Van der Merwe v Bonnievale Piggery (Pty) Ltd

The parties entered into an oral business relationship in 2005 consisting of interlinked contracts: (i) contracts for sale of slaughtered pig carcasses at periodically agreed, market-related prices; (ii) an exclusive supply agreement; and (iii) a sole distributorship agreement. The relationship was of indefinite duration and terminable by either party. The plaintiff (Bonnievale Piggery) reared pigs and supplied carcasses to the defendant (Van der Merwe) who sold them to the retail market under his own brand in the Western Cape. The plaintiff granted credit to the defendant with payment due within 14 days, secured by a cession of the defendant's book debts. Prices were negotiated and changed at least four times a year based on market fluctuations, carcass size, and season. Between 2005 and 2012, the parties managed to agree on prices despite frequent disputes. In July 2012, they reached an impasse over the price of approximately 1300 heavyweight carcasses. A meeting was held at Bonnievale to resolve the deadlock but the parties could not reach consensus on price. After this meeting, the defendant wrote letters indicating he accepted the relationship had ended and even proposed a new arrangement. The plaintiff claimed R1,196,868.84 for carcasses supplied to the defendant in January and February 2013, which the defendant admitted receiving. The defendant counterclaimed for breach of contract and unlawful competition, alleging the plaintiff failed to adjust prices downwards, overcharged him, failed to give written notice of inability to adjust prices, and used confidential customer information to sell directly to his customers.

• Whether the contractual arrangement between the parties terminated when they could not agree on the price of carcasses in July 2012
• Whether consensus on price was essential for the continuation of the sale contracts and whether failure to reach consensus ended the entire contractual scheme
• Whether the plaintiff breached the supply/distributorship agreement by failing to adjust prices downwards in accordance with market trends
• Whether there was an undertaking by the plaintiff to provide written reasons if unable to adjust prices
• Whether the plaintiff unlawfully competed with the defendant by selling directly to his customers
• Whether the plaintiff breached a duty of confidentiality regarding customer information obtained through the cession of book debts
• Whether the information obtained was confidential in nature and deserving of protection
• Whether the plaintiff wrongfully interfered with the defendant's contractual relationships with his customers
• Whether the separation of issues under Rule 33(4), particularly separating causation from a delictual claim, was proper
• Whether the trial court erred in dismissing the plaintiff's claim when the defendant conceded receipt of carcasses and liability to pay

The appeal was dismissed with costs, including costs of only senior counsel. The full court's order was upheld: judgment for the plaintiff for payment of R1,196,868.84 together with interest and costs; the counterclaim was dismissed with costs.

Where parties to an ongoing supply contract agree that prices will be "market-related" but provide no objective mechanism for determining price in the absence of consensus, the agreement to market-related pricing constitutes merely a framework for negotiation of prices. When the parties reach an impasse and cannot agree on price—an essential term of each sale contract—and there is no external standard or mechanism (such as third-party determination) to resolve the deadlock, the failure to reach consensus terminates the contractual arrangement. In the law of unlawful competition based on the Aquilian action, wrongfulness must be established by showing that according to the legal convictions of the community, the competitive conduct is unreasonable or unfair when assessed through the prism of the Bill of Rights. A claim for unlawful interference with contractual relations requires proof of the existence and terms of the contracts allegedly interfered with. For information to be protected as confidential, it must possess the necessary quality of confidence and be imparted in circumstances giving rise to an obligation of confidence. Information that is in the public domain or is standard commercial information necessarily provided in security arrangements does not acquire confidential status. The conduct of parties following an alleged termination of contractual relations is relevant evidence of whether they accepted that the relationship had ended.

The Court made important observations about the proper use of Rule 33(4) separation of issues, stating that "a trial court must be satisfied that it is proper to make an order under rule 33(4), which should be made only after 'careful thought has been given to the anticipated course of the litigation as a whole that it will be possible properly to determine whether it is convenient to try an issue separately.'" The Court noted it was "misconceived" to separate causation (an essential element) from a delictual claim. The Court observed that the trial court had conflated different legal concepts (unlawful interference in business, restraint of trade agreements, and breach of contract), which led to material errors of law including applying the wrong legal test and improperly allocating the onus of proof. The Court noted that regarding costs, where both parties were ably represented by only senior counsel at trial and in the full court appeal, costs of two counsel in the Supreme Court of Appeal were not justified. This provides guidance on when costs of multiple counsel will be allowed.

This case is significant for several aspects of South African contract and delict law: (1) It clarifies that where parties agree prices will be "market-related" in ongoing supply contracts, this constitutes a framework for negotiation rather than an objective mechanism for determining price when consensus cannot be reached. Without an external standard or third-party determination mechanism, failure to reach consensus on an essential term (price) terminates the contract. (2) It demonstrates the importance of parties' post-dispute conduct in determining whether they accepted termination of contractual relations. (3) It reaffirms the elements of unlawful competition based on the Aquilian action, requiring proof of wrongfulness assessed against the legal convictions of the community through the prism of the Bill of Rights. (4) It clarifies that information provided in standard commercial security arrangements (like cession of book debts) does not automatically acquire confidential status. For information to be confidential, it must have the necessary quality of confidence and be imparted in circumstances giving rise to an obligation of confidence. Publicly available industry information does not meet this threshold. (5) It demonstrates the limits of a claim for inducing breach of contract—the claimant must prove the existence and terms of contracts with third parties that were allegedly interfered with. (6) It provides guidance on the proper use of Rule 33(4) separation of issues, warning against separating essential elements of a cause of action (like causation from delict). (7) It reaffirms appellate court powers to reassess credibility findings where the trial court was plainly wrong.