Carrick Wealth has been granted orders to enforce its restraint of trade and confidentiality agreements against former employees who started their own wealth management company, Arck Wealth.
Carrick submitted that Arck was trading on confidential information that the former employees obtained while they were in its employ. Carrick also complained that Arck was luring away its clients.
Although the High Court in Johannesburg found there was no conclusive evidence that the restraints and confidentiality undertakings had been breached, it determined that Carrick had a reasonable basis to believe that such breaches may occur in future, justifying the enforcement of the restraints and confidentiality undertakings.
The former employees cited in Carrick’s application were Christopher Janse van Rensberg (first respondent), Raymond Gombera (second respondent), Kenechukwu Okafor (third respondent), and Adrian Jossel (fifth respondent).
At the time of the application, the restraints of trade applicable to Janse van Rensberg, Gombera, and Okafor were still in force.
The restraint applicable to Jossel had expired, but Carrick said there was no time bar on his duty to keep information subject to the confidentiality undertakings secret.
The four former employees and Arck denied they have breached their confidentiality undertakings. Janse van Rensberg, Gombera, and Okafor also denied that they have acted in breach of their restraints of trade.
Agreements were reasonable and enforceable
In a decision handed down this week, Judge Stuart Wilson found that the restraints of trade were not overly broad and were, therefore, reasonable and enforceable.
The court noted that Carrick sought only to prevent Okafor from poaching its clients for a year after his employment ended. In the case of Janse van Rensberg and Gombera, the restraint was extended to two years because of an exit agreement that included an additional payment from Carrick.
The court found no valid argument from the respondents to suggest that the restraints were too broad. Judge Wilson dismissed the concern raised by the respondents’ counsel about the enforceability of the extended restraint for Janse van Rensberg and Gombera, saying any issue could be resolved by ensuring that Carrick performed its obligations under the exit agreement.
The court also found that the confidentiality undertakings were not overbroad. Judge Wilson was satisfied that the information protected under these undertakings – which included client lists, trade secrets, operating procedures, and strategic plans – was genuinely confidential and protectable.
The judge addressed the respondents’ criticism of Annexure C of the employment contracts, which listed the confidential information. He rejected the argument that the document was overly broad or unclear, finding it was intended to protect information essential to Carrick’s core business functions.
He construed the confidentiality undertaking as aiming to prevent the disclosure of business associations material to Carrick’s operations. The document was fairly constructed, and Carrick had a legitimate protectable interest in keeping the information listed confidential.
‘Reasonable apprehension’
Judge Wilson, noting the conflicting submissions by the parties, did not make a definitive finding that the restraints and confidentiality undertakings had already been breached.
However, he said Carrick may be granted relief in the face of the respondents’ denials if “the undisputed facts ground a reasonable apprehension that the confidentiality undertakings and restraints will be breached in future”.
Judge Wilson said he thought Carrick met this test, in light of the “undisputed facts”, some of which were as follows:
- The former employees, while still employed by Carrick, were involved in the incorporation of Arck Wealth without disclosing this to Carrick.
- Carrick had recently lost two clients who were previously managed by Okafor and Jossel, and at least one of these clients likely transferred their business to Arck.
- The former employees admitted to being in contact with Carrick’s clients after leaving the company, although they denied soliciting them to move their business to Arck.
- When asked to confirm their adherence to the restraints and confidentiality undertakings, the former employees promised only to “act lawfully”, which the judge described as “evasive”.
Judge Wilson therefore concluded that Carrick had a legitimate concern that the former employees might breach their contractual obligations in the future, even if the respondents’ version was accepted.
Can Arck be restrained?
It was contended that Arck Wealth, the fourth respondent, could be placed under any restraint because it has no agreement with Carrick not to disclose its confidential information, and not to compete with it.
Judge Wilson said this overlooked the fact that the former employees’ contracts state they may not compete unlawfully with Carrick or disclose its information “directly or indirectly”.
He said the only way Arck can currently compete with Carrick unlawfully or disclose its confidential information is the former employees cause it to do so. “Such disclosure or competition would amount to intentionally assisting Mr Janse van Rensberg, Mr Gombera, Mr Okafor, or Mr Jossel to breach their contractual obligations, which is itself a delict. There can accordingly be no real difficulty with placing Arck Wealth under restraint.”
The court issued orders enforcing the restraints of trade on Janse van Rensberg, Gombera, and Okafor. All four former employees were interdicted and restrained from disclosing any of Carrick’s confidential information to each other or any other person, whether directly or indirectly.
Arck Wealth was interdicted and restrained from using any of Carrick’s confidential information disclosed to it by the former employees.
The court ordered Carrick to perform all its obligations under the “Departure Enrichment Agreements” with Janse van Rensberg and Gombera as and when those obligations fell due.
The respondents were ordered to pay Carrick’s costs, including the costs of two counsel.
