Grobbelaar v Shoprite Checkers Limited

Shoprite Checkers (through its predecessor SCEB) purchased the businesses of Sentra and Megasave as going concerns in 1995. As a condition precedent, the appellants (former directors/employees of Sentra and Megasave) entered into restraint of trade agreements in return for substantial consideration. Following a group rationalisation scheme in 1998, the entire business of SCEB, including Sentra and Megasave, was transferred to OK Bazaars (1929) Ltd, later renamed Shoprite Checkers Ltd, subject to a suspensive condition (tax approval). During the restraint period, the appellants were involved in establishing and funding a competing buying organisation, The Buying Exchange Company (BEC), solicited members of Sentra and Megasave to resign, and disclosed confidential information. Several members resigned in early 1999. Shoprite Checkers claimed damages for loss of income resulting from these resignations, relying on the transfer or cession of rights under the restraint agreements.

The appeal was dismissed with costs, including the costs of two counsel. The declaratory order holding the appellants liable for damages was confirmed.

The case is significant for South African contract and commercial law as it clarifies the transfer and cession of incorporeal rights, including restraint of trade rights, as part of the sale of a business as a going concern. It affirms that cession can occur tacitly through conduct and that such rights form part of goodwill. The judgment also reinforces principles of causation and enforcement of restraint of trade agreements.