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[2021] ZAECPEHC 61
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Mont Blanc Financial Services (Pty) Ltd v Reddy (340/2021; 763/2021) [2021] ZAECPEHC 61 (7 December 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
CASE
NO.: 340/2021
Not
reportable
In
the matter between:
MONT
BLANC FINANCIAL SERVICES (PTY) LTD
Plaintiff
and
VERONIQUE
CAROL REDDY
Defendant
AND
CASE
NO.: 763/2021
MONT
BLANC FINANCIAL SERVICES (PTY) LTD
Plaintiff
and
VERONIQUE
CAROL REDDY
Defendant
JUDGMENT
Goosen
J:
[1]
These are two cases in which the plaintiff seeks summary judgment
against the defendant.
The causes of action and the defences pleaded
are identical. The plaintiff’s claims against the defendant are
founded upon
a restraint of trade agreement operative between the
parties. In case number 340/2021 an amount of R439 885.92 is claimed
in respect
of pre-estimated contractual damages. These damages relate
to an alleged breach of an undertaking not to solicit certain clients
of the plaintiff. In case four clients are identified. In the case
number 763/2021 an amount of R370 169.28 is claimed. This is
in
respect of fourteen identified clients. The cases have not been
consolidated. The applications of summary judgment were argued
as one
matter and I shall therefore deal with the applications in a single
judgment.
[2]
The plaintiff and the defendant entered into an employment agreement
on 7 May 2019
in terms of which the defendant was employed as a
senior short-term commercial insurance broker. The employment
agreement incorporated
a restraint of trade clause. Clause 8.1
contains certain definitions to which reference will be made, where
relevant hereunder.
Clause 8.2 contains the terms of the restraint as
follows:
“
8.2 In
terms of the broker’s employment contract with the Company as
an insurance broker, the Broker hereby agrees
that he/she shall not:
-
8.2.1 during the Broker’s
employment with the Company and during the restraint period be
interested or engaged, directly or
indirectly, in the capacity as an
insurance broker, in any competitive activity in the territory.
8.2.2 at any time,
whether during the period of the Broker’s employment with the
Company or at any time thereafter, disclose
any confidential
information and/or trade secrets other than to entities connected
with the Company who are entitled to know such
confidential
information and trade secrets.
8.2.3 persuade, induce,
encourage or procure any employee of the Company to become employed
by or interested in any manner whatever
within the territory on any
competitive activity.
8.2.4 during the period
of his/her employment with the Company or during the restraint period
entice or solicit or canvas any client
of the Company with respect to
a competitive activity whether for his/her own business or otherwise.
[3]
Clause 8.6 and 8.7 provide for payment of damages in the event of a
breach as follows:
“
8.6
The Broker acknowledges and accepts that in the event that the
restraint of trade is transgressed, the broker will
owe the Company a
pre-estimation of damages in the amount calculated at 24
(twenty-four) months times the commission and fees earned
by the
Company in the month preceding the transgression. The broker further
acknowledges that this shall apply to each and every
transgression
and is a fair and reasonable calculation of the harm that will be
suffered by the Company.
8.7 The
Broker acknowledges and understands that The Tier One Commission is
an additional commission and is over
and above Tier Two Commission.in
the circumstances, the Tier One commission operates as a once-off
restraint of trade payment in
respect of each client the Broker
writes up during his/her employment with the Company.”
[4]
In terms of the definitions clause “competitive activity”
means the business
of a short-term insurance broker; the “restraint
period” is a period of 24 months from the date of termination
of the
agreement; and “territory” means the whole of
Gauteng.
[5]
It is common cause that the defendant terminated the agreement on 2
November 2020.
It is also common cause that the defendant is resident
in Port Elizabeth (Gqeberha) and is a short-term insurance broker.
The plaintiff’s
cause of action is founded upon the following
alleged breaches of the restraint clause:
“
5.1
that the defendant was interested in or engaged as a short term
insurance entity being Surenet Financial Services
Group (Pty) Ltd;
and
5.2
that the defendant enticed, solicited or canvassed the plaintiff’s
clients with respect to the business
of a short term insurance
broker.
[6]
As a result of these alleged breaches plaintiff’s clients have
cancelled plaintiff’s
appointment as short-term insurance
broker and appointed the defendant alternatively Surenet Financial
Service Group (Pty) Ltd.
The plaintiff accordingly claims the damages
referred to hereinabove.
[7]
The defendant initially noted an exception to the plaintiff’s
particulars of
claim. The exception was to the effect that the
particulars lacked averments to sustain a cause of action. As a
result, the plaintiff
amended its particulars in relation to the
alleged breaches. In the amended particulars of claim the plaintiff
alleged that the
enticement of clients occurred during February 2021;
that it related to an entity engaged in competitive activity, namely
Surenet
Financial Services Group (Pty) Ltd which carried on business
in Port Elizabeth (Gqeberha); and that the restraint in clause 8.2.4
is not territorially limited. It is unnecessary to set out the
further averments which relate to the calculation of the damages
allegedly suffered.
[8]
In her plea the defendant denies that the identified persons (14 in
the one case and
4 in the other) were clients of the plaintiff at a
time relevant to her employment with the plaintiff. One of the 14
named clients
in case 763/2021 is the defendant. It was accepted by
counsel for the plaintiff, during argument, that it could hardly be
contended
that the defendant breached an obligation not to use
confidential information or enticed or solicited herself. She also
denies
that she solicited or enticed them to terminate their
relationship with the plaintiff. In this regard she pleads that
several of
the identified persons approached her, that she indicated
to them the existence of a restraint operative upon her and that they
declared in writing that they had not been solicited or enticed. The
defendant further pleads that the restraint in clause 8.2.4
is –
since it is claimed not to be territorially restricted – over
broad and accordingly unenforceable. Her plea contains
a further
averment, by way of alternative, that she did not solicit the said
clients in Gauteng.
[9]
In relation to the claimed damages the defendant relies, in her plea,
upon the terms
of s 3 of
Conventional Penalties Act
of 1968,
suggesting that the damages were excessive and ought to be reduced.
[10]
Based upon these pleaded defences, it was submitted on behalf of the
defendant that a
bona fide
defence has been raised; that the
disputes in relation to the facts – i.e. whether or not the
defendant “solicited
or enticed” persons who were clients
of the plaintiff; and the proper interpretation of clause 8.2.4 are
triable issues.
As such, the application for summary judgment ought
to be refused.
[11]
The onus to prove a breach of the restraint agreement will rest upon
the plaintiff at trial.
In this case that will require proof of
“solicitation” or “enticement” of each of the
clients in respect
of whom a breach is alleged. The pleaded defence,
namely that the applicant was approached by certain clients and that
she did
not “solicit” or “entice” these
persons, if established at trial, constitutes a sound defence in
law.
[1]
The determination of
this factual issue is, quintessentially, a triable issue.
[12]
Base on this conclusion, it is unnecessary to consider the
interpretation question or the reliance
upon the Conventional
Penalties Act in detail. The former issue may well require
consideration of appropriate contextual or background
evidence,
notwithstanding that it concerns interpretation of an agreement.
[13]
It follows therefore that I am satisfied that the defendant has
raised a
bona fide
defence. Accordingly, summary judgment must
be refused in both matters.
[14]
I make the following order:
1.
The applications for summary judgment in Case No. 340/2021 and Case
No. 763/2021
are dismissed.
2.
The defendant is granted leave to defend in Case No. 340/2021 and
763/2021.
3.
The costs of the application for summary judgment shall be costs in
the cause
in each matter.
___________________________
G.G.
GOOSEN
JUDGE
OF THE HIGH COURT
APPEARANCES:
Obo
the Plaintiff:
:
Adv J M Ramsay
Instructed
by
:
Van Heerden Attorneys
Obo
the Defendant
:
Adv Dwayi
Instructed
by
:
Nicole Oosthuizen Attorneys
Heard
:
16 November 2021
Delivered
:
7 December 2021
[1]
Cf
Cargocare Freight Services (Pty) Ltd v Raath (2021/37630) [2021]
ZAGPJHC 497 (28 September 2021) par [24] – [26]).