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[2024] ZALCJHB 200
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Aon South Africa (Pty) Ltd v Smith and Others (J298/24) [2024] ZALCJHB 200 (8 May 2024)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case
No: J298/24
In the matter between:
AON
SOUTH AFRICA (PTY) LTD
Applicant
and
MARTHINUS
HERMANUS WILHELM SMITH
First Respondent
CAPITAUX FINANCIAL
SERVICES TRUST
Second Respondent
HOSKI
LINDE
N.O.
Third Respondent
JOHANNES
WERNER SCHEEPERS
N.O.
Fourth Respondent
DESMOND
VAN VIEGEN
N.O.
Fifth Respondent
WILLEM
JOHANNES VAN ZYL
N.O.
Sixth Respondent
MATTHEUS
JOHANNES DE BRUYN
N.O.
Seventh Respondent
Heard:
3 May 2024
Delivered:
8 May 2024
This judgment was
handed down electronically by circulation to the parties’ legal
representatives by email. The date for handing
down judgment is
deemed to be 8 May 2024.
JUDGMENT
MAKHURA, J
Introduction
[1]
AON South Africa (Pty) Ltd (applicant) launched
these proceedings on an urgent basis
seeking a final order to
enforce a restraint of trade undertaking against the first
respondent, Marthinus Hermanus Wilhelm Smith
(Smith). The restraint
agreement sought to be enforced was concluded on 27 June 2022, less
than 2 years before Smith’s retirement
age.
[2]
The application is opposed by Smith. He advanced two primary grounds
of opposition.
First
, he raised the defence
of
exceptio non adimpleti contractus
(
exceptio
) and
second, that it would be unreasonable to enforce the restraint
agreement
inter alia
because the restraint agreement is vague
and unenforceable and that the applicant failed to show that it has
protectable interest
– customer connection and confidential
information.
Material
facts
[3]
On 27 June 2022, the applicant and Smith concluded a contract of
employment, which
contained
a restraint
undertaking. The restraint undertaking is set out under clause 34 of
the employment contract. The relevant part of
clause 34 provides
that:
‘
In terms of this
restraint of trade, the Employee specifically undertakes and agrees
that for the duration of the restraint period
referred to in the
Offer Letter s/he shall:
· not be
interested in any business in the territory which carries on
business, brokers who supplies [sic] insurance
intermediary services
or performs or render service, in competition with or identical or
similar or comparative to that carried
on, brokered or performed by
the Company during the period of employment of the Employee up to and
including the last day of the
employment of the Employee. For the
avoidance of doubt, this restraint does not preclude the Employee
from being interested in
such business in the capacity of an
employee;
· not
solicit the custom of or deal with or in any way transact with, in
competition to the Company, any business,
company, firm, undertaking,
association or person which during the period of 2 (two) years
preceding the date of termination of
the employment of the Employee
has been a client of the Company in the territory; and
· not
directly or indirectly offer employment to or in any way cause to be
employed any person who was employed by
the Company as at the
termination of the employment of the Employee with the Company or at
any time within a period of 2 (two)
years immediately preceding such
termination.’
[4] The definition
of “interest” or “interested” expressly
excludes Smith’s interest or concern,
directly or indirectly,
in a business, company, firm, undertaking, association or person in
his capacity as an employee. Smith
has expressly recorded as part of
the restraint undertaking that he agreed to the restraint undertaking
“
in consideration of
” “
all benefits which
s/he has or will accrue to him/her for the Company
”.
[5]
On 5 February 2024, Smith submitted a retirement notice to the
applicant. On 9 February
2024
, the
applicant placed him on garden leave, with immediate effect, until 29
February 2024, his last day of work before going on
retirement.
[6]
Whilst on garden leave, the applicant learnt that Smith was allegedly
soliciting and diverting its clients and business
away from the
applicant to Capitaux Financial Services Trust (Capitaux) in breach
of the restraint undertaking. On 27 February
2024, the applicant’s
attorneys addressed a letter to Smith demanding compliance with the
restraint undertaking. Paragraphs
9 and 10 of the letter stated:
‘
Our Client is also
investigating the circumstances under which its clients cancelled
their policies and appointed Capitaux as their
broker and reserves
the right to take legal action against you and Capitaux, including
seeking an order for damages for the loss
suffered, as a result of
any unlawful conduct.
In
addition, our Client wishes to advise that
it will not be paying
you your discretionary bonus until such time that it has completed
the investigation into the cancellation
of the policies in respect of
approximately 24 clients
. Depending on the outcome of the
investigation,
our Client reserves the right to exercise its
discretion and not pay you a bonus and/or set off any discretionary
bonus amount against
the damages suffered by it as a result of the
breach of your undertakings.
Should you wish to object to this
then please make representations in writing.’ (Emphasis added)
[7]
On 8 March 2024, Smith’s attorneys responded to the applicant’s
attorneys’ letter. In it,
Smith
recorded that he has no employment relationship with Capitaux. The
letter continued:
‘
It
is further our specific instructions that our client is entitled to
his bonus your client is owing to [him], as he has acted
in terms of
the requirements as requested by AON.
We
therefore hereby demand payment of our client’s bonus which he
is entitled to and furthermore confirm that it is our client’s
instructions to oppose any application your client intends to issue
relating to our client’s restraint clause.’
[8]
Smith refused to give the undertaking and the applicant launched
these proceedings.
The
exceptio
defence
[9]
In his
answering
affidavit, Smith alleged
that:
‘
AON owes me in
excess of R300 000.00 as the bonus to which I am entitled
because of the services I had rendered to it up until
my retirement.
I have made several enquiries in this regard and to this date I have
simply been told that AON is investigating
this entitlement and
payment because
inter alia
its allegation that I am in breach
of the restraint of trade covenant. It [refuses] to pay me this
amount, which became due on
1 March 2024.’
[10]
In
reply
, the applicant stated:
‘
It
is admitted that there is an ongoing dispute relating to a bonus
payment, however, it has no bearing on the fact that Smith has
breached his RTCU and that the RTCU is enforceable.’
[11]
In his
heads of argument, Mr Grobler, who appeared as counsel for Smith,
argued that the restraint undertaking connotes and denotes
that Smith
agreed to the
restraint
of trade because of all the benefits that had or would accrue to him
during his employment with the applicant and therefore the
restraint
undertaking poses upon the applicant and Smith reciprocal
obligations. For this contention, Mr Grobler relied on the
judgment
of this Court in
Megafreight
Services (Pty) Ltd v Bezuidenhout and another
[1]
(
Megafreigh
t).
[12]
Ms Swarts,
appearing for the applicant, argued that the
exceptio
must fail for two reasons – first, the defence has not been
properly pleaded or raised in the papers and
second
,
a claim for payment of discretionary bonus is not based on statute or
contract and therefore the contract did not impose reciprocal
obligations. Ms Swartz relied on the judgment of this Court in
Adviceworx
(Pty) Ltd and another v Roux and others
[2]
(
Adviceworx
)
for the contention that Smith failed to plead the defence of
exceptio
.
[13]
In
Adviceworx
,
this Court found that to rely on
exceptio
,
the respondent must specifically state that he was not required to
perform his side of the bargain under the
restraint
agreement due to the applicant’s breach. The learned acting
Judge referred to
Telcordia
Technologies Inc v Telkom SA Ltd
,
[3]
where the Supreme Court of Appeal (SCA) stated that:
‘
A defendant who
wishes to raise the defence of
exceptio
non adimpleti contractus
on the
basis of an incomplete tender must particularise in the plea in what
respects performance was defective and will ordinarily
have to give
evidence on this aspect first (although the overall
onus
to disprove the existence of the defects will remain on the
plaintiff). The reason is obvious: a plaintiff cannot be expected to
prove a negative where the complaints of the defendant are
unknown...’
[14]
The above
dictum
simply reiterated the trite legal principle
for parties to plead a case with sufficient particularity to enable
the other party
to respond thereto.
[15]
The current
proceedings were brought on application. It is trite that in
application proceedings, affidavits constitute both the
pleadings and
the evidence, where
parties
set out and define the nature of their dispute and the Court is
called upon to adjudicate on those issues.
[4]
The enquiry therefore is whether the facts pleaded and/or the
evidence (not the law) put forward by Smith in his answering
affidavit
establish the legal basis for the defence of
exceptio
.
[16]
Smith specifically averred that he is entitled to payment of a bonus
in excess of R300 000.00 and that this payment
was due on 1
March 2024. Further, he stated that he is entitled to this bonus
payment because of the services he rendered until
his
retirement
.
In reply, the applicant did not dispute that Smith is owed a bonus
payment nor did it dispute that this payment was due on 1 March
2024.
Smith made his complaints known to the applicant. In my view, he has
made the necessary, adequate and particular averments
to support his
defence of
exceptio
. The fact that he did not specifically
state that he was relying on the
exceptio
defence, as
suggested by
Adviceworx
that this must be specifically
pleaded, does not, in my view, detract from the facts pleaded and
evidence put forward that the
applicant owes him money and has
refused to pay him. The applicant is not prejudiced in any way
because Smith made the necessary
allegations that he is due a bonus
payment, the date when this payment was due and that the applicant
failed to pay him. Accordingly,
there is no merit in the applicant’s
argument that the defence has not been pleaded and its argument is
rejected.
[17]
Regarding
the merit of the
exceptio
defence, Smith relied on
Megafreight
.
There, Van Niekerk J (as he then was), referring to
Universal
Storage Systems (Pty) Ltd v Crafford and others
[5]
(
Universal
Storage Systems
),
summarised the legal position as follows:
‘
The court held
that where in a covenant in restraint of trade certain consideration
has been promised to the party restrained (the
respondent), the
obligation to abide by the restraint is reciprocal to the obligation
of the party in whose favour the restraint
operates (the applicant)
to render the promised consideration, and the latter obligation has
to be performed first. As long as
something remains which has to be
performed by the applicant, the respondent may raise the
exceptio
non adempleti contractus
as a defence to any attempt by the applicant to enforce the
restraint.’
[6]
[18]
Smith agreed to the restraint in consideration of all benefits that
would accrue to him during his employment. That a
benefit is due to
Smith and payable by 1 March 2024
is
not in
dispute. The alleged dispute about the bonus payment as articulated
by the applicant is a reference to the investigation,
which,
depending on its outcome, the applicant may or may not pay Smith the
discretionary bonus. On facts of the matter, the alleged
dispute
about the payment of the bonus is irrelevant and does not disentitle
Smith from the
exceptio
defence. The dispute has nothing to do
with Smith’s entitlement to the bonus. In my view, the letter
dated 8 March 2024 from
the applicant’s attorneys acknowledges
that Smith is due his bonus payment.
[19]
The
consideration of benefits was agreed to and embodied in the contract
of employment. It has been found that a contract of employment
is a
reciprocal
contract
.
[7]
The applicant refused to pay Smith pending finalisation of its
investigation. The consequence of the applicant’s decision
is
that Smith’s performance of his obligation is not triggered
until the applicant performs its obligation first.
[20]
In
Universal Storage Systems
, the Court dealt with a restraint
undertaking which was entered into in “consideration” to
the employee as compensation
for his willingness to enter into the
restraint undertaking. The restraint undertaking then set out the two
considerations, which
included the right to participate in the
company’s commission structure which was still to be formed or
finalised. Addressing
the company’s contention that the
“consideration” did not avail the employee of
exceptio
,
the Court held that:
‘
The
right to participate in the commission structure of the company to be
formed, as expressed in the restraint, does not cease
to be a
consideration in exchange for the restraint merely because the amount
of the remuneration has not been, or even cannot
be, quantified; nor
does the possibility that nothing may have become payable, deprive
the consideration of its character as a
reciprocal obligation for the
restraint - because the consideration is the right to participate,
not the value of that right. For
the same reason the argument that
because there was no allegation that a particular sum of money, or
any money at all,
would have become owing, the
consideration cannot be said to be due, is without merit.’
[8]
[21]
The
consideration in the present case is the benefit (bonus) and it has,
in this case, become due and payable on 1 March 2024. In
a contract
where performance of an
obligation
by the respondent is conditional upon performance by the applicant of
a reciprocal obligation, the applicant’s performance
of its
obligation is a necessary prerequisite of its right to sue the
respondent and the applicant must show that it has performed
its part
or tender performance of its obligation.
[9]
[22]
The applicant has made an intentional decision not to perform its
obligation in terms of the restraint undertaking. It
has also not
tendered payment of Smith’s bonus. The defence of
exceptio
must succeed and the application stands to be dismissed. This Court
therefore need not consider whether Smith breached the restraint
undertaking and whether it must be enforced or not.
Costs
[23]
This is a contractual claim where costs ordinarily follow the result,
although the Court
retains
the discretion
to award costs. Both parties sought costs and there is no reason not
to grant their wish.
[24]
In the
premises
, the following order is
made:
Order
1. The application
is dismissed with costs.
M. Makhura
Judge of the Labour Court
of South Africa
Appearances:
For
the Applicant:
Adv. S. Swartz
Instructed
by:
DLA Piper South Africa (RF) Incorporated.
For
the First Respondent: Adv. S. Grobler SC
Instructed
by:
Kramer Weihmann Incorporated.
[1]
[2019] ZALCJHB 218 (28 August 2019).
[2]
[2024] ZALCJHB 52 (23 February 2024).
[3]
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) at para 163.
[4]
See:
Fischer
and another v Ramahlele and others
[2014] ZASCA 88
;
2014 (4) SA 614
(SCA) at para 13.
[5]
2001 (4) SA 249
(W) at para 8. The Court there said that: “The
first respondent raised the
exceptio
non adimpleti contractus
as a defence to the relief sought on the second restraint and
referred to
International
Executive
Communications Ltd t/a Institute for International Research v
Turnley and Another
1996 (3) SA 1043
(W) at 1047F - I where the following was said:
'So
far as final relief is concerned, the applicant's performance of its
obligation (payment of a percentage of its net profit)
is obviously
reciprocal to the first respondent's obligation to abide by the
restraint after leaving the employ of the applicant,
and would have
had to have been performed first. The onus of proving that there was
performance of that obligation or that such
performance was excused,
is on the applicant:
BK Tooling (Edms) Bpk v Scope Precision
Engineering (Edms) Bpk
1979 (1) SA 391
(A) at 491H; and
''Solank as iets nog
oorbly wat gepresteer moet word, kan die eksepsie dat vervulling nie
gevolg het nie, teen beide die eiser
self en sy erfgenaam geopper
word - selfs as die kleinste deel van die kontrak nie vervul is nie
of die nie-vervulling slegs
op
accidentalia
betrekking het.”
[6]
Megafreight
supra
at para 4.
[7]
3M SA
(Pty) Ltd v SA Commercial Catering and Allied Workers Union and
others
(2001) 22 ILJ 1092 (LAC) at para 9;
Adviceworx
supra
at para 152.
[8]
Universal
Storage Systems supra
at para 10.
[9]
See:
Ese
Financial Services (Pty) Ltd v Cramer
1973
(2) SA 805
(C) at 809E – H.