The Labour Court in Cape Town has upheld a restraint-of-trade clause of three years in a matter involving two financial services companies and a golf sponsorship.
In June 2019, “JA”, the first respondent, joined Warwick Wealth (Pty) Ltd as a client relationship specialist. Her employment contract included a restraint-of-trade clause in which she undertook not to do certain things for three years after the date of termination.
The clause prohibited JA from contacting clients of Spirit Invest Group (SIG), or providing business services to the clients of SIG, or soliciting business from those clients.
SIG owns three holding companies. One of them, Orion Wealth Managers, owns Warwick Wealth.
The restraint-of-trade clause also prohibited JA, either for herself or as an agent, from persuading, inducing, soliciting, encouraging, or procuring (or endeavouring to do any of the foregoing) any entities through which Warwick markets its services and products to become interested in any manner in any business, firm, undertaking, or company directly or indirectly in competition with Warwick.
JA resigned from Warwick in December 2022 and took up employment with Overberg Asset Management (Pty) Ltd.
In March 2023, Warwick discovered that JA secured Overberg’s sponsorship of Westlake Golf Club in Cape Town. Warwick alleged that Westlake was part of its network.
JA denied breaching the restraint-of-trade clause. She submitted that Westlake does not belong to Warwick’s network, according to the judgment handed down by Judge Graham Moshoana. JA said Overberg had been sponsoring golf days at Westlake before she became its employee.
Judge Moshoana found that JA approached Westlake and solicited the sponsorship using confidential client information she obtained while employed by Warwick.
He said the restraint-of-trade clause defined Warwick’s network as including sports clubs, and he rejected JA’s contention that Westlake did not form part of its network.
The court held that JA’s conduct prejudiced Warwick Wealth’s protectable interest – namely, its extensive network of entities, of which Westlake was one.
However, Judge Moshoana said Warwick failed to demonstrate that JA contacted or solicited business from Warwick’s clients. JA did have access to Warwick’s clients, but this did not necessarily mean that she contacted them or solicited business from them.
The court interdicted JA from persuading, inducing, soliciting, or encouraging any entities through which Warwick markets its services products. She was also interdicted from disclosing, whether for herself and Overberg’s purposes, or for the purposes of any third party, any of Warwick’s confidential information, trade secrets, or client particulars.
Each party was ordered to bear its own costs.
In its commentary on the case, law firm Cliffe Dekker Hofmeyr (CDH) said the reasonableness of the duration of a restraint-of-trade clause is often the subject of court disputes.
The case confirms that a restraint period of three years is not unduly long, and employers may hold employees accountable for their conduct and protect their proprietary rights for extended periods, CDH said.
