2002 MR 93 JAUFEERALLY H R & CO.

v J V SMITH & ANOR Numerous prayers in respect of an alleged breach of contract had been dropped following various amendments and the remaining issue is a claim for damages in the sum of Rs1.5M for the prejudice suffered by the plaintiff owing to the acts and doings of the defendants which, it is averred, constitute a breach of obligation by defendant no. 1 as vendor and that the new business set up by defendant no. 1 was an unfair and illicit competition. The uncontroverted facts are that defendant no. 1, a successful optician, who had his practice at Edith Cavell Street, Port-Louis, a stone's throw from the main terminal of buses from the Upper Plaines Wilhems, before leaving for South Africa in January 1984 with the intention to emigrate, sold his practice including the equipments, stock-in-trade, and the goodwill to plaintiff for an amount which is now irrelevant as the claim for rescission of the contract had been dropped. In July 1984, defendant no. 1 returned from South Africa as his partnership with his South African colleagues did not materialise and he worked for the plaintiff for some four months before they parted. Later, defendant no. 1, through defendant no. 2, a company whose shareholders were his children and who are not in any way connected with ophthalmology, advertised that he was back in business. Despite a notice served on the defendants, no heed was taken to the objection of the plaintiff. It is the contention of the plaintiff that it was an essential implied condition of the sale that defendant no. 1 would abstain from setting up in competition with him, more specially by practising as an optician or for a competing optician in Mauritius and trading in contact lens, spectacles etc. That condition was denied by defendant no. 1 who further averred that, if such term existed, it was null and void and unenforceable. On November 14, 1997, the Court of Civil Appeal ordered a new trial as the then trial Judge had erred in not setting out his findings of fact and in not applying the relevant legal principles to those facts. The Court after referring to Encyclopdie Dalloz (Commercial) Vol III, Verbo: Fonds de Commerce notes 358 to 364 remarked that the fact of not actively canvassing his former clients after selling his business was not the determining factor but that the proper test is as laid down in notes 361 and 363 (vide H. R. Jaufeerally v J. V. Smith & Anor [1997 SCJ 383]; Case note [1997 MR 281]).

If there is a prohibition, it is for the Court to appreciate whether the restriction in time and space is reasonable or not having regard to all the circumstances and the local conditions (emphasis added); (c) even in the absence of a clause of not setting up a competing business, there exists a legal obligation on the part of the seller under article 1626 of the French Civil Code (similar to our article 1626 of the Civil Code) namely a duty to refrain to do any act which would diminish or divert customers from the business sold (emphasis added); (d) such legal obligation however does not preclude the seller from setting up a business provided that in setting up the new business, he does not act in such a way as to divert the clients of the former business; (e) in any event, in the absence of a clause prohibiting the setting up of a rival business, it is for the judge of fact to appreciate whether by the setting up of a competing business, the vendor had created or not "un trouble" to the purchaser (emphasis added); Both learned counsel, having been guided by the principles along which the case in hand had to be viewed in the light of the judgment of the Court of Civil Appeal, had limited the ushering of the evidence to the essentials. Learned counsel for the defendants had focused his cross-examination of Mr Jaufeerally to the right of the defendant no. 1 to set up a new practice after the latter's premature return to Mauritius. The quantum of damages had not been touched at all and I understand learned counsel for the defendants that it is for the plaintiff to establish that the setting up of the new business by defendant no. 1 had caused prejudice to it. He submitted that the evidence fell short of that. It was contended by learned counsel for the plaintiff that on a balance of probabilities, the plaintiff has established that the setting up of the new business by defendant no. 1 was in breach of his legal obligation under article 1626 of the Civil code and which breach had caused it prejudice. It is common ground between counsel that it is not a live issue whether defendant no. 1 had the intention to emigrate for good to South Africa. However, whether it was a condition that defendant no. 1 would not set up a business to compete with the plaintiff had been conceded by the latter as being a gentleman agreement which had been denied by defendant no. 1 that such an undertaking was ever given although in his mind, if he were to come back, it was simply for his retirement. But unfortunately, his return to Mauritius was premature owing to disagreement with his South African partners. Even if such an implied term exists, it has been questioned by the defendants whether an implied clause prohibiting absolutely the setting up of a competing practice is valid having regard to the right of a professional to earn a livelihood in a specialised field.

From the answer to particulars, it is stated that the alleged essential condition namely that of not setting up in competition with the purchaser by practising on his own or for a competing optician is an implied one. In Court, Mr Jaufeerally in effect conceded that there was no written agreement and that he was relying on an implied condition. It is clear from the answer of defendant no. 1 that his intention was to emigrate to South Africa. I cannot further infer that he therefore had implied that he had no intention to set up a business along the same line as the one sold if ever he returned albeit that he had sold his goodwill as well. It is clear that there was never any agreement on this point and the plaintiff ought to have been well advised to put in writing any agreement of not setting up a similar business to the one sold. In the absence of any condition expressed or otherwise prohibiting the setting up of a competing business in the contract, as in the present case, and in the light of the authorities quoted above, I therefore find that there is no prohibition in defendant no. 1 setting up a competing business anywhere over the island. However, there is an implied obligation that he should not do acts which would divert clients from his former business which obligation flows from his duty under article 1626 of the Civil Code. As there is no clause prohibiting the setting up of a rival business, there is no breach of any agreement and no presumption that the purchaser had suffered damages by the mere setting up of a new business by the vendor. It is therefore for the plaintiff to establish that it had suffered damages owing to the unlawful acts of the defendants with the setting up of the new business along the same line as the one sold. It is for the plaintiff to prove what are the acts committed by the defendants which constitute a breach of the legal obligation under article 1626 of the Civil Code. I shall refer to the landmark decision of the Cour de cassation in Lopold Patillon v Philippe Patillon et Louis Silvain Patillon reported in D. P 1909.1.381 upholding the decision of the Cour d'appel de Besanon as an illustration of what has to be established: "Attendu, en droit, qu'en l'absence d'une clause expresse portant interdiction au vendeur d'un fonds de commerce de faire un commerce similaire, la vente d'un tel fonds avec clientle et achalandage n'entrane pas ncessairement pour le vendeur une pareille interdiction; que s'il est tenu, dans tous les cas, la garantie dicte par l'article 1626 code civil, ainsi que l'arrt attaqu l'a dclar, cette obligation emporte seulement pour lui

le devoir de s'abstenir de tout acte de nature diminuer l'achalandage, et dtourner la clientle du fonds cd; Attendu qu'il est constat en fait par la cour d'appel, d'une part, qu'en cdant son frre le fonds de commerce qu'il exploitait en commun avec lui, Sylvain Patillon s'est refus l'insertion dans l'acte de vente d'une clause lui interdisant de faire un commerce similaire dans la mme localit; d'autre part, que le demandeur n'a pas rapport la preuve d'agissements par lesquels le dfendeur ventuel aurait port prjudice l'tablissement cd; (emphasis added). Il ne doit <se livrer aucune manoeuvre ni acte de concurrence dloyale> (arrt du 2 mai 1860). Dans la prsente affaire <l'acheteur n'a pas rapport la preuve d'agissements par lequels le vendeur aurait port prjudice l'tablissement cd>." Furthermore the author had more specially considered the vagueness of the expression "de s'abstenir de tout acte de nature diminuer l'achalandage et dtourner la clientle du fonds cd" used by French Courts and he posed the following questions:"Quelle est exactement la porte de ces formules un peu vagues? Le vendeur doit-il simplement s'abstenir de toutes manoeuvres qui, l'gard d'un confrre quelconque, auraient le caractre d'actes de concurrence dloyale? Sa responsabilit ne sera-t-elle engage envers son acheteur que dans le cas o de pareilles manoeuvres seraient releves sa charge?" Finally, the vexed questions had been answered in that, each case has to be considered on its own merits. Now, what is the evidence adduced by the plaintiff's representative to show the setting up of the new practice by defendant no. 1 had caused prejudice and what are those acts which had diverted clients from plaintiff? It is said that there had been an advertisement in the press whereby defendant no.1 was informing his former clients that he was back in business in Rose-Hill and also the fact that some of his former clients had telephoned the plaintiff's secretary to ask for the address of defendant no. 1.