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Enforcement - Restraint of trade during COVID-19

  • Africa

    10-06-2021

    Oomph Out of Home Media (Pty) Ltd v Brien and another [2021] JOL 49492 (GJ)

    The Applicant brought an application against the first respondent to enforce compliance with a restraint of trade agreement and a shareholders agreement that was concluded between the Applicant and the first respondent.

    The Applicant contended that the first respondent was in breach of the restraint of trade and shareholders agreement. The first respondent was a director and shareholder of the Applicant who tendered his resignation in February 2020 because of the irretrievable breakdown of his relationship with another director of the Applicant, and because he had not been paid his full salary by the Applicant for a while. Following the resignation, the first respondent sought employment with the second respondent who was a competitor of the Applicant.

    The Applicant was of the view that the first respondent would use its confidential information and trade secrets if employed by the second respondent, and that the first respondent could persuade the Applicants customers, associates and its employees to leave the Applicant’s business. The first respondent defended the action on the basis that the restrictions would prevent him from earning an income.

    The court had to consider whether the restraint of trade in this case was reasonable, especially during the COVID-19 pandemic. Restraints of trade are valid but will however be unenforceable if contrary to public policy. It is contrary to public policy if it is unreasonable and prevents a party from working. The Applicant was not able to pay the first respondent his full salary because of cash flow problems and owed him an amount of R1.2million. The Applicant in support of its application also argued that the first respondent has other qualifications that he can use to seek employment in a different field. The court found that it was unreasonable for the Applicant to force the first respondent out of a career of choice and to start working in a different field during the COVID-19 pandemic and at a time where most businesses are closing down. Leaving the Applicant’s business seems to have been the first respondent’s only viable option. The request was found to be contrary to public policy and the values laid down in the Constitution. As a result, the restraint of trade was rendered unenforceable by the court. 

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