Can a School Enforce a Restraint of Trade against a Former Headmaster?

Jan 31, 2023 | , , , , | News

In the case of Ashton International College Ballito v Erasmus [2023] ZAKZDHC 1 (see reference) Ashton International College Ballito (PTY) Ltd v Erasmus and Another (D12967/2022) [2023] ZAKZDHC 1 (23 January 2023) where judgment was handed down on 23 January 2023, the Court dealt with an interesting question that I find we are approached with quite regularly – and that is the question of the enforcement of a restraint of trade.

Restraint of Trade

In this matter, the applicant was Ashton International College Ballito (Pty) Ltd (“Ashton”), a private school in Ballito.  The first respondent is Petrus Cornelius Johannes Erasmus (“Erasmus”), who was previously employed by Ashton, first as the headmaster and later as its managing director.  The second respondent is Curro Salt Rock Primary School (Pty) Ltd (“Curro”), which functions as an independent private school in Salt Rock.

In the application, Ashton sought an order interdicting Erasmus from breaching a so-called restraint of trade agreement in taking up employment with Curro, for a period of eight months, with effect from 15 December 2022.

According to the applicant’s papers, Curro is a trade rival and offers the same services as Ashton, they compete in the same community for student attendance and against each other in sporting events.  From the papers it was clear that both schools offer quality education, cultural and sporting activities.

Erasmus commenced employment at Ashton as its headmaster in January 2010, in May 2010 he purchased 6% of the shares in Ashton and in January 2017 he was promoted to managing director.  He resigned in August 2021 and Ashton announced that Erasmus was taking early retirement.  For the next sixteen months he was effectively retired.  At the end of 2022 Curro announced that Erasmus will be appointed as the head of its primary school and that he hopes to take the position at the end of January 2023.

At the beginning of December 2022, Ashton’s attorneys sent an email to Erasmus in which they contended that Erasmus was in breach of “Confidentiality Restraint Undertakings” contained in a Mutual Separation Agreement that Erasmus and Ashton had concluded in August 2022 and demanded that he sign an undertaking that he would honour those terms. Erasmus declined to sign it, on the advice of his attorney, since he had no obligation to do so.  The interdict application was therefore launched on 6 December 2022.  Erasmus opposed the application.

In discussing the evidence in papers before it, the Court commented that the Mutual Separation Agreement was poorly drafted, that it appears to be product of a so-called – “cut and paste” exercise, there are no definitions in the agreement,  and it, for example, refers to definitions of “prescribed customers”, “prescribed services”, “competing services” and “prescribed area”.  Further, some of the clauses are so badly worded that it was not possible to work out what they intended to say.

Apart from the difficulties the Court referred to, Judge van Amstel noted that the difficulty that Ashton has with its case is the question of protectable interests – “… a restraint clause such as the one that the applicant wants to enforce is against public policy and unenforceable if its sole aim is to stifle competition”.

Ashton dealt in its founding affidavit with confidentiality, trade secret, customers and supplier connections in general and in unspecific terms.  The deponent to the founding affidavit referred to Ashton’s enhanced curriculum, trade secrets, relationships and tailor-made deals with long standing customers – the relationships that Mr Erasmus had developed with strategic partners and so-forth.  There is no information with regard to the nature of these trade secrets, or the connections with customers and suppliers, or indeed any of the so-called confidential information.  There is no evidence to suggest that the Ashton curriculum is confidential or that the identity of its customers and suppliers are confidential.  As a matter of probability, a school’s curriculum is available to any parent who is considering sending a child there and the deponent say-so with regard to confidentiality is not enough.

In his answering affidavit, Erasmus denied any of the information referred to by Ashton as confidential, he stated that there were no trade secrets or trade connections, that the curriculum is not confidential, that Ashton offers the curriculum set by the IED (Independent Examinations Board) as well as Cambridge.   Further, Curro too offers the IEB curriculum, as most private schools.  He stated that his skills and ability to head a school is a product of his own experience and expertise.

The Court held that a school is not entitled to enforce a Restraint of Trade Agreement to prevent an employee from moving to a competing school if its sole purpose is to retain, for example, a popular or particularly competent teacher or headmaster or to prevent a competitor from acquiring his services.  This agreement will be unenforceable unless there is a protectable interest.  As such, the application was dismissed with costs.

Restraint of Trade by its very nature is a complex part of our law and it should not be used lightly.

My suggestion would be for any prospective employer, concluding a Restraint of Trade Agreement with a prospective employee, to have an attorney consider the content thereof, and obtain appropriate advices as to the enforceability.  Further, it is well known that to merely copy and paste contract terms from various sources is insufficient and blatantly a risk  – if you wish to protect your business’ interests, do so properly.

The same advice can be applied to a prospective employee – if an employer has a Restraint of Trade Agreement in your employment contract, seek independent advice prior to signing same.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.

Author:

Michele Engela

Michéle Engela

Michéle Engela is a director at CK Attorneys.

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