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[2023] ZALAC 14
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Sadan and Another v Workforce Staffing (Pty) Ltd (JA38/23 ; JA88/23) [2023] ZALAC 14 (17 August 2023)

FLYNOTES:
L
ABOUR
– Restraint –
Geographical
area
–
Territorial
reach of restraint throughout the Republic – Whether
enforcement of agreements was reasonable – Precluding

appellants from being gainfully employed anywhere in the country
for an inordinately and disproportionately long period –
One
year restriction reasonable to ensure protection of Workforce
Staffing’s proprietary interest – Restraint
agreements
apply throughout the Republic.
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA38/23 /
JA88/23
In the matter between:
TAZNEEM
SADAN

First Appellant
NICHOLAS
ARAJUO

Second Appellant
and
WORKFORCE STAFFING
(PTY) LTD

Respondent
Heard:
19 July 2023
Judgment:
17 August 2023
Coram:
Waglay JP, Davis and Smith AJJA
JUDGMENT
SMITH AJA
Introduction
[1]
This appeal is against the judgment of
Nkutha-Nkontwana J, delivered on 19 April 2023 enforcing restraint of
trade agreements concluded
by the parties. The appeal is on limited
grounds and directed only against paragraph 3.2, read with paragraph
3 of the order. Those
paragraphs effectively prohibit the appellants
from taking up employment with the respondent’s competitors
anywhere in the
Republic of South Africa for a period of two years
after they were last employed by the respondent. The appellants
contend that
the restraints are unreasonable and against public
policy, both in respect of their territorial reach and duration. They
consequently
seek partial enforcement of the agreements. The appeal
is with the leave of this Court and was heard on an urgent basis.
Findings of the Labour
Court
[2]
Most
of Nkutha-Nkontwana J’s findings relate to issues which are not
challenged on appeal. It seems that the issue relating
to the
reasonableness of the restraint was not the main thrust of the
appellants’ case in the court
a
quo
and,
unsurprisingly, that issue has been dealt with rather fleetingly in
her judgment. In this regard, the learned Judge was of
the view that:
“
the
extent of the [appellants’] connection with the respondent’s
customers and their conduct post their departure justifies
the period
of two years
”
and that “
the
restraint offers no more than what is reasonably necessary to protect
the applicant’s [respondent’s] proprietary
interest
”
[1]
.
[3]
The relevant portion of the impugned order
reads as follows:
‘
3.
The first and second respondents are interdicted and restricted until
15 December
2024, in respect of the first respondent, and until
20 January 2025, in respect of the second respondent, from, directly
or indirectly,
and whether for the third respondent or individually,
together or with another or others, and whether or not for their own
account,
sole or partial benefit or the benefit solely or partially
of the third respondent or any third party, whether natural or
juristic:
…
3.2.
carrying on or being in any way directly or indirectly engaged,
employed or financially interested
in any business including but not
limited to the third respondent and its respective divisions, which
at any time, directly or
indirectly, in any way competes with the
business conducted by the applicant, and conducts such competing
business directly or
indirectly within a 50 kilometre radius from the
applicant’s office anywhere in South Africa…’
[4]
The appellants do not challenge the court
a
quo’s
finding that the respondent
has established a proprietary interest worthy of protection and that
that interest had been
threatened
by
their behaviour. They contend only that the enforcement of the
restraint is unreasonable for the reasons set out above.
Factual background
[5]
The respondent provides staffing solutions,
human resources, staff placement, and related services throughout the
country. Over
the years it also designed and developed unique
computer programmes for staff management, generation of payrolls and
invoicing
to clients.
[6]
The first appellant was employed by the
respondent as its General Manager of Sales since August 2020. She
resigned on 21 November
2022 and her last day of employment was 15
December 2022. The second appellant was employed as the respondent’s
National
Sales Executive since 17 September 2017. He resigned from
his position on 31 December 2022 and his last day of employment was
20
January 2023.
[7]
Both appellants concluded restraint of
trade agreements with the respondent in the following terms:
‘
The
employee undertakes that he shall not for the period of two (2) years
after the termination of his/her employment for whatever
reasons and
howsoever his employment terminates, with the Company:
“
13.4.1.
directly or indirectly, and whether alone or with another
or others,
and whether or not for his/her own sole or partial benefit or the
benefit solely or partially for others, carry on or
be engaged,
employed or financially interested in any business which:
13.4.1.1.
at any time during that period compete with the business conducted
by
the Company; and
13.4.1.2.
conduct such business within fifty (50) kilometre radius from any

office, branch where the employee was employed or at which the
employee undertook or was given any responsibility during the
duration
of his/her employment with the Company.’’’
[8]
It is common cause that during their
employment, the appellants have established close relationships with
the respondent’s
customers and had become privy to information,
inter alia
,
regarding the respondent’s pricing strategies, costing of its
products and profit margins. The appellants also had access,
inter
alia
, to the respondent’s client
database, marketing material, business strategies and financial
information.
[9]
During her employment with the respondent,
the first appellant was responsible for developing and implementing
sales strategies
for allocated regions, revenue generation,
achievement of sales targets and recruitment, and selling staffing
services and solutions
to customers.
[10]
The second appellant, in his capacity as
National Sales Executive, entertained customers,
inter
alia
, by hosting them for breakfast and
arranging social events such as golf days. In the course of executing
his responsibilities,
which related,
inter
alia
, to the procurement of new
business and managing existing customer relationships, the second
appellant was intricately involved
with the respondent’s
customers.
[11]
After their resignations they both took up
employment with one of the respondent’s competitors, namely
Rise Up Group (Pty)
Ltd (Rise Up). Rise Up also operates in Durban,
Secunda and Johannesburg and provides staffing solutions in those
areas. It was
not disputed that it does so in competition with the
respondent.
[12]
Much was made in the court
a
quo
of allegations that the appellants
had initially misrepresented to the respondent the details of their
new employment, prompting
the latter to engage the services of a
private investigator. While that factual dispute may have had some
relevance to the issues
that fell for decision in the court
a
quo
, it has no bearing on the
adjudication of the appeal.
Territorial reach of
the restraint agreements
[13]
The appellants contend that clause 13.4 of
the restraint agreement, reasonably construed, prohibits them from
taking up employment
with the respondent’s competitors within a
radius of 50 kilometres from the office or branch where they were
employed, namely
at Cresta, Johannesburg. They argue that the
interpretation contended for by the respondent, and upheld by the
court
a quo
,
namely that the prohibition extends to all other branches or offices
where they performed their duties or were allocated responsibilities,

is unduly harsh and unreasonable in that it precludes them from
taking up employment anywhere in the Republic.
[14]
Mr Cassim SC, who appeared for the
appellants, stated that in the event of the court upholding their
argument regarding the construction
of the contested clause, they
will be prepared to accept that the period of two years is not
unreasonably overbroad, since they
would then only be prohibited from
taking up employment with the respondent’s competitors located
within a radius of 50 kilometres
from the latter’s Cresta
office. If, however, the respondent’s interpretation is upheld,
then they submit that a period
of two years is unreasonable and
contrary to public policy, because they would then be barred from
taking up employment anywhere
in the Republic. It would thus be
reasonable and proper for that period to be reduced to six months,
alternatively to one year,
or so Mr Cassim argued.
[15]
The
restraint agreements must be construed on the basis of the principles
enunciated in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2]
.
They
must thus be given meaning and business-like efficacy by having
regard:
‘
...[T]o
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production… The “inevitable
point of
departure is the language of the provision itself,” read in
context and having regard to the purpose of the provision
and the
background to the preparation and production of the document.’
[3]
[16]
When construed in accordance with the
abovementioned legal principles, the impugned clause brooks no other
construction than that
contended for by the respondent. The clause
was drafted in deliberately broad terms and seeks to prohibit the
employee from taking
up employment within a 50-kilometre radius of
the office where he or she has been employed, and explicitly extends
the limitation
to any other office or branch at which the employee
undertook or was given responsibilities. Such a construction also
makes business
sense. Both appellants had national responsibilities,
had formed relationships with customers throughout the country and
had access
to the respondent’s confidential information and
national client database. It was not disputed that the appellants
were given
responsibilities to procure new clients and to manage and
retain existing relationships with clients throughout the country.
It
thus made business sense for the respondent
to protect itself against the possibility of former employees, who
had access to its
confidential business information, being employed
by a competitor in all areas where they were given responsibilities
and would
thus have had the opportunity to interact with and
establish close relationships with its clients. Accordingly, to my
mind, properly
construed, clause 13.4 of the agreement has the effect
of prohibiting the appellants from taking up employment with the
respondent’s
competitors anywhere in the Republic for a period
of two years from their last days of employment with the respondent.
Is
the enforcement of the agreements reasonable?
[17]
In
our law, restraints of trade agreements are valid, binding, and
enforceable, unless their enforcement would be unreasonable.
[4]
The test for determining the reasonableness of a restraint of trade
agreement was set out in
Basson
v Chilwan and Others
[5]
,
where
Nienaber JA postulated the following considerations: (a) Does one
party have an interest that deserves protection after termination
of
the agreement? (b) Is that interest threatened or being prejudiced by
the other party? (c) If so, does that interest weigh qualitatively

and quantitatively against the interest of the other party not to be
economically inactive and unproductive? (d) Is there an aspect
of
public policy having nothing to do with the relationship between the
parties that requires that the restraint be maintained
or rejected?
[18]
In
Reddy
v
Siemens Telecommunications (Pty) Ltd
[6]
(
Reddy
),
the Supreme Court of Appeal (SCA) posited a fifth consideration,
namely whether the restraint goes further than necessary to
protect
the interest. The Court held that this consideration corresponds with
s 36(1)
(e)
of the Constitution, requiring a consideration of less restrictive
measures to achieve the purpose of the limitation and that “
[t]he
value judgment required by Basson necessarily requires determining
whether the restraint or limitation is “reasonable
and
justifiable in an open and democratic society based on human dignity,
equality and freedom
”’
[7]
.
[19]
Once
the
party seeking to enforce a restraint of trade agreement has
established an interest worthy of protection and that the other
party
is threatening that interest, the onus is on the party resisting the
enforcement of the agreement to prove that it would
be
unreasonable.
[8]
The appellants thus bore the onus of proving that the enforcement of
the restraint will be unreasonable, both in respect of its

territorial operation and duration.
[20]
In
deciding whether or not it would be reasonable to enforce a restraint
of trade, the court must make a value judgment, mindful
of the
following policy considerations:
(a)
that public interest requires that parties
should
comply with their contractual obligations, a notion expressed by the
maxim
pacta
servanda sunt
;
and (b) all persons should, in the interests of society, be
productive and permitted to engage in trade and commerce or their

professions.
Both
considerations reflect not only common law but also constitutional
values. In
Reddy,
the
court held that:“
[c]ontractual
autonomy is part of freedom informing the constitutional value of
dignity, and it is by entering into contracts that
an individual
takes part in economic life. In this sense freedom to contract is an
integral part of the fundamental right referred
to in s 22
”
[9]
.
In
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[10]
,
Rabie CJ held that a court may, in the public interest, order that
either the whole or only a part of the restraint on trade be

enforced.
[21]
The question then arises as to whether the
territorial limitation and duration of the restraints are reasonable.
Mr Malan SC, who
appeared for the respondent, submitted that the
appellants failed to discharge the onus of proving that the
enforcement of the
restraint will be unreasonable. He argued that
allegations put up by the appellants in this regard are ‘bald
and unsubstantiated’
and that they have failed to proffer any
evidence to show why the enforcement of the restraint will be
unreasonable.
[22]
It is indeed so that the facts put up by
the appellants in support of their contention that the enforcement of
the restraint of
trade will be unreasonable and against
public
policy are tenuous and insubstantial. In this
regard, they relied only on the following assertions:
‘
226
The restraints of trade are unreasonable for the following reasons:
226.1
there is no defined geographical area or territory. The applicant
seeks to prevent the respondents from working
in any and all
provinces within the Republic;
226.2.
the period of two years is unreasonable and is unnecessary to protect
any interest of the applicant, The industry is
highly competitive,
fast-paced and ever-changing and a period of two years effectively
requires that the respondents not practise
their chosen trade and
profession for two years.’
[23]
As I have demonstrated above, the assertion
that the restraint of trade does not relate to a defined geographical
area is unsustainable.
Reasonably construed in terms of the
abovementioned canons of interpretation, clause 13.4 prohibits the
appellants from seeking
employment with any of the respondent’s
competitors anywhere in the country. The undisputed facts establish
that both appellants
were not confined to the respondent’s
Cresta offices but performed their duties nationally and had formed
close relationships
with the respondent’s clients throughout
the Republic. It was thus reasonable for the respondent to expect its
employees
to commit to a covenant that would protect its interest
wherever such employees had the opportunity to form relationships
with
clients. In the case of the appellants, who were both employed
in capacities that required of them to perform their duties
nationally,
only a country-wide limitation would have achieved that
objective.
[24]
The
SCA
in
AB
and Another v Pridwin Preparatory School and Others
[11]
(
Pridwin
),
held that a court must declare invalid a contract that is
prima
facie
inimical to a constitutional value or principle, or otherwise
contrary to public policy. Where a contract is not
prima
facie
invalid, but its enforcement in particular circumstances is, a court
will not enforce it. The court pronounced the following principles

that govern judicial control of contracts: (a) public policy demands
that contracts freely and voluntarily entered into must be
honoured;
(b) the party who attacks the contract or its enforcement bears the
onus of establishing that its enforcement will be
contra
bonis mores
;
and (c) a court will use the power to invalidate a contract or not to
enforce it, sparingly.
[25]
In
Beadicia
231 CC and Others v Trustees for the time being of the Oregon Trust
and Others
[12]
(
Beadicia)
,
the Constitutional Court cited
Pridwin
with approval and held, in addition, that abstract values such as
good faith, fairness or reasonableness do not provide a free-standing

basis on which courts may interfere with contractual relationships.
They do, however, have relevance in the application of contract
law
when the question arises as to whether a contractual provision or the
enforcement thereof would be against public policy. If
the
enforcement of a contractual term will implicate constitutional
rights, “a careful balancing exercise”
[13]
is required to determine whether it will offend public policy. The
court also cautioned that the caveat that the power to invalidate
or
not enforce contractual provisions should be used sparingly, should
not deter courts from exercising their duty to infuse public
policy
with constitutional values.
[26]
In this matter the ‘careful balancing
exercise’ mentioned in
Beadicia
implies a value judgment
pursuant
to
the balancing of the respondent’s right to hold the appellants
to the agreements, on the basis of the principle of
pacta
servanda sunt
, against the appellants’
constitutional rights to ply their trade and engage in commerce.
[27]
Because clause 13.4 prohibits the
appellants from plying their trade or engaging in commerce throughout
the Republic, the duration
of the limitation must be subjected to
rigorous scrutiny. And even though the appellants did not proffer any
evidence other than
the broad-sweeping statement quoted above, other
considerations such as the requirement that parties must be held to
covenants
freely entered into and the appellants’ rights in
terms of section 22 of the Constitution to choose and freely ply
their
trade, occupation or profession, require serious consideration.
The fundamental question that arises is whether there were any less

restrictive means available to the respondent effectively to protect
its proprietary interest. In my view, the justification provided
by
the respondent for the period of two years is manifestly
unconvincing. In its replying affidavit, the respondent asserts that

the period is not unreasonable ‘taking into account that the
respondents had deep-rooted relationships with the applicant’s

clients and that these relationships were established over time and
were as a result of numerous engagements as well as social

engagements of golf, breakfasts and lunches.’ It asserts
furthermore that the appellants’ replacements will require
at
least two years to meet with clients and develop relationships.
[28]
The
facts of this case are distinguishable from those in
Beedle
v Slo-Jo Innovations
(Pty)
Ltd
[14]
,
where
Davis AJA said that “
[
p]rima
facie, a restraint for two years without any plausible justification
being offered by the party seeking to enforce the restraint
cannot,
on its own, pass legal muster
”
[15]
.
The learned Judge,
having
found that the restraint, in that case, applied throughout the
Republic, was, however, satisfied that
“
the
respondent has offered a comprehensive explanation as to why two
years is necessary to protect its interests. It explained that
the
lead time for the conceptualisation of a product required by one of
its customers until the product is brought to market, can
take
between 24 to 36 months”
[16]
.
Moreover, the learned Judge said, “
[the
appellant] was free to be employed in any position where she could
exploit her skill and knowledge, save in the specific context
of the
beverage industry in which the respondent traded
”.
[29]
It is
common
cause that in this case, the operation of
paragraph 3.2 of the order effectively serves to prevent the
appellants from exploiting
the only skills they have and from plying
their trades anywhere in the country for a period of two years. Other
than relying on
the cursory assertion that a restraint of two years
is required to protect its proprietary interest, namely its
relationships with
clients, the respondent has failed to provide any
compelling evidence to justify such a manifestly onerous and
unreasonable limitation
of the appellants’ constitutional
rights to ply their trade and engage in commerce. To my mind, a
period of two years is
an inordinately long time merely to allow new
employees to meet with and develop relationships with existing
clients. It is also
disproportionate, particularly having regard to
the fact that the territorial limitation extends to the whole of the
Republic.
[30]
I
accordingly
agree with Mr Cassim that the enforcement of the
impugned clause on the basis contended for by the respondent will be
unreasonably
harsh in that it will effectively preclude the
appellants from being gainfully employed anywhere in the country for
an inordinately
and disproportionately long period. I am therefore of
the view that the period is unreasonable, and its enforcement will
thus be
contrary to public policy.
[31]
A partial enforcement of the restraint for
a shorter period will, in my view, suffice to ensure protection of
the respondent’s
proprietary interest. I consequently find that
the respondent’s proprietary interest will be sufficiently
protected if the
restriction mentioned in paragraph 3.2 of the order
endures for a period of one year from the appellants’ last days
of employment.
Costs
[32]
Regarding
the issue of costs, I am of the view that the appellants’
partial success on appeal means that the respondent was
substantially
successful in the court
a
quo
and the costs order that was issued in that court should therefore
not be disturbed.
The
parties
were, however, both partially successful on appeal, the appellants
having succeeded in establishing the unreasonableness
of the two-year
restraint period and the respondent having successfully resisted the
attempt to restrict the territorial reach
of the restraint to within
50 kilometres of its Cresta office. It will therefore only be fair
and reasonable that the parties bear
their own costs. As was the case
in
Beedle
,
costs must include those occasioned by the successful application
brought by the respondent in the court a quo in terms of section
18
of the Superior Courts Act
[17]
.
Order
[33]
In the result, the appeal succeeds to the
following extent:
1.
It is declared that:
(a)
The restraint of trade agreements concluded
by the First and Second Appellants and the Respondent, respectively,
apply throughout
the Republic of South Africa;
(b)
The interdicts mentioned in paragraph 3.2
of the court
a quo
’s
order shall endure for a period of one year from the last dates of
the First and Second Appellants’ employment with
the
Respondent.
(c)
The parties shall bear their own costs in
respect of the appeal.
___________________
Smith
AJA
Waglay
JP and Davis AJA concur.
Appearances:
For
Appellants:        Adv Cassim
SC with Adv K Naidoo
Instructed
by:             Shaheed
Dollie Inc.
For
the Respondent:  Adv M Malan SC with Adv C Gibson
Instructed
by:              Hunts
Inc (Borkhums) Attorneys
[1]
Workforce
Staffing (Pty) Ltd v Sadan and Others
[2023]
ZALCJHB 107 at paras 34 and 35.
[2]
2012
(4) SA 593 (SCA).
[3]
Ibid
at para 18.
[4]
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984
(4) SA 874
(A) (
Magna
Alloys
).
[5]
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 767G-H.
[6]
2007
(2) SA (SCA).
[7]
Reddy
at
para 17.
[8]
Reddy
at
para 10.
[9]
Reddy
at para 15.
[10]
Magna
Alloys supra
at
896A-E.
[11]
2019
(1) SA 327 (SCA).
[12]
2020
(5) SA 247 (CC).
[13]
Ibid
at para 87.
[14]
Unreported
judgment of the LAC under case no JA 21/23 delivered 17 August 2023.
[15]
Ibid
at para 35.
[16]
At
para 36.
[17]
Act
10 of 2013.