THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case No: 837/2010

In the matter between

GERT JAKOBUS VAN DER WATT
FIRST APPELLANT

MARTHA JACOBA VAN DER WATT

SECOND APPELLANT

and

CHRISTIAAN JACOBUS JONKER

FIRST RESPONDENT

AGRIWEN (EDMS) BPK

SECOND RESPONDENT

AGRIGEN PETROLEUM (EDMS) BPK
THIRD RESPONDENT

AGRIGEN DIESEL BULTFONTEIN
(EDMS) BPK

FOURTH RESPONDENT

Neutral citation: Van der Watt v Jonker (837/2010) [2011] ZASCA 140
(23 September 2011)

Coram:
HARMS AP, LEWIS, PONNAN, CACHALIA and MAJIEDT JJA

Heard:
5 SEPTEMBER 2011

Delivered:
23 SEPTEMBER 2011

Summary:
Contract – Sale of business including goodwill – effect of – locus
standi in enforcing contract.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Free State High Court (Bloemfontein) (Kruger J, sitting as
court of first instance):
The appeal is dismissed with costs.
______________________________________________________________

JUDGMENT
______________________________________________________________

MAJIEDT JA (HARMS AP, LEWIS, PONNAN and CACHALIA JA
concurring):

[1] This is an appeal against the judgment and order of Kruger J, sitting as
court of first instance in the Free State High Court, Bloemfontein, enforcing
the terms of a restraint of trade agreement. Leave to appeal was granted by
this court.

[2] In terms of the order of the court below, the appellants, as
respondents, were restrained for a period of 10 years from being involved in a
business entailing the trading, storage, handling, sale, marketing or
distribution of fuel, oil and/or related products in the areas serviced by the
second, third and fourth respondents (as applicants below). They were each
also restrained from providing financial support or acting as a consultant,
adviser or agent of any person or entity conducting business in the
abovementioned respects.

[3] The first respondent, Mr Christiaan Jacobus Jonker (Jonker), started
the business of the second respondent, Agriwen (Pty) Ltd (Agriwen), third
respondent, Agrigen Petroleum (Pty) Ltd (Agri-petroleum) and the fourth

respondent, Agrigen Diesel Bultfontein (Pty) Ltd (Agri-diesel) in 1991, 2000
and 2001 respectively. Agriwen‟s predecessor was Kuiltjie Landbou (Pty) Ltd
trading as Agri-Mekka Koppies1 and its business was primarily the sale of
agricultural products to farmers, similar to the type of business usually
conducted by agricultural co-operatives. In 1998, Agriwen‟s business was
expanded to include the distribution of Engen petroleum products in certain
areas of the Free State province. Agri-petroleum was involved in the sale and
distribution of Engen petroleum products under the Zenex brand2 in certain
other circumscribed areas of the Free State, with three distribution depots at
Bothaville, Bultfontein and Virginia. Agri-diesel was established as a black
economic empowerment entity, also for the sale and distribution of Engen
petroleum products in certain other areas in the Free State (ie different to the
areas serviced by Agriwen and Agri-petroleum). I shall refer to these three
businesses collectively as „the Agri group‟. It bears mention at the outset that
the businesses were indeed conducted as one large, diverse entity. Jonker
was not a shareholder in the Agri group companies in his own name; his trust,
the Chris Jonker Trust, held these shares.

[4] The first appellant, Mr Gert Jakobus van der Watt, was a close family
friend of Jonker until their business relationship turned sour. Van der Watt
started working for Jonker in 1997 as shop manager of Agri-Mekka Koppies
and he later became Agriwen‟s marketing manager until September 2000.
Thereafter Van der Watt served as marketing manager for Agri-petroleum
until 2005. Van der Watt held a 30 per cent shareholding in Agri-petroleum
and a 21 per cent shareholding in Agri-diesel. He is married to the second
appellant, Mrs Martha Jacoba van der Watt, who was not a shareholder or
employee of any of the businesses in the Agri group. In 2005, by agreement
with Jonker, Van der Watt terminated his services with Agri-petroleum and
started a new business in Randfontein selling and distributing Sasol
petroleum products, mostly to industrial clients (the Agri group businesses

1 The name was changed to Agriwen in 2004.
2 Engen took over the Zenex businesses countrywide at about the time when Agri-petroleum
had been established, first as a shelf company, just before 2000.

distributed Engen petroleum products, mostly to farmers). The Randfontein
business was purchased in the name of the erstwhile third respondent in the
court below, Big Red Investments (Pty) Ltd, a company owned in equal parts
by Van der Watt and Jonker. Despite this equal shareholding, Van der Watt
was reflected as the only shareholder on the company documents, to protect
Jonker‟s business relationship with Engen. For the same reason a similar
arrangement regarding the purchase and shareholding was reached between
them in respect of the filling station business at Randfontein, which was
purchased in the name of the erstwhile fourth respondent, Turquoise Moon
(Pty) Ltd. Mrs van der Watt is the sole shareholder and director of this last
mentioned company. The filling station business was conducted under the
trade name „Dynamic Fuels‟.

[5] It is common cause that the Randfontein and Agri group businesses all
did very well. However, Van der Watt wanted to operate separately and
independently. Jonker acquiesced to a separation of the Randfontein and Agri
group businesses, culminating in a written agreement on 25 April 2007 (the
restraint agreement). This agreement is the kernel of the dispute between the
parties and it is therefore necessary to set out its salient features. The
restraint agreement was between Jonker on the one part and the two van der
Watts on the other. It contained a recordal that the parties do business in the
Randfontein companies and in the Agri group companies and that they agree
to separate these businesses. The agreement provided that the Van der
Watts became the sole shareholders of the two companies in which the
Randfontein business was conducted, while Jonker in turn became the sole
shareholder in the Agri group companies. It was agreed further that, in order
to effect a fair and equitable settlement, Jonker would pay to the Van der
Watts R2 million in cash - a point that assumes particular significance in this
case. Clause 6 contains restraints in respect of both the Van der Watts and
Jonker in respect of a 10 year period in the petroleum business for the
geographical areas serviced by the Agri group businesses (for the Van der
Watts) and for a radius of 80 kilometres from Randfontein (for Jonker). It was
recorded further in clause 6 that the parties agree that the restraints of trade

are fair and reasonable in respect of their nature, extent and period and that
they do not extend further than is reasonably necessary to protect the
businesses of the respective companies.

[6] Jonker and the Agri group companies sought and obtained relief in the
high court in terms of the restraint agreement on the basis that the Van der
Watts were proved to have solicited customers of the Agri group and were
trading in contravention of their restraint under the trade name Dynamic Fuel
on both the distribution and retail sides. It was not seriously in issue that the
Van der Watts were trading in the Agri group‟s service areas contrary to the
restraint provisions. To the extent that Van der Watt  sought  to create a
factual dispute on this aspect in the papers, the high court correctly found for
Jonker and the Agri group that there was indeed a breach if the restraint was
enforceable. In this court counsel for the Van der Watts sensibly argued the
matter on the basis that the Van der Watts were in fact trading in the
petroleum business in the affected areas. Their attack was directed against
the enforceability of the restraint. Three main issues were raised in argument
on behalf of the appellants, namely Jonker and the Agri group‟s locus standi,
the unenforceability of the restraints due to the absence of a protectable
interest on the part of Jonker and the Agri group and lastly the 10 year period
of the restraint. As will presently appear, this appeal stands to be decided on
a somewhat different basis to the one advanced by the parties and decided by
the high court. In this regard, this court drew the parties‟ attention prior to the
hearing to its decision in A Becker & Co (Pty) Ltd v Becker & others.3 I shall
deal with that decision in due course.

[7] It is convenient to deal first with the locus standi issue. Appellants‟ counsel
argued the point not on the legal standing per se, but on the question whether
Jonker had the right to sue in the absence of a protectable interest. He
contended that Jonker himself does not have a protectable interest since he is

3 A Becker & Co (Pty) Ltd v Becker & others 1981 (3) SA 406 (A).

not the owner of the goodwill in the Agri group.  Such goodwill, counsel
submitted, was held by the companies themselves. It was contended further
that Jonker is not a shareholder in any of the Agri group companies.
Reference was made to a dictum of Botha JA in Botha & another v Carapax
Shadeports (Pty) Ltd 4 which reads as follows:
„What I have been referring to as “the benefit” of an agreement in restraint of trade, pertaining
to a business, is, in the eyes of the law, the contractual right to enforce the restraint. It rests in
the owner of the business. He is the creditor in respect of it.‟
These contentions are misconceived. Jonker was a party to the contract. It is
in that capacity that he seeks to enforce the restraint. The restraint agreement
stipulates that Jonker himself became the sole shareholder in the Agri group.
And clause 4 of the restraint agreement provided that Jonker must pay the
sum of R2 million in cash to the Van der Watts. His protectable interest plainly
arises from the restraint agreement itself and there can be no ambiguity about
this at all.

[8] This court‟s decision in Basson v Chilwan & others5 fortifies the
aforementioned conclusion. The Chilwans owned Chilwans Bus Services, a
large transport company based in Cape Town with countrywide operations.
Basson had acquired vast experience in the design and construction of
busses. After he had built a bus for the Chilwans with which they were very
satisfied, they negotiated successfully with Basson to jointly set up a bus
construction business. This resulted in a written agreement to form a close
corporation, named Coach-Tech, with the Chilwans and Basson holding equal
interests in it. A restraint clause, which formed the subject of the dispute
between the parties, was included in the agreement in respect of Basson‟s
employment and the confidentiality of the agreement.
Of importance for present purposes is that the parties to the restraint
agreement were the four Chilwans, Basson and Coach-Tech. Both Nienaber
JA6 and Van Heerden JA7 held that the Chilwans were entitled to seek

4 Botha & another v Carapax Shadeports (Pty) Ltd 1992(1) SA 202 (A) at 214B.
5 Basson v Chilwan and others 1993 (3) SA 742 (A).
6 At 768J–769B.
7 At 774G-H.

enforcement of the restraint against Basson as embodied in the agreement. In
the words of Van Heerden JA (supra):
„Tweedens het die Chilwans net so seer as Coach-Tech „n belang by die beperking gehad.
Enige handeling wat tot nadeel van Coach-Tech sou strek, sou onvermydelik nadelig op hul
ledebelange inwerk. Bowendien was hulle partye tot die kontrak waarin die beperking op
Basson gelê is . . .‟ (Emphasis supplied.)
Jonker therefore, as a contracting party like the Chilwans, plainly has a
protectable interest affording him the right to sue for enforcement of the
restraint. The startling contention was made in the appellants‟ heads of
argument (although not persisted with in oral argument) that the Agri group
companies lack a protectable interest since they had not been parties to the
contract. This circuitous argument is self-evidently destructive of the one or
the other proposition. But cadit quaestio – as indicated in Chilwan, both the
companies and Jonker clearly have a protectable interest and they have a
right to sue on the restraint agreement.

[9] I turn next to a discussion of the application of Becker to this case. In
that matter Becker had sold his jewellery business which he conducted in a
company, the appellant, A Becker & Co, to one Akoodie. The assets sold
included goodwill and certain restraints of trade were set out in the written
agreement of sale. The restraint of trade was for a period of five years and
extended to the entire Republic of South Africa. Becker and his companies, to
which the restraint applied, complied in full with it until the expiry of the
restraint period. After the restraint had fallen away, Becker through his
companies approached his old customers in order to solicit business from
them. Circulars were distributed reminding former customers of Becker‟s
previous jewellery business and announcing that Becker was back in that
business. Akoodie, through the appellant company which he had bought from
Becker, sued for an interdict to restrain Becker and his wife (who had been in
the business with Becker) from canvassing or soliciting business from their old
customers. In upholding the appeal against an order of absolution this court
held that while the express restraint in respect of competition had fallen away,
the sale of the company‟s goodwill meant that Becker and his wife were

prohibited from soliciting business from their former customers. Muller JA
referred with approval to the speech of Lord Macnaghten in Trego v Hunt 8
and held as follows:9
„In my opinion the judgement in the English case of Trego v Hunt . . . is correct. If a seller
disposes of the goodwill of a business he is not allowed thereafter to act contrary to the sale‟.
In a separate, concurring judgment Van Heerden AJA analysed in detail the
origin and nature of the right to goodwill in a business. He pointed out that it is
an incorporeal property right usually based on two components, namely
locality of the business and the personality of the driving force behind the
business.10 In alienating the goodwill of a business, a vendor commits himself
not to perform any act adverse to the granting of the right. In this regard Van
Heerden AJA cited the well established English law notion that „a vendor is
not entitled to derogate from his grant‟, as espoused by Lord Herschell in
Trego v Hunt.11 It is by now also firmly established in our law that, absent a
restraint provision, the seller of goodwill is permitted to trade in competition
with the purchaser, but he may not solicit his old customers for business.12

[10] The present matter falls squarely within the Becker principles. Van der
Watt seeks to take back that which he has sold for a consideration of R2
million in cash, namely the old customers with whom he did business while
part of the Agri group. It is plain from Becker and the authorities cited there
that the present matter concerns the protection of goodwill as well as the
restraint of trade. Harms JA described goodwill in Caterham Car Sales &
Coachworks Ltd v Birkin Cars (Pty) Ltd13 as follows:
„Goodwill is the totality of attributes that lure or entice clients or potential clients to support a
particular business.‟

8 Trego v Hunt [1896] AC 7 at 22-25.
9 At 414H.
10 See also Receiver of Revenue, Cape v Cavanagh 1912 AD 459 at 461–462.
11 At 19-20.
12 A Becker & Co (Pty) Ltd v Becker & others at 417F-G and 418G-H; see also: Corbin on
Contracts vol. 6A s1386: „When a business is sold with its goodwill, but without any express
promise not to compete, the seller is privileged to open a new business in competition with
the buyer; but he is under obligation not to solicit his former customers or to conduct his
business under such a name and in such a manner as to deprive the buyer of the “goodwill”
that he paid for.‟
13 Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd 1998 (3) SA 938 (SCA) para
15.

In The Commissioners of Inland Revenue v Muller & Co’s Margarine Ltd14
Lord Macnaghten defined goodwill thus:
„What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit
and advantage of the good name, reputation and connection of a business. It is the attractive
force which brings in custom.‟

[11]    It is plain on the undisputed facts that van der Watt had built up strong
business relationships with Agri group‟s existing customers through his
previous employment there. He had also formed strong  personal associations
with some of them through his family and that of his wife. This is particularly
so in the case of the Parys, Koppies and Bothaville areas15. It is significant
that Van der Watt, on his own version, focused Dynamic Fuels‟ business
entirely on those areas of the Free State where the Agri group operates. This
suggests, to my mind, that he targeted customers in those areas for his new
business. The uncontroverted facts demonstrate that Van der Watt actively
solicited those Agri group customers by marketing his petroleum products at
the Koppies club, where a number of them were in attendance, at a golf day
where he actively marketed Dynamic Fuels‟ business and through a direct
approach to at least one Agri group customer, Mr Taljaard. There is in my
view no difference between this type of general canvassing,  that is, at a club
or during a golf day and that employed in Becker, namely the distribution of
circulars to erstwhile customers. It is not necessary to prove direct overtures
to Agri group customers by Van der Watt. In any event, as the court below
correctly found, the Taljaard case amply demonstrates that direct canvassing
and solicitation was undertaken by Van der Watt. It was admitted in Van der
Watt‟s answering affidavit that he had personally informed Jonker that he
intended resuming his business activities in the Agri group‟s service areas.
His defence was that the restraint of trade was unenforceable and that he
might consequently trade with his old Agri group customers in competition
with Jonker and the Agri group.

14 The Commissioners of Inland Revenue v Muller & Co’s Margarine Ltd [1901] AC 217 at
223-224.
15 The Van der Watts live in Parys and had opened a filling station there. Mrs van der Watt
hails from Bothaville and Van der Watt‟s family live in the Koppies area.

[12] In summary: Jonker and the Van der Watts separated their businesses
through their written agreement as mentioned. The businesses were sold as
going concerns. It is trite that such a sale of business as going concern
includes that business‟ goodwill. A restraint of trade against a seller forms part
of the goodwill of a business.16 In order to determine all the components
contained in the merx in a sale of a business one must have regard to the
contract and those components will normally, if not invariably, include the
goodwill of the business.17 There can be no doubt that the parties intended to
and did in fact sell the goodwill in the respective businesses to each other.
The appellants‟ counsel did not contend otherwise. The legal consequences
of such sale were apparently not emphasized in the high court and, as stated,
the parties were alerted to Becker’s case by this court prior to the hearing. But
in the papers, Jonker, on behalf of the respondents, repeatedly complained
that the goodwill was being eroded by the Van der Watts‟ conduct. The issue
was therefore raised pertinently in the papers and referred to in the judgment
of the high court. As stated, the Van der Watts‟ answer was that the restraint
is unenforceable. But in a supplementary answering affidavit an auditor of the
Van der Watts undertook, on their instructions, a calculation of the price of the
various businesses, including goodwill. Implicitly therefore, the appellants had
been alive to the fact that goodwill formed part of the businesses purchased
and sold respectively. The legal consequences of trading in contravention of
the alienation of the goodwill appear, however, to have eluded them. For
these reasons Jonker and the Agri group have the right to assert their rights to
goodwill in terms of the restraint agreement.

[13] The position of the second appellant, Mrs van der Watt, requires brief
consideration. It was contended on her behalf that no relief should have been
granted against her, since she was neither an employee nor a shareholder of

16 Botha & another v Carapax Shadeports (Pty) Ltd at 212D
17 Slims (Pty) Ltd v Morris NO 1988 (1) SA 715 (A) at 727E; Shoprite Checkers (Edms) Bpk v
Grobbelaar [2011] ZASCA 11 paras 18-19.

any of the Agri group companies. The contention cannot be upheld. First, Mrs
van der Watt was a signatory to the restraint agreement. Second, it is
abundantly clear on the papers that Van der Watt is using his wife‟s company,
Turquoise Moon (Pty Ltd, as a front to conduct the retail business (the filling
stations) with Agri group customers as a target market. Lastly, she was a co-
recipient of the R2 million cash consideration in terms of the agreement. She
is therefore also in breach of the agreement.

[14] Having reached this conclusion, it is not necessary to deal at length
with the restraint of trade issue. It would suffice to uphold the findings of the
high court, that the Van der Watts were in breach of the restraint and that the
ten year period was not unreasonable. I agree with the high court that the
following features of the restraint were conclusive – the reciprocity of the
restraint (i.e. binding both the Van der Watts and Jonker), the fact that the
Van der Watts were paid R2 million in cash as part of the deal, the success
attained by Van der Watt with the Randfontein business even with the
restraint in operation, Van der Watt‟s special relationship with the Agri group
customers while he worked for the group as a marketer, the Taljaard incident,
the fact that Van der Watt is specifically targeting the areas where the Agri
group operates and lastly the fact that this is a commercial, not an employer-
employee restraint agreed upon when the parties parted ways in their
business relationship and at a stage when they were fully conversant with
their respective businesses‟ extent and potential.

[15] The appeal is dismissed with costs.

___________

S A MAJIEDT

JUDGE OF APPEAL

APPEARANCES:

Counsel for appellants
:
C E PUCKRIN SC (with him AJP ELS)

Instructed by

:
Thomas & Swanepoel, Tzaneen

Symington & de Kok, Bloemfontein

Counsel for respondents
:
J Y CLAASEN SC

Instructed by

:
Thabo Grimbeek Attorneys, Kroonstad

Naude‟s, Bloemfontein

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE
SUPREME COURT OF APPEAL
MEDIA SUMMARY – JUDGMENT DELIVERED IN COURT OF
APPEAL
23 September 2011

STATUS: Immediate

VAN DER WATT V JONKER

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

The Supreme Court of Appeal (SCA) today dismissed an appeal against a judgment
of the Free State High Court, Bloemfontein.

The high court had granted the respondents’ application to enforce a restraint of
trade against the appellants in respect of trading in the petroleum industry in certain
circumscribed areas of the Free State Province. The SCA decided the matter on a
different basis as the high court, while upholding that court’s findings on the breach
of the restraint of trade by the appellants. The SCA held that, since the appellants
had sold goodwill in the businesses to the respondents, for which the first
respondent paid the sum of R2 million in cash to the appellants, they were not
permitted to solicit customers of the second, third and fourth respondents to do
business with them. The SCA found that such canvassing and solicitation of
business had been proved by the respondents and the appeal was consequently
dismissed with costs.

-- ends --