26/01/2023
RESTRAINT AND PROTECTABLE INTEREST
The matter below deals with Restraint – Protectable Interest – School attempting to enforce restraint over former headmaster to prevent him taking up a position with a competitor school. Not entitled to enforce restraint is sole purpose is to stifle (throttle/choke) competition.
High Court, Case number D12967/2022 Ashton International College Ballito (Pty) Ltd v Petrus Cornelius Johannes Erasmus.
In this matter, judge van Amstel held, inter alia the following:
1. A restraint clause may not be against public policy and will be regarded as unenforceable if its sole aim is to stifle competition. This was confirmed in Mozart Ice Cream Franchises (Pty) Ltd v Davidoff and Another wherein judge Davis said the following:
In crisp terms, a restraint of trade raises significant questions regarding its enforceability when examined through the prism of public policy. In deciding whether a restraint of trade is contrary to public policy, regard must be had to two principal considerations:
firstly, agreements freely concluded should be honoured, and
secondly, each person should be free to enter into business, a profession or trade in the manner they deem fit.
For this reason, unreasonable restraint of trade clauses is contrary to public policy.… An important guideline in the evaluation process is that a restraint should, as far as activities, area and duration are concerned, be necessary to protect the infringed or threatened interest. Furthermore, it is trite that goodwill such as trade connections, interests and confidential information are recognised as protectable interests.
Example:
Where a salesperson in a shoe shop is offered a better salary by a competing shoe shop, he will ordinarily not be bound by a restraint clause in favour of his previous employer, because there is nothing to protect. There is no protectable interest. The only purpose of the restraint will be to prevent a competitor from acquiring his salesperson. The fact that the salesperson may be experienced and competent does not justify restraining him from changing his employment.
Public policy:
Demands that businesses should be allowed to compete, and individuals to work and ply their trade freely, wherever they choose. This is why the law requires a protectable interest for a restraint clause to be enforceable. It is to protect the employer’s confidential information from falling into the hands of a competitor.
In the matter of Ashton International Colleges, it was held that a school is not entitled to enforce a restraint of trade agreement to prevent an employee from moving to a competing school if its sole purpose is to retain, for example, a popular or particularly competent teacher or headmaster, or to prevent a competitor from acquiring his services. The agreement will be unenforceable unless there is a protectable interest.
For further information you can contact Sonja Nelson at 0825600754 / [email protected]