Magna Alloys & Research (S.A.) (Pty) Ltd. v Ellis (109/84) [1984] ZASCA 116; [1984] 2 All SA 583 (A) ; 1984 (4) SA 874 (A) (27 September 1984)

Magna Alloys & Research (S.A.) (Pty) Ltd. v Ellis (109/84) [1984] ZASCA 116; [1984] 2 All SA 583 (A) ; 1984 (4) SA 874 (A) (27 September 1984)

The Supreme Court of Appeal held that South African law does not follow the English rule that all restraints of trade are prima facie unenforceable. Instead, the enforceability of a restraint of trade clause depends on whether its enforcement would be contrary to public policy, which is to be assessed in light of...

Source-derived case information.

Citation
[1984] ZASCA 116
Parties
Appellant: Magna Alloys & Research (S.A.) (Pty) Limited; Respondent: Adolf Christiaan Ellis
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Case Number
109/84
Procedural Posture
Civil Appeal / Appeal From Decision of Witwatersrand Local Division
Outcome
Appeal upheld; order of the court a quo set aside and replaced.
Judges
Rabie, Kotze, Joubert, Trengove, Van Heerden
Legal Topics
Restraint of Trade, Enforceability of Contracts, Public Policy, Penalty Clauses, Burden of Proof
Commercial and Corporate Civil Procedure Restraint of Trade Enforceability of Contracts Public Policy Penalty Clauses Burden of Proof

Source-derived case record

Summary, issues, holding and outcome

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Parties

Magna Alloys & Research (S.A.) (Pty) Limited

Appellant

Adolf Christiaan Ellis

Respondent

Procedural Posture

Civil Appeal / Appeal From Decision of Witwatersrand Local Division

  1. 1 Is a restraint of trade clause in an agency agreement enforceable under South African law?
  2. 2 Does the burden of proof rest on the party seeking to avoid the restraint to show it is contrary to public policy?
  3. 3 Is the penalty clause for breach of restraint enforceable, and if so, to what extent?

Ratio Decidendi

The Supreme Court of Appeal held that South African law does not follow the English rule that all restraints of trade are prima facie unenforceable. Instead, the enforceability of a restraint of trade clause depends on whether its enforcement would be contrary to public policy, which is to be assessed in light of the circumstances at the time enforcement is sought. The party seeking to avoid the restraint bears the burden of proving that enforcement would harm the public interest. In this case, the respondent failed to show that the restraint was contrary to public policy or that the penalty clause was disproportionate. The evidence established that the restraint was reasonable and...

Court Disposition

Appeal upheld; order of the court a quo set aside and replaced.

Orders

  • The appeal succeeds with costs, including the costs of two counsel.
  • The order of the court a quo is set aside and replaced with an order that the respondent is to pay the appellant R1,500 and costs, including the costs of two counsel.