THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:   710/2008
In the matter between:

LOUIS JOHANNES JACOBUS GROBBELAAR                                  First   Appellant

DANIEL JOHANNES MONK HEYNS

Second    Appellant

PETRUS CROUS WELGEMOED

Third Appellant

and
SHOPRITE CHECKERS LIMITED

Respondent

Neutral citation:
Grobbelaar v Shoprite Checkers (710/2008) [2011] ZASCA 11
(11 March 2011)
Coram:
BRAND, NUGENT, LEWIS, MALAN and MAJIEDT JJA
Heard:
15 February 2011
Delivered:
11 March 2011
Summary:
Agreement in restraint of trade – breach of – sale of business as
going concern – cession of rights – claim for damages - causation

_____________________________________________________________________
ORDER
On appeal from:
Western Cape High Court (Cape Town) (Van der Westhuizen AJ
sitting as court of first instance):
The appeal is dismissed with costs, including the costs of two counsel.
_____________________________________________________________________
JUDGMENT
MALAN JA (BRAND, NUGENT, LEWIS, and MAJIEDT JJA  concurring)

[1] This is an appeal by the defendants in the court a quo, against the judgment and
order of Van der Westhuizen JA in the Cape High Court, declaring the defendants liable
to the respondent, the plaintiff in the court below, for damages caused by their breaches
of undertakings in restraint of trade.

[2] The dispute between the parties arose from the purchase on 23 November 1995
by Shoprite Checkers (Edms) Bpk (SCEB) of the businesses of Sentra Koop
Handelaars Bpk and Megasave (Edms) Bpk (the Sentra/Megasave sale). The first
defendant was the managing director of and shareholder in both the latter companies,
the second defendant was a shareholder and director and the third defendant an
employee. The two companies were buying organisations, Megasave conducting a
wholesale and Sentra a retail business. A buying organisation acts as a broker between
the supplier and the dealer. The dealer becomes a member of the buying organisation
which negotiates prices to be paid with the supplier. The buying organisation pays the
supplier and thus accepts the credit risk of the member who must reimburse it. The
buying organisation earns its revenue from rebates and allowances made by the
supplier, part of which is passed on to its members.

[3] It was a condition precedent of the Sentra/Megasave sale that the defendants
conclude agreements in restraint of trade with SCEB. The terms of the restraint
agreements signed by the defendants were identical save that the period of the restraint
for the third defendant was 24 months and for the first and second defendants 36
months, from the time the defendants left the employ of SCEB. The first defendant left
his employment on 31 May 1998, the second defendant on 30 April 1997 and the third
defendant on 30 April 1998. The restraints thus expired on 31 May 2001 and 30 April
2000 respectively. As consideration for agreeing to the restraints the first and second
defendants were paid R1,1 million each and the third defendant R 500 000. Clause 3 of
each of the restraints provided:

‘Die Werknemer onderneem hiermee teenoor Shoprite [SCEB] en op die basis van ‘n beding ten
behoewe van  derdes, teenoor elke ander lid van die Shoprite groep vir die duur van die
inperkingsperiode, dat hy nie: -
3.1
‘n Belang sal hê of betrokke sal wees, direk of indirek, in enige hoedanigheid (insluitend maar nie
beperk tot adviseur, agent, konsultant, direkteur, werknemer, finansier, bestuurder, lid van ‘n beslote
korporasie, lid van ‘n vrywillige assosiasie, vennoot, eienaar, aandeelhouer of trustee) in enige entiteit,
direk of indirek, wat gemoeid is in ‘n mededingende aktiwiteit binne die gebied [ie the Republic and
Namibia] nie;
3.2
Enige vertroulike inligting sal openbaar aan entiteite ander dan entiteite verbonde aan die
Shoprite groep en wat geregtig is op sodanige vertroulike inligting nie;
3.3
Ten opsigte van enige mededingende aktiwiteit binne die gebied direk of indirek betrekkinge sal
aanbied of enige dienskontrak sluit met of enige werwing te doen ten opsigte van enige persoon in diens
van die Groep;
3.4
Enige poging sal aanwend om enige voorsiener of klant van die Groep te oorreed om enige
kontraktuele verhouding van welke aard ook al met die Shoprite groep te beëindig of die terme daarvan te
wysig tot nadeel van die Groep nie;
3.5
Binne die gebied en ten opsigte van die besigheid van die Shoprite groep gebruik sal maak van
enige handelsverbintenis van die Groep met enige klant of voorsiener, anders as vir die doel om sy
verpligtinge as werknemer van Shoprite na te kom nie.’

[4] Pursuant to an agreement of sale concluded on 31 October 1997 Shoprite
Holdings Beperk acquired the share capital and loan accounts of OK Bazaars (1929)

Ltd from South African Breweries Ltd. OK Bazaars (1929) Ltd, as the plaintiff was then
known, became a subsidiary of Shoprite Holdings and a member of the Shoprite Group.

[5] In order to make use of an accrued tax loss in OK Bazaars (1929) Ltd a
reorganisation and rationalisation scheme was launched by the Shoprite Group in
August 1998.  To give effect to the scheme the business, assets and rights of SCEB
and some 40 other companies in the Shoprite Group (the ‘sellers’) were in terms of an
agreement of sale dated 28 August 1998 sold to OK Bazaars (1929) Ltd, the plaintiff, as
going concerns with retrospective effect to 1 November 1997 (the ‘SCEB sale’).
Thereafter OK Bazaars (1929) Ltd changed its name to Shoprite Checkers (Edms) Bpk
(the respondent in this court and plaintiff in the court below). SCEB subsequently
changed its name to OK Bazaars (1998) (Pty) Ltd and, having disposed of all its
business, became dormant. Clause 2 of the SCEB sale contained the following
condition:

‘It is a condition precedent for the transactions embodied in this Agreement acquiring force and effect that
the approval of the Commissioner of Inland Revenue be obtained in terms of Section 39 of the Taxation
Laws Amendment Act, Act 20 of 1994.’

It is not in dispute that the Commissioner approved the rationalisation scheme on 27
October 1998. SCEB managed the entire business as agent of the plaintiff from 1
November 1997 pending fulfilment of the suspensive condition.

[6] The plaintiff’s cause of action is based on its acquisition of the entire business of
SCEB with the inclusion of the rights SCEB held in terms of the restraints against the
defendants, the plaintiff having taken possession of the business and conducted it. In
the alternative the plaintiff relied on a written cession of the rights arising from the
restraints dated 24 September 1999. The defendants admitted this cession.

[7] The plaintiff alleged in its particulars of claim that the defendants committed
breaches of their restraint agreements by becoming involved in competitive activities,
disclosing confidential information and by the establishment of a competing buying

organisation, The Buying Exchange Company (Pty) Ltd (BEC). The defendants
allegedly, directly or indirectly, enabled BEC to conduct a competing buying
organisation by providing it with advice, knowledge and financial assistance and by
furthering the purpose and aims of BEC. Members of Megasave and Sentra were
encouraged to resign and join BEC. The defendants disclosed the identity of suppliers
and clients of the Shoprite Group to BEC and persuaded them to sever their contractual
relationships with the plaintiff. The plaintiff listed some 11 members who resigned from
Megasave and Sentra between 3 February 1999 and 16 March 1999 (the dates of
resignation of three members are unknown). This conduct, it was alleged, was unlawful
and in breach of the provisions of the restraint agreements. The amount claimed, some
R8m, represented the income the plaintiff would have earned, but for the resignation of
these members, until termination of the first defendant’s restraint.

[8] The defendants pleaded that during the course of the second part of 1998 they
considered the establishment of a buying forum, not a buying organisation, in which
members of Megasave and Sentra could have taken part. The forum would not have
competed with these two organisations. The defendants stated that they had
discussions with certain of these members and gave instructions for the registration of
BEC, the vehicle through which the buying forum would have conducted business. The
defendants were appointed directors of BEC. The defendants added that during
November 1998 certain members of Megasave and Sentra, with whom the buying
forum was discussed, were dissatisfied with these organisations and indicated that they
wanted to resign and to take part in the buying forum through an alternative buying
organisation. Consequently, the defendants pleaded, they informed these members on
17 November 1998, when the first board meeting of BEC was held, that they could no
longer be involved in the proposed organisation since that might infringe the provisions
of their restraint agreements.  They gave instructions to Mr B J Van den Berg, BEC’s
secretary, to have them removed as directors and terminated their involvement with
BEC.

[9] At the first hearing before the court a quo Van der Westhuizen AJ granted
absolution from the instance on the basis that the plaintiff had not shown that it had
acquired the rights arising from the restraint agreements on the limited basis that there
was no evidence that SCEB had complied with s 228 of the Companies Act 61 of 1973.
In terms of the SCEB sale, SCEB and the other sellers sold their businesses to the
plaintiff so that a resolution in terms of s 228 was required. On appeal to this court the
order of absolution was set aside and the matter referred back to the trial court. Before
the trial commenced a separation order was made, calling on the trial court first to
determine the issue of liability, including the question whether the persons or entities
listed in the particulars of claim resigned as members and ended their relationship with
the plaintiff as a result of the defendants’ alleged breaches of contract.  At the resumed
hearing only the first defendant gave evidence for the defendants and called as
witnesses Mr G S Yusuf, a former employee of the plaintiff and later employed by BEC,
and Mr J R Basson, the managing director of the plaintiff. Van der Westhuizen AJ made
the declarator holding the defendants liable. As I have said, he also found that the
defendants’ conduct caused the resignations of the members of Sentra and Megasave
referred to in the particulars of claim. In coming to these conclusions he rejected the
evidence of the first defendant and drew adverse inferences from the failure of the
second and third defendants to testify and call, amongst others, Van den Berg, as a
witness.

[10] On appeal the judgment of the trial court was attacked on four bases: First,
whether the plaintiff acquired the rights arising from the restraint agreement and, if so,
whether the acquisition was prior to the defendants’ breaches of contract or the
‘damage-causing’ events, viz the resignation of members of Megasave and Sentra;
secondly, whether the defendants breached their obligations under the restraints;
thirdly, whether such breaches, if established, caused the relevant members of Sentra
and Megasave to terminate their membership or their relationship with the plaintiff; and,
fourthly, whether the plaintiff had acquired the Sentra and Megasave business and their
members prior to the resignations of the members (ie whether the plaintiff had in fact
suffered loss).

[11] The trial court found that in the absence of any contradictory evidence the rights
arising from the restraint agreements attached to the businesses of Megasave and
Sentra, forming part of their goodwill. These rights included the rights arising from the
restraint agreements as well as the right to earn an income from sales made by
members of Megasave and Sentra. It was not in dispute that the purpose of the
rationalisation scheme was to transfer the whole of the business of SCEB to the plaintiff.
The rights referred to, the court found, were transferable and were in fact transferred to
the plaintiff with effect from 1 November 1997, but at least on 27 October 1998, when
the suspensive condition to the SCEB sale, the approval of the Commissioner for Inland
Revenue, was fulfilled. It was not in dispute that SCEB conducted the businesses of
Sentra and Megasave from 1 January 1996 as a division of its own business. SCEB
also conducted as part of its enterprise a retail chain of supermarkets under the names
of ‘Shoprite’ or ‘Checkers’. The plaintiff conducted a retail chain of supermarkets under
the names of ‘OK Bazaars’ and ‘Hyperama’.

[12] It was common cause that pursuant to the rationalisation scheme the entire
business of SCEB was sold and transferred to the plaintiff and merged with the
business of the plaintiff. In their additional heads of argument the appellants disputed
only the date of the transfer. The rationalisation scheme was implemented to take
advantage of the accrued tax loss of the plaintiff and this could be done only if the entire
business of SCEB had been transferred to the plaintiff. The plaintiff had in fact used part
of the tax loss in the financial year ending June 1998.

[13] The best illustration that the entire business of SCEB was transferred to the
plaintiff is the fact that SCEB became dormant after the transfer, and the plaintiff
became the operating company in the group. These facts were not disputed at the trial.

[14] The first ground on which the plaintiff relied for its acquisition of these rights as
pleaded in the particulars of claim was that they were transferred and acquired by the
plaintiff’s taking possession of the business and conducting it. This is indeed what the
court a quo found. The defendants, however, characterized this finding differently and

contended that the trial court found that these rights passed to the plaintiff by operation
of the SCEB sale per se. This is not correct. The trial found that the plaintiff ‘die gehele
onderneming van SCEB met effek 1 November 1997, ingevolge die koopkontrak van 28
Augustus 1998, gekoop, oorgeneem en bedryf het’.

[15] What the defendants disputed was the finding of the court a quo that SCEB
managed the business of SCEB with effect from 1 November 1997 as the agent for the
plaintiff. The defendants contended that SCEB managed, pending fulfilment of the
suspensive condition, the business on behalf of Shoprite Holdings Ltd and not on behalf
of the plaintiff. This is not correct. The clause 3 of Part Four of the SCEB sale provides
that the management and control in respect of the businesses -

‘shall be deemed to have passed to the PURCHASER on the Effective Date, from which date it has been
managed and controlled on behalf of the PURCHASER by the SELLERS as its agent.’

The ‘purchaser’ as defined is the plaintiff. Shoprite Holdings Ltd is not one of the
‘sellers’.1 This conclusion is, moreover, borne out by the evidence of Mr A N Van Zyl,
the plaintiff’s secretary, and Ms S J De Boor, an employee of the plaintiff’s auditors. In
addition, the documents submitted as part of the application for approval of the
rationalisation scheme show that the amalgamation of the entire business of SCEB with
that of the plaintiff was envisaged. Moreover, the managing director of Shoprite reported
in February 1998 to the directors of SCEB and Shoprite Holdings Ltd that the merged
businesses were conducted as a single entity from 1 November 1997. The
rationalisation scheme was approved on 24 February 1998 by the directors of both
SCEB and the plaintiff. The SCEB sale was ratified by Shoprite Holdings Ltd on 7 July
1998. The court a quo was therefore correct in finding that SCEB conducted its
business as agent for and on behalf of the plaintiff from 1 November 1997.

1  Clause 1.2.2.18 of Part One of the SCEB sale.

Was there a transfer of the right to enforce the restraints to the plaintiff?

[16] The defendants contended that there was no evidence that the rights had passed
to the plaintiff before 24 September 1999 when the written cession was executed. The
relevant members of Megasave and Sentra had all resigned before that date, viz during
February and March 1999. It follows, so the argument went, that no rights of the plaintiff
were infringed at the time of the resignations and thus no wrongs were committed as
against the plaintiff at that time. The defendants submitted that clause 1 of Part Four of
the SCEB sale, providing that the effective date of the sale would operate retroactively
from 1 November 1997, was a deeming provision inter se that could not affect the
parties to the litigation or elevate any prior act of the defendants to the breach of a right
which the plaintiff did not have at the time of breach. The only evidence of a cession, it
was argued, was the written document of 24 September 1999 which expressly provided
for the cession. For the reasons set out these contentions cannot be accepted.

[17] There is, as was observed, a distinction between the agreement to cede and the
real agreement of cession, although these will often coincide.2

‘The undertaking to cede and the actual cession will often coincide and be consolidated in a single
document, yet they remain discrete juristic acts. However, because they are frequently merged into one
transaction the clear distinction between the obligationary agreement to cede and the actual cession
sometimes tend to be smudged. They are nevertheless distinct in function and it can be so in time: by the
former a duty to cede is created, by the latter it is discharged.’

[18] The SCEB sale was an agreement to effect a cession in future. A cession is an
abstract legal act that is independent of the underlying, obligationary, agreement.3 The
cession of personal rights is brought about by agreement and no formalities are
required.

2 P M Nienaber ‘Cession’ 2 (2) LAWSA 2 ed para 8. See in particular Botha v Fick 1995 (2) SA 750 (A) at
765 A-B.
3 Rabinowitz & another v De Beers Consolidated Mines Ltd & another 1958 (3) SA 619 (A) at 637B-C;
Dreyer & another NNO v AXZS Industries (Pty) Ltd 2006 (5) SA 548 (SCA) at 554E-H; 2 (2) LAWSA 2ed
para 8.

A cession may thus be either express or tacit, to be inferred from the conduct of the
parties.4 Clause 4.3 of Part Four of the SCEB sale requires the sellers, including SCEB,
to ‘use their best endeavours to procure, with effect from the fulfilment of the condition
precedent referred to in clause 2 of Part One [ie the approval by the Commissioner for
Inland Revenue], the cession and assignment of all rights and delegation of all
obligations under the contracts to the PURCHASER with effect from the Effective Date,
[1 November 1997]….’ It does not follow from this clause that a real agreement of
cession could not have been concluded tacitly. No formalities were required for the
cession envisaged: all the parties had to do was to use their best endeavours to procure
it. The intention was clearly that any cession, whenever done and in whatever manner
accomplished, would suffice. The evidence was that SCEB conducted its entire
business on behalf of the plaintiff from the effective date in order to give effect to the
rationalisation scheme. The only inference to be drawn from this is that the parties by
their conduct concluded the real agreement of cession transferring the rights flowing
from the restraint agreements, being part of the business of SCEB, to the plaintiff.5 This
was no ‘mere loose understanding’.6

[19] An agreement to cede may be subject to a suspensive condition, as in this case,
or to a time clause relating to the cession, in which event the right will not pass until the
condition has been fulfilled or the prescribed period has elapsed. Logically, the transfer
of the rights to enforce the restraints was also subject to the same suspensive condition
the SCEB sale was subject to. On fulfilment of the condition the parties inter se are then

4 Botha v Fick at  762B-H and 778F-G.
5 See Botha & another v Carapax Shadeports (Pty) Ltd 1992 (1) SA 202 (A) 213A-B and at 214D-F where
it was said: ‘[T]he obligationary agreement is the sale of the goodwill, including as it does the contractual
right, while the transfer agreement by which the right is conveyed to the purchaser, is constituted by the
delivery by the seller, and the acceptance by the purchaser, of the physical possession of the business,
pursuant to the sale. The incorporeal assets comprising the goodwill are incidental to the business itself
and they are transferred together, in the intendment of the law. … I am convinced that nothing more is
required by law to render the cession effective as between cedent and cessionary …’.
6 2 (2) Lawsa 2 ed para 26.

placed in that position ex tunc.7 In view of my conclusion below, I need not express an
opinion on the effect of such a cession inter omnes, as against third parties, but will
accept that as far as third parties are concerned the rights vested in the plaintiff only on
fulfilment of the condition, on 27 October 1998, a date before the resignation of the
members of Sentra and Megasave.

[20] The defendants, however, contended on appeal that the plaintiff had failed to
show that the rights in respect of Sentra and Megasave formed part of the SCEB sale.
The argument rested on a narrow basis. Clause 3.1.1 of Part One describes the merx
as ‘the SC business comprising: the entire retail supermarket business which is being
sold as a going concern’ as well as the immovable property and share sales and claims
in respect of its subsidiaries. The ‘retail supermarket business’, the argument went, did
not include the businesses of Sentra and Megasave: the latter’s members were
wholesalers and Sentra did not conduct a supermarket business. The definition of
‘going concerns’ in clause 1.2.2.6 of Part One and, by reference, of ‘SC Business’ in
clause 1.2.2.17 again contain the same apparent limitation of the business sold as the
‘retail supermarket business’. It was argued on behalf of the plaintiff that this
interpretation was too restrictive and that, when the whole agreement is seen in context
and against its factual matrix,8 it became clear that the entire business of the seller
under the SCEB sale was to be disposed of. It is not necessary to determine this issue.
The trial court found that the businesses of Sentra and Megasave were transferred to
and conducted by the plaintiff, initially by SCEB on behalf of the plaintiff and later, after

7 ABSA Bank Ltd v Sweet & others 1993 (1) SA 318 (C) 323B-C: ‘It is also now, it appears, accepted that
when a suspensive condition is fulfilled the contract and the mutual rights of the parties relate back to,
and are deemed to have been in force from, the date of the agreement and not from the date of fulfilment
of the condition, ie ex tunc …’. And at 323H: ‘The effect of the aforegoing would therefore appear to be
that rights acquired by third parties during the period of suspension would not be affected by the
retroactivity in regard to the rights of the contracting parties’. Schalk van der Merwe, L F van Huyssteen,
M F B Reinecke and G F Lubbe Contract General Principles 3ed (2007) p 488 refer to Wolfgang
Fikenscher and Andreas Heinemann Schuldrecht (2006) para 59 II A 1 who state: ‘An agreement,
according to which the claim should be transferred to the cessionary retroactively, ie with an effect of an
earlier date, can only be construed as a cession of the claim with effect ex nunc. This is inevitable for the
sake of the protection of the debtor. A retroactive cession is, as matter of principle, excluded and not
conceivable. However, the parties to the cession  are obliged to treat each other as if the cession would
have been effective at the earlier date, especially with respect to interest’ (my translation).
8 KPMG Chartered Accountants (SA) v Securefin Ltd & another 2009 (4) SA 399 (SCA) para 39.

fulfilment of the suspensive condition, by the plaintiff itself. For the reasons set out the
real agreement of cession was concluded tacitly and pursuant to the rationalisation
scheme followed by the SCEB sale which was implemented by SCEB taking
possession and managing the entire business on behalf of the plaintiff. Only its effect
was suspended pending fulfilment of the condition precedent. Whether or not the rights
arising from the restraints formed part of the ‘SC business’ as defined is irrelevant: they
formed part of the business of SCEB.

Breach of duty to plaintiff

[21] The defendants contended that, inasmuch as the plaintiff sought to recover
damages suffered in its own right, it had to establish a breach of an obligation owed to it
which resulted in the ‘damage-causing’ events, that is the resignation of the members.
This again depended on the existence of a contractual obligation at the time of the
conduct complained of. The submission was made that it was not within the power of
the plaintiff to render an act retroactively wrongful by taking cession of the relevant right
at a later stage. The first answer to this contention is that the real agreement of cession
on fulfilment of the condition brought about the transfer of the rights of SCEB, arising
from the restraint agreements, to the plaintiff. Since the plaintiff acquired the entire
business of SCEB, the rights ceded also included all rights that had accrued to SCEB
arising from the alleged breaches of the restraints. These rights vested pendente
conditione in SCEB, and would in the ordinary course and in an appropriate case have
provided a sufficient basis for an interdict at the suit of SCEB. Pending fulfilment of the
condition any wrong would have been committed against SCEB, not as against the
plaintiff. But on fulfilment of the condition the rights in respect of the restraint
agreements and also those arising from their breach vested in the plaintiff. The
damages (ie those resulting from the resignation of the members) were suffered only
later after the plaintiff had acquired those rights. The claim for damages thus vested in
the plaintiff.

Defendants’ breaches

[22] The defendants contended that, assuming that the cession had taken place
before resignation of the members, it was not sufficient for the plaintiff to rely on
evidence of generalised breaches of the restraints but that it had to show particular acts
on the part of each defendant that were causally linked to the resignation of each
member. This, the argument proceeded, was not considered by the court a quo.

[23] The trial court found that BEC was a buying organisation that conducted
business in competition with Megasave and Sentra. It was established after a meeting
in August 1998 by members of these organisations at the Little Switzerland Hotel and
convened by the defendants. After the meeting the defendants prepared a business
plan for the proposed buying organisation which was handed in as Exhibit S. BEC was
registered on the instructions of the first defendant. The office of BEC was set up as a
result. The defendants directly or indirectly funded BEC. Their resignation at the first
board meeting of BEC was not in good faith and, the court found, they continued to be
involved in BEC.  I accept these findings and the inferences drawn by the trial court.
The conclusion of the court that the defendants planned and funded the establishment
of a competing buying organisation seems to me the most likely, if not the only,
inference to be drawn.

The Little Switzerland Hotel meeting of 12 August 1998

[24] The defendants convened the meeting. The trial court found that what was
discussed was not, as alleged by the defendants, the establishment of a forum that
would have done business through Megasave but a competing buying organisation. The
evidence indeed shows that several of the largest members of Sentra and Megasave
were invited. Mr A Allie, a member of Megasave, testified that everyone invited was
hand-picked and that they represented some of the largest stores. The meeting was
addressed by the first and second defendants, the first defendant playing the leading
role. The third defendant attended. Allie had been informed before the meeting by the

first and second defendants that a new buying group would be formed and that he
would be invited. He indeed received a written invitation and understood the purpose of
the meeting to be the formation of a new group to ‘run down Shoprite Checkers’. Allie
had no interest in supplying small members: all those invited were businessmen
intending to establish a new buying group of which they would be the ‘muscle’. He
understood that the rebate system at Shoprite was to be restructured and a franchise
operation and administration fee introduced. The defendants were apparently unhappy
with this course of events and informed the invitees that the new organisation would be
less difficult, offering more benefits to members. Those invited were to be its directors
and shareholders. They were encouraged to resign from Sentra and Megasave and
take up shares in the new organisation. It was suggested that each had to contribute
R100 000 as capital. New members would be recruited after the buying organisation
was set up and its structure settled. The defendants undertook to provide a business
plan for the new organisation and to submit it to those present for approval. Exhibit S
was eventually produced. No reference was made at the meeting to the restraints to
which the defendants were subject, not even when it became clear at the meeting, as
was put to Allie in cross-examination, that some of those present wanted to form a new
buying organisation.

[25] The trial court accepted that all three defendants had played a leading role in
convening the meeting and that its purpose was the formation of a new buying
organisation in competition with Sentra and Megasave. Had it been the intention to
establish a buying forum, one would have expected the latter two organisations would
have been invited as well, particularly where the concept of a ‘banner group’ had
already been discussed by the second defendant with officials of the plaintiff. The
meeting was clearly confidential and set up to discuss the establishment of a competing
buying organisation. Had the defendants planned a buying forum, one would have
expected them to continue with this enterprise. What they did, however, was to support
the ‘core’ group. As the court found, Exhibit S, was a detailed plan for the establishment
of a buying organisation, produced shortly after the meeting.

Exhibit S

[26] Exhibit S was distributed under the name of the interim management committee,
comprising the first and second defendants. Each of the defendants contributed to it. In
the letter accompanying the exhibit those who attended the meeting were thanked for
their participation. Paragraph two thereof read that ‘[t]he enthusiasm and support that
was shown, convinced us once more of the opportunity to combine our efforts. Attached
herewith a draft document listing our plans.’ The two cellphone numbers listed at the
foot of the letter were those of the first and second defendants.

[27] Exhibit S was headed ‘The Buying Exchange Company’ and commences with
the words ‘[i]n order to investigate\evaluate the need for an independent buying group it
is necessary to analize certain basic concepts …’. It continued with descriptions of the
retail market, the independent market and the future market. Franchises and buying
groups were discussed. It was stated that Shoprite intended Sentra and Megasave to
become fully franchised operations. This information, the trial court found, could only
have come from the first defendant.  The formal franchise market was expected to grow
but ‘a second market exists for either the true independent or those operating in the
informal market’. The ‘Concept for the Future’ was to follow a ‘top down approach’ and
to establish a low risk organisation with a small capital base. The ideal structure for the
organisation was a company to be owned and controlled by 15 major equal
shareholders and directors. The shareholders’ agreement had to provide for ownership
to remain in the hands of the major players and for the buy-out of or sale to new
members and directors. Participants on the second level were to be involved on a
membership or smaller shareholder basis. Provision was also made for an operating
company and for the eventual listing on the JSE. It was not intended to sell the
proposed company but rather to provide benefits to members through discounts and
rebates and growth in the share value. The trial court correctly inferred that the latter
provision was probably included to allay the fears of members that, as had happened in
the case of Sentra and Megasave, the business of the new organisation would

eventually be sold by the defendants. This issue was specifically raised at the Little
Switzerland Hotel meeting.

[28] The new organisation was to commence with the establishment and equipping of
a buying office in Gauteng after the formation of the company and the setting of the
share participations. Exhibit S stated that during the initial phase members had to
conduct their accounts through their existing buying organisations because rebates
usually ran to December of each year. It follows that the eventual resignation of
members from their old buying organisations was contemplated. After the initial phase
the buying organisation had to be established and second level members recruited. To
recruit smaller members and allow for their rebate income it was planned to carry their
accounts and pay suppliers on their behalf. It was not the intention to create a franchise
operation although it was envisaged that some sort of ‘combining image’ had to be
offered to smaller members. A timetable was annexed to Exhibit S requiring the
company to be established by 30 September 1998. Dates were set for the
establishment of the company, for top members taking up their shares, for the opening
of the buying office, for the recruiting of second level members and for the
administration and accounts system to be set up. The full organisation had to be
functional by July 1999. Exhibit S also contained an income and expense budget, a pro
forma letter to suppliers (which included a statement that Mr Leon Volschenk had been
appointed as commercial manager) and a draft acceptance form for taking up shares in
the company. The last section dealt with computer and software requirements, invoices
and statements.

[29] The court a quo rejected the evidence of the first defendant that Exhibit S was
merely an ‘interim document’ and not a specific guide to be followed. I agree with this
assessment. The very wording of Exhibit S reflects that it was a detailed business plan
for the establishment of BEC. This conclusion is supported by the reluctance of the
defendants to admit its origin. The first defendant at first said in evidence that he gave
Exhibit S to his attorneys. Although a document substantially the same as Exhibit S was
discovered before the trial, it was only admitted after Allie had given evidence and

referred to it. The first defendant, moreover, denied in a discovery affidavit that there
existed any documents pertaining to the establishment of BEC or the buying forum. He
also denied, after the trial had commenced, that he was in possession of Exhibit S or
that it was prepared by him or on his behalf. The trial court correctly drew the inference
that the defendants deliberately tried to conceal their role in the drafting of Exhibit S and
the establishment of BEC. The trial court, moreover, rejected the contention that an
amount of R1,5m was insufficient for the establishment of a buying organisation. The
manner of financing the new organisation was detailed in Exhibit S, and it was
specifically stated that the capital of the company did not have to be substantial. The
founding members were at first going to purchase through their existing buying
organisations but thereafter through BEC. Moreover, at the first meeting of the BEC
board on 17 November 1998 it was resolved that members would initially have to pay
for their purchases in advance.

Establishment of BEC

[30] Events after the distribution of Exhibit S confirm that the defendants assisted in
implementing the business plan. The first defendant instructed Van den Berg to see to
the establishment of BEC, which was registered on 8 September 1998. The main
business of BEC was to carry on the business of a ‘buying organisation’. The first
defendant provided both the name of the company and the description of its main
purpose. An office was found and equipped. Volschenk and Van den Berg were
appointed as managing director and secretary respectively. The defendants were BEC’s
first directors. Some of those who attended the meeting at the Little Switzerland Hotel
took up their shares and were appointed directors of BEC. The members of Sentra and
Megasave who became members of BEC resigned, as contemplated in Exhibit S,
during February and March 1999, after BEC started operating.

[31] The minutes of the board meeting of BEC on 17 November 1998 confirm most of
these events. It was attended by some of the persons who had attended the meeting at
the hotel.  Also present was the chairman of Verbruikers Groothandel. It was resolved

that ‘an option be exercised to take up shares in The BEC in exchange for shares by
The BEC in VGK’. Verbruikers was a competing buying organisation and the undisputed
evidence for the plaintiff was that the first defendant knew from early 1998 that it was for
sale. Verbruikers, the trial court found, would provide the vehicle through which the
members of BEC could make their purchases. It was resolved that the share capital of
BEC was to be R1,5m and that there would be 15 main shareholders with ten board
members and five executive directors. BEC was to function with a small capital base
and members initially had to pay for their purchases in advance.  The minutes show that
BEC was geared to start operating on 1 February 1999 and that members would be
informed of the date on which business would commence so that they could resign their
existing membership. Legal opinion on the correct procedure for resignation had to be
obtained. The minutes of the meeting of 3 February 1999 reflect that the resignations of
members of Sentra and Megasave had been discussed with attorneys. Negotiations
with suppliers had already taken place and they required written resignations. The
conclusion of the trial court that BEC was established in breach of the defendants’
obligations under their restraints seems unassailable.

Funding of BEC

[32] Extensive evidence of the funding of BEC by the defendants through the
Sengroep group of companies was led. MEGS was a wholly owned subsidiary of
Sengroep, the shares of which were held by DSAL, Superbia and Desbel (all private
companies). The three defendants were directors of MEGS during 1998 and 1999. They
were also directors of Sengroep and DSAL in 1998. Van den Berg was the secretary of
most if not all of these companies. Howard, their auditor, described Van den Berg as the
‘de facto executive’ of the group. In the 1998 and 1999 financial years the third
defendant and Van den Berg were among the directors of Karaat (a private company
associated with the Sengroep group). The latter was also the secretary of BEC.

[33] The account into which the funds flowed was an ABSA money market account,
the account holder of which was reflected as BEC in the books of the bank on 28

October 1998. The account holder was subsequently indicated as MEGS. The trial court
concluded that the account was indeed that of BEC. The defendants in their concise
heads of argument filed at the request of this court admitted the findings made by the
trial court to the effect that the account was that of BEC. Yet a day before this appeal
was heard the defendants filed a supplementary note seeking to withdraw the
admissions including the admission that the money market account referred to
‘belonged’ to BEC. The plaintiff had inadequate time to address the issues raised
properly.

[34] It is not necessary to determine these issues. Clause 3 of the restraints prohibit
the defendants from having an interest in or being involved with, directly or indirectly, in
any capacity, including that of a financier, a competing activity. The flow of funds
commenced with a transfer of R500 000 on 28 October 1998 from an account of MEGS
to the current account of Karaat. On the same day BEC’s current account was credited
with the amounts of R10 000 and R90 000 and Karaat’s account debited accordingly.
On that day an amount of R400 000 was transferred from Karaat’s current account to
the disputed BEC money market account. Further transfers were made from this
account to BEC’s current account. MEGS also advanced a loan of R500 000 to
Volschenk during 1999 while the defendants were its directors. At that time they knew
that Volschenk was the managing director of BEC. The ‘transfer’ of this loan to
Sengroep, and later to Desbel because the directors of Desbel had approved it does not
detract from the conclusion that the defendants funded BEC through companies in the
Sengroep group. Whether or not the disputed money market account belonged to BEC
or MEGS is of no consequence. The fact is that both amounts originated from MEGS of
which all three defendants were directors at the relevant times. They were, therefore,
directly or indirectly, involved as financiers in BEC. In addition, the evidence of the first
defendant was that, since they were still involved with BEC during October 1998, he
requested Van den Berg to have ‘’n paar rand beskikbaar’ for BEC. The transfer of the
R100 000 (in two amounts of R10 000 and R90 000) occurred, as he said, ‘in my tyd’.
The first defendant also said that he did not put any money of his own into BEC but that
if they, the defendants, had contributed then the funds had to be returned. There is no

evidence that the amount of R100 000 was repaid after the defendants had allegedly
withdrawn from BEC. If any person could have explained the movement of the funds it
would have been Van den Berg. The defendants did not call him as a witness. The
inference that the defendants, in breach of their restraints, financed BEC is unavoidable.

Causation

[35] The defendants submitted that the evidence did not establish that the members
of Sentra and Megasave resigned as a result of any conduct on the part of each
defendant and that the plaintiff had not shown that the resignations were not attributable
to other factors related to dissatisfaction with the plaintiff. In addition, it was submitted
that the plaintiff had not demonstrated that there was a contract or some other
relationship between the plaintiff and these members. The trial court, it was argued,
erred in not applying the ‘but for’ test to establish whether the conduct of the defendants
was the factual cause of the resignations.9 The argument was that the trial court
approached the issue on the basis that the defendants bore some or other burden of
showing that the members resigned for reasons other than those alleged by the plaintiff.
This is not how I understand the judgment of the court a quo. In this court Combrinck
AJA in reversing the order of absolution from the instance held that there was prima
facie evidence that the 11 members had resigned because of the conduct of the
defendants. The expression prima facie evidence10 ‘is used to mean prima facie proof of
an issue the burden of proving which is upon the party giving that evidence. In the
absence of further evidence from the other side, the prima facie proof becomes
conclusive proof and the party giving it discharges his onus.’ I understand the judgment
of the trial court to be saying no more than this. Nor was the question whether the
members who resigned were members or buyers from Sentra and Megasave disputed
in evidence: they had all resigned.

9 International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700E-H.
10 Ex parte The Minister of Justice: In re Rex v Jacobson & Levy 1931 AD 466 at 478. See the discussion
by D T Zeffertt A P Paizes and A St Q Skeen The South African Law of Evidence (formerly Hoffmann and
Zeffertt) (2003)  p 124 ff.

[36] The witnesses for the plaintiff readily conceded that a large number of members
resigned from Sentra and Megasave during the period following September 1998 and
that there was dissatisfaction among them due to the policy of retaining rebates, the
1999 incentive scheme, the opening of competing stores and stringent structural and
policy changes. The defendants relied on allegations to the effect that some of the
members resigned as a result of the incentive package that was introduced at the end
of 1998. Another member who resigned had requested a special concession which was
denied. Other members were upset about competing stores of Shoprite opening or the
structural changes that were introduced. The trial court found that there was no
admissible evidence of the reasons why the defendants resigned and that the
defendants’ contentions were speculative. In addition, it found that the resolution taken
by the BEC board at its meeting on 17 November 1998 that members would be advised
when to resign from Sentra and Megasave implied that the incentive packages for 1999
could not have played a role in the decisions of four founding members of BEC because
the package only became known in December 1998. The letters of resignation of these
four members were worded in the same terms, all dated 3 February 1999, and faxed
from BEC’s offices. The majority of members who resigned were, by January 1999,
reflected as members of BEC although they only resigned in February 1999. This
indicates, as Combrinck AJA found, at least prima facie that the resignations were
consequences of the defendants’ conduct. In the absence of evidence to the contrary
the prima facie proof becomes conclusive.

[37] Even if the facts relied upon by the defendants were established they do not
assist them. The essence of the plaintiff’s case is that the defendants acted in concert
pursuant to a carefully contrived plan to establish, set up and finance BEC. This conduct
constituted a breach of clause 3.1 of each of the agreements in restraint of trade. The
resignations of the members were consequences of this conduct: these members would
probably not have resigned but for the establishment of BEC. A plaintiff suing for breach
of contract is, in any event, not required to show that the breach by the defendant was

the cause but only that it was a cause of the loss.11 Nor was it necessary for the plaintiff
to show particular acts of each defendant that were causally linked to the resignation of
each member of Megasave and Sentra. Each defendant is liable for the conduct of the
others individually or in co-operation with the other in breach of their respective restraint
agreements in order to achieve their common object.12 Their breach, the establishment
of BEC, led to the resignations of the members of Sentra and Megasave or contributed
to it.13 The trial court found that the defendants acted in concert in pursuit of the
common purpose to establish BEC. They intended members of Sentra and Megasave
to resign and, a fortiori, caused their resignations.14  It follows that the appeal should be
dismissed.

Order

[38] The appeal is dismissed with costs, including the costs of two counsel.

_________________
F R MALAN
JUDGE OF APPEAL

11 Thoroughbred Breeders’ Association v Price Waterhouse 2001 (4) SA 551 (SCA) para 66.
12 Aetiology Today CC t/a Somerset Schools v Van Aswegen & another 1992 (1) SA 807 (W) at 816C-E
and compare Nedcor Bank Ltd t/a Nedbank v Lloyd-Gray Lithographers (Pty) Ltd  2000 (4) SA 915 (SCA)
para 10. The defendants were in a sense ‘joint wrongdoers’ as the term is used in delict.
13 Thoroughbred Breeders’ Association para 66: ‘Where a plaintiff can prove that the breach of the
defendant was a cause of the loss (as opposed to the cause thereof) he should succeed even if there
was another contributing cause for the loss, be it an innocent one, the actions of a third party … or,
logically, the carelessness of the plaintiff himself in failing to take reasonable precautions to avoid it.’
14 I am not called upon to consider whether all the damages claimed is a consequence of the resignations
of the relevant members.

APPEARANCES:
For Appellant:

J G Dickerson SC

A Smalberger

Instructed by:

Edward Nathan Sonnenbergs Inc

Cape Town

Matsepes Inc

Bloemfontein

For Respondent:

P Coetsee SC

D van der Walt

Instructed by:

Werksmans Inc

Cape Town

Naudes

Bloemfontein

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal

Date:
11 March 2011

Status:
Immediate

Please note that the media summary is intended for the benefit of
the media and does not form part of the judgment of the Supreme
Court of Appeal.

GROBBELAAR v SHOPRITE CHECKERS

The Supreme Court of Appeal dismissed an appeal today by three
former employees of the plaintiff’s predecessor who were sued in
the Cape high court for damages arising from their breaches of
agreements in restraint of trade they had entered into with
companies subsequently acquired by the plaintiff. The Cape high
court upheld the plaintiff’s claim and held that the defendants were
liable to the plaintiff. It was ordered that the quantification of the
damages allegedly suffered be postponed until after adjudication
of the question of liability. The Supreme Court of Appeal found that
the defendants had established and funded a buying organisation,

The Buyers Exchange Company (Pty) Ltd, in breach of their
restraint agreements which competed with Megasave and Sentra,
the businesses of which were acquired by the plaintiff’s
predecessor and subsequently by the plaintiff, and caused certain
members to resign from them. The court also found that the
plaintiff had acquired the rights arising from the restraint
agreements and their breach when it acquired the entire business
of its predecessor.