upon.

Held, further, that the appellant had not discharged the onus of proving that the agreement was against the public interest.

A Held, further, that there had likewise been no breach of clause 2(c) of the agreement on the respondents' interpretation of such clause, and that either such interpretation had to be accepted or the clause had to be regarded as pro non scripto with the same result.

The question whether the respondents could claim performance of the agreement if one of the clauses was found to be unenforceable raised but B not decided.

The decision in the Witwatersrand Local Division in Silbermann and Another v van de Pol confirmed. C

Case Information

Appeal from a decision in the Witwatersrand Local Division (BLACKWELL, J.). The facts appear from the judgment of GREENBERG, J.A.

J. F. Ludorf, Q.C. (with him R. S. Welsh), for the appellant: The covenants in respect of trade were invalid and since they were a D material and indivisible part of the consideration for appellant's promise to sell the shares, the entire contract is unenforceable. See Joseph Evans & Co. Ltd v Heathcote and Others, 1918 (1) K.B. at p. 437; McEllistrim v Ballymacelligott Co-Operative Agricultural and Dairy Society, Ltd., 1919 A.C. at pp. 584 - 5; Wyatt v Kreglinger and Fernau, 1933 (1) K.B. at pp. 810 - 1; Anson, Contract (19th ed., p. E 231); Pollock, Contracts (10th ed., p. 335); Salmond & Williams, Contracts (2nd ed., p. 373). The English law on this, as on other aspects of restraint of trade, should be followed by our Courts; see Holmes v Goodall & Williams, Ltd., 1936 CPD at p. 42; Erasmus v du Toit, 1907 T.S. at p. 895. Prima facie all restraints of trade are F contrary to public policy and void. The party supporting the contract must allege, and prove, that the restraint goes no further than is reasonably necessary to protect the interest of the covenantee; see Halsbury's Laws of England (2nd ed., Vol. 32, para. 711 et aut. loc. cit.); Routh v Jones, 1947 (1) A.E.R. at p. 763; Gordon v van Blerk, G 1927 T.P.D. at p. 773; Halliwell v Laverack, 1929 W.L.D. at p. 178. Since the relationship of master and apprentice and the possession of trade secrets by the apprentice are the only matters in respect of which a master is entitled to protection against a former apprentice, the restrictive covenants cannot be justified on this basis in the present H case; see Halsbury, supra paras. 684 - 8 et aut. loc. cit.; Routh's case, supra at p. 181; Gordon's case, supra; Estate Matthews v Redelinghuys, 1927 W.L.D. 307; Thompson v Nortier, 1931 OPD 147; Holmes v Goodall & Williams, Ltd., supra at pp. 41 - 2. Nor is the present case one in which the purchaser of the goodwill of a business seeks to protect what he has bought against undue competition by the vendor. In such cases the justification of the covenant is that the goodwill is peculiarly at the mercy of the vendor and that without a restraint the purchaser would

1952 (2) SA p563

not get what he was contracting to buy nor would the vendor give what he was intending to sell; see Herbert Morris, ltd v Saxelby, 1916 (1) A.C. at pp. 700 - 1, 708, 713; British Reinforced Concrete Engineering Co., Ltd v Schelff, 1921 (2) Ch. at pp. 574 - 6. No such justification exists in the present case. Clauses 2(b) and (c) are mere covenants in gross against competition as such and they are accordingly A contrary to public policy; see Schelff's case, supra; Vancouver Malt & Sake Brewing Co., Ltd v Vancouver Breweries, Ltd., 1934 A.C. at pp. 189 - 90; Halliwell's case, supra at pp. 179 - 80. Hubbard v Miller, 15 Am. Rep. 153 cited in Wessels' Law of Contract in South Africa in support of the proposition stated in para. 611, does not support that B proposition. The promise to be enforceable must be on the face of the document, a separate promise, a separate compact, the subject of separate consideration and accord, the performance of which is independent of the performance of any other promises which the promisor may have made; see Putsman v Taylor, 1927 (1) K.B. at p. 639. This C truly reflects both the English, and the South African, law in regard to the severance of illegal promises; see Halsbury, supra, Vol. 7, paras. 246 - 7; Williston, Contracts (Rev. ed., Vol. 6, paras. 1780, 1782); Horwood v Millar's Timber & Trading Co. Ltd., 1917 (1) K.B. 305; Hopkins v Prescott, 136 E.R. 634; Miller v Karlinski, 62 D T.L.R. 85; Napier v National Business Agency, Ltd., 1951 (2) A.E.R. 264; Wessels, supra, paras. 605 - 18, more especially paras. 610 - 11, 613 - 16, 618; Eastwood v Shepstone, 1902 T.S. 294; Modder East Orchards, ltd v Receiver of Revenue, 1924 T.P.D. at p. 19; du Preez v Laird, 1927 AD at p. 27; Rex v Hees, 1938 T.P.D. at pp. 336, 340 - E 1; Claassens v Pretorius, 1950 (1) SA at pp. 44 - 5. The cases on severance lay it down that the Court will not make a new contract for the parties. The act of severance must be the act of the parties and not of the Court. If severance of part of the agreement gives it a meaning and object different in kind and not only in extent, the different parts F cannot be said to be independent promises and they are therefore not severable; see New United Yeast Distributors (Pty.) Ltd v Brooks and Another, 1935 W.L.D. at pp. 81 - 2; 1936 T.P.D. at pp. 303 - 4; Bhengu v Alexander, 1947 (4) SA 341; Jonker v Yzelle, 1948 (2) SA 942. There is also some authority for the view that a void promise may be G severed if it is merely a subsidiary part of the contract; see Restatement of the Law (Contracts, para. 603); Bal v van Staden, 1903 T.S. 70; Cherry and Amm v Leask and Potgieter, 1907 T.S. 702; Wolfe v Liquidators, Smyth and Crawford, 1914 CPD 187; van Swieten v. H Pienaar, 1928 T.P.D. 407. According to some authors, the presence of a covenant in unreasonable restraint of trade does not...