Reeves and Another v Marfield Insurance Brokers CC and Another

• Jurisdiction: South Africa
• Citation: 1996 (3) SA 766 (A)

Reeves and Another v Marfield Insurance Brokers CC and Another
1996 (3) SA 766 (A)

1996 (3) SA p766

Citation	1996 (3) SA 766 (A)
Case No	12/95
Court	Appellate Division
Judge	Orbett CJ, Hefer JA, Nienaber JA, Schutz JA and Scott JA
Heard	February 15, 1996
Judgment	March 28, 1996
Counsel	A J G Lang SC (with him T J M Patterson) for the appellants.; M J D Wallis SC (with him A I S Redding) for the respondents.

Flynote : Sleutelwoorde

Contract — Legality — Restraint of trade — Enforcement of — Employer wrongfully C terminating contract of employment — Little justification for importing English rule that employer in such circumstances precluded from enforcing restraint — Such rule in any event not applicable where parties were in agreement that restraint was to operate in circumstances where employer himself wrongfully terminated employment — Where a provision in restraint of trade, however, couched in D language wide enough to confer benefit on party resulting from his own fraud or wilful wrongdoing, such provision not enforceable to extent that it does so.

Headnote : Kopnota

The words 'ceases to be employed . . . for any reason whatsoever' in the restraint clause of a contract of service indicate that the restraint is to operate once there is no longer an E employment relationship between employer and employee and make it clear that the circumstances in which the employment relationship comes to an end or the underlying cause of its termination are irrelevant to the operation of the restraint provision. There is no justification for the argument that the phrase is to be construed as referring only to a termination of the employment relationship which did not involve a breach on the part of the employer or amount to an unfair labour practice: there is no need to import into our law the English rule that an employer who wrongfully terminates a contract of employment F is precluded from enforcing a restraint of trade contained therein. (At 771I/J-772B and 773H-I.) Such a rule in any event cannot apply once it is found that the parties were in agreement that the restraint was to operate in circumstances where the employer himself wrongfully terminated the contract of service. (At 774H/I-I/J.) Where a provision in a restraint of trade is, however, couched in language wide enough to confer a benefit on a party resulting from his own fraud or wilful wrongdoing, it will not be enforceable to the extent that it does so. (At 775G/H-H.)

Cases Considered

Annotations

Reported cases

G The following decided cases were cited in the judgment of the Court:

Basson v Chilwan and Others 1993 (3) SA 742 (A)

Biografic (Pvt) Ltd v Wilson 1974 (2) SA 342 (R)

Cambridge Plan AG and Another v Moore and Others 1987 (4) SA 821 (D)

Capecan (Pty) Ltd t/a Canon Western Cape v Van Nimwegen and Another 1988 (2) SA 454 (C)

H Chubb Fire Security (Pty) Ltd v Greaves 1993 (4) SA 358 (W)

Commercial and Industrial Holdings (Pvt) Ltd and Another v Leigh-Smith and Others 1982 (4) SA 226 (Z)

CTP Ltd and Others v Argus Holdings Ltd and Another 1995 (4) SA 774 (A)

Diner v Carpet Manufacturing Co of SA Ltd 1969 (2) SA 101 (D)

Drewtons (Pty) Ltd v Carlie 1981 (4) SA 305 (C) at 308D-E

I Elgin Brown & Hamer (Pty) Ltd v Industrial Machinery Suppliers (Pty) Ltd 1993 (3) SA 424 (A)

Ex Parte Minister of Justice: In re Nedbank Ltd v Abstein Distributors (Pty) Ltd and Others and Donelly v Barclays National Bank Ltd 1995 (3) SA 1 (A)

Freight Bureau (Pty) Ltd v Kruger and Another 1979 (4) SA 337 (W)

General Billposting Company Ltd v Atkinson [1909] AC 118 (HL)

Government of the Republic of South Africa v Fibre Spinners & Weavers (Pty) Ltd 1978 (2) SA 794 (A)

J Info DB Computers v Newby and Another 1996 (1) SA 105 (W)

1996 (3) SA p767

A Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A)

Measures Brothers Ltd v Measures [1910] 2 Ch 248 (CA)

Meter Systems Holdings Ltd v Venter and Another 1993 (1) SA 409 (W)

Sunshine Records (Pty) Ltd v Frohling and Others 1990 (4) SA 782 (A)

S W Strange Ltd v Mann [1965] 1 All ER 1069 (Ch)

Wells v South African Alumenite Co 1927 AD 69.

Case Information

B Appeal from a decision in the Eastern Cape Division (Van Rensburg J). The facts appear from the judgment of Scott JA.

A J G Lang SC (with him T J M Patterson) for the appellants.

M J D Wallis SC (with him A I S Redding) for the respondents.

In addition to the cases cited in the judgment of the Court, counsel on both sides referred C to the following authorities:

Botha and Another v Carapax Shadeports (Pty) Ltd 1992 (1) SA 202 (A)

Cotton Marketing Board v Zimbabwe National Railways 1990 (1) SA 582 (ZSC)

Deetlefs v Wright 1977 (2) SA 560 (A) at 567F

Galloon v Modern Burglar Alarms (Pty) Ltd 1973 (3) SA 647 (C) at 655D-E D

Hayne & Co v Kaffrarian Steam Mill Co Ltd 1914 AD 363

Heerman's Supermarket v Mona Road Investments (Pty) Ltd 1975 (4) SA 391 (D) at 395E

Joseph Travers and Sons Ltd v Cooper (1915) 1 KB 723

Morrison v Angelo Deep Goldmines Ltd 1905 TS 775 at 779 E

National Chemsearch (SA) (Pty) Ltd v Borrowman and Another 1979 (3) SA 1092 (T)

Pest Control (Central Africa) Ltd v Martin 1955 (3) SA 609 (SR)

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) F

Rand Bank v Rubinstein 1981 (2) SA 207 (W) at 215A-F

Rawlins and Another v Caravantruck (Pty) Ltd 1993 (1) SA 537 (A)

Valasek v Consolidated Frame Cotton Corporation Ltd 1983 (1) SA 694 (N).

G Heydon The Restraint of Trade Doctrine at 299-300

Jordaan 'Transfer, Closure and Insolvency of Undertakings' (1991) 12 ILJ 935

Cur adv vult.

Postea (March 28). H

Judgment

Scott JA:

Prior to 1987, the first appellant (to whom I shall refer as 'Reeves') and his father carried on business as insurance brokers in East London through the medium of a close corporation, Harold Reeves & Associates CC, in which Reeves had a 40% interest I and his father a 60% interest. They were both well known in the East London and Border area and had established what were described as 'valuable' relationships with the clients of the business. In 1987 the first respondent, which was then known as Glenvaal (Pty) Ltd and which carried on business as insurance brokers in various centres in the Republic, was anxious to open an office in East London. (The first respondent subsequently changed its name to Marfield Insurance Brokers (Pty) Ltd but it is J convenient to refer to it as

1996 (3) SA p768

Scott JA

'Glenvaal'.) At the time and for reasons which are not material to this appeal, the business of the close corporation had suffered a financial set-back. Following negotiations and in terms of a written agreement of sale dated 21 July 1987 Glenvaal acquired the business (including its goodwill) of the close corporation as a going concern. The agreement provided further that Reeves and his father were to enter into service agreements with Glenvaal on the latter's usual terms and conditions. It is common cause that they both did so.

Reeves's service agreement provided that it was to be deemed to commence on 1 July 1987 and was to continue until 30 June 1988 whereafter it could be terminated on three C calendar months' notice given by either party to the other. Clause 14 contained the restraint which forms the subject-matter of the present appeal. The terms which are relevant are the following:

'14.4

The employee hereby undertakes to Glenvaal that during his employment and for a period of three years after the date upon which D he ceases to be employed by Glenvaal (or any company in the Glenvaal Group) for any reason whatsoever, he will not, within a radius of 350 kilometres from the City Hall in East London either alone or jointly together with, or as agent for any other person, firm, partnership, company, body corporate or association of any nature whatsoever:

14.4.1

be engaged, interested or concerned, whether financially or E otherwise and whether directly or indirectly, in; or

14.4.2

be a director of or a shareholder, directly or indirectly, in; or

14.4.3

act as a consultant or advisor to or be an employee of; or

14.4.4

directly or indirectly finance,

any of the business of insurance broking, underwriting, insurance consultants, insurance agents, claims settling agents (or be party F directly or indirectly to any management contracts relating to any of such businesses); or any other business which may directly or indirectly compete with that carried on by Glenvaal, save for his employment with Glenvaal.'

A restraint in virtually identical terms was contained in the agreement of sale.

G Reeves was in due course appointed joint manager of Glenvaal's branch in East London. In this capacity he nurtured the relationships with former clients of the close corporation and established new client relationships for and on behalf of Glenvaal. By the very nature of his employment he also acquired a detailed knowledge of the insurance needs and cover of Glenvaal's clients. Reeves's father in the mean time retired on account H of ill-health and did not become involved in the dispute which subsequently arose.

In 1994 Glenvaal and its holding company entered into an agreement with Dewar Rand Investments (Pty) Ltd, which also carried on business as insurance brokers, in terms of which the businesses of both Glenvaal and Dewar Rand were to be transferred to I Glenvaal Dewar Rand Ltd (the second respondent) which had been incorporated for this purpose and which was also a party to the agreement. (I shall refer to this company as 'GDR'.) With effect from 1 April 1994 the assets (including goodwill) and liabilities of both businesses were transferred to GDR, which on that day commenced carrying on the J new combined business on its own behalf.

1996 (3) SA p769

Scott JA

A In...