In this matter Michelin Tyre Company South Africa (Pty) Ltd (“Michelin”) sought an order to restrain Calvin Morgan (“Morgan”) from taking up employment with any of its competitors for the balance of the restraint period Morgan had agreed to.

Michelin sought a semi-urgent order against Morgan, firstly to interdict and restrain him from being employed by, associated with or being interested in any manner and in any capacity whatsoever with the second respondent, Continental Tyre SA (Pty) Ltd (“Continental”), or any other person or any entity with which Michelin directly or indirectly competes, in the various segments of the tyre industry including (without limitation)automotive, truck and bus, agriculture, heavy industry, aviation, mining tyres, within the whole of the Republic of South Africa until 10 June 2023, and secondly, interdicting and restraining Morgan from directly or indirectly or in any like capacity as he did whilst employed at Michelin, whether on his own behalf or on behalf of on behalf of another entity, soliciting from, dealing with, supplying or engaging in any manner whatsoever with any person or entity with whom Michelin dealt with whilst Morgan was employed by it, within the whole of the Republic of South Africa, until 10 June 2023.

The urgent application was instituted on 10 March 2023, and was heard on 11 April 2023. As at 10 March 2023, Morgan was employed by Continental, a direct competitor of Michelin.

On 27 March 2023, and after the urgent application had been launched, Michelin ascertained that Morgan and Continental had concluded a mutual separation agreement in terms of which Morgan’s employment with Continental had been terminated. As such, and as a result of the termination, Michelin sought to amend the relief in the notice of motion by deleting any reference to Continental and therefore not seeking any relief against Continental.

On 27 March 2023, Morgan advised Michelin’s attorneys of the mutual separation agreement and that the urgent application was no longer relevant, nor urgent and that it was not necessary for Michelin to pursue the application.

Michelin’s attorneys responded on 31 March 2023 recording, amongst other matters, that Morgan’s contention that the hearing of the urgent application is no longer relevant is incorrect and that Michele intended to proceed with the application as the termination of Morgan’s employment with Continental only addressed the relief as sought in respect of Continental, but that such termination did not address the relief sought by Michelin in respect of “any other person or entity with which the applicant directly or indirectly competes, in the various segments of the tyre industry including …”, nor did it address costs. Morgan therefore opposed the urgent application.

In short, and the background of the relationship between Morgan and Michelin is that on 5 June 2019 Morgan and Michelin concluded a written agreement of employment, and Morgan was employed as a sales agent, and thereafter as an accounts manager until 10 December 2022 when he resigned from his employment. The agreement of employment contained a Restraint of Trade clause, which reads as follows:

“23.4 – The Employee undertakes that, in order to preserve and protect the Company’s proprietary information, the Employee shall not –

1. Become employed by, be associated with nor be interested in any manner and in any capacity whatsoever with the Company’s competitive entities, whether directly or indirectly and competition with the Company during the terms of the Employee’s employment or during the restraint period and within the restraint area; nor 
2. Solicit, interfere with nor entice any of the Company’s members of staff, customers, clients and business partnerships, during its term of employment and during the restraint period within the restraint area.”

As such, the 6-month restraint period would have expired on 10 June 2023.

Interestingly enough, it is recorded in the judgment that Michelin attempted to assist Morgan since he was “going through a difficult time in his personal life”, and secured employment for him at Minty’s, a major tyre retailer dealership which Michelin regarded as not being in competition with Michelin. The potential employment with Minty’s is not disputed by Morgan,  but Morgan contends that Minty’s indirectly competes with Michelin and therefore, according to Morgan, Michelin is breaching its own Restraint of Trade and therefore waving the Restraint of Trade, by arranging such potential employment with Minty’s. But in its founding papers, Michelin, amongst other allegations, stated that as a result of the knowledge of the confidential and proprietary information of Michelin, Morgan “could if he so wished” disclose the information “if he so decides”, to Continental (or any other direct or indirect competitor). Michelin contended that such ability on the part of Morgan constitutes “good and sufficient grounds” for the relief sought by Michelin.

The Court dealt with the aspect of urgency, from paragraph 51 onwards in its judgment and confirmed that every applicant must satisfy the two stage tests in an urgent application by settling out explicitly in the founding affidavit why the application is urgent and secondly, why such an application cannot be afforded substantial redress at a hearing in due course.

The Court was satisfied that there was urgency in the application since if Michelin was entitled to the relief sought, Mr Morgan must be restrained from breaching the provisions of the restraint, and it is highly unlikely that Michelin would be able to obtain substantial redress at a hearing in course, as the extent of any compensation that Michelin may be entitled to, would be impossible to prove.

The Court then dealt with the legal principles of Restraint of Trade, from paragraph 59 in the judgment onwards and commented specifically the following:

1. It is trite that Restraint of Trade agreements are valid and enforceable in South Africa and that such agreements should be honoured in their terms, unless such a Restraint of Trade provisions unreasonably restricts a person’s right to trade or work, or are in conflict with public policy;

2. A party that challenges the enforceability of a Restraint of Trade agreement bears the burden of alleging and proving that the Restraint of Trade provision is unreasonable or unconstitutional – Restraint of Trade agreements are enforced having regard to Constitutional dispensation, but the mere fact that Section 22 of the Constitution confers a right to work does not prevent Restraint of Trade agreements from being enforced. The right to work must be balanced with the right to enter into a contract which contains a Restraint of Trade provision, on a free and voluntary basis.
3. The reasonableness or otherwise of a Restraint of Trade has been considered in many cases, and it was held that reasonableness should be determined with reference to the following four considerations:

• Is there an interest deserving of protection at determination of the agreement?
• Is that interest being prejudiced?
• If so, how does that interest weigh up qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?
• Is there any other facet of public policy not having anything to do with the relationship between the contracting parties which requires that the restraint should either be enforced or disallowed?

4. The Court held that had Morgan still be employed by Continental at the time that the urgent application was heard, he would have been inclined to grant the relief as sought by Michelin since in his view, the restraint provisions were not unreasonable or unconstitutional, and do not unnecessarily restrain Morgan from being economically active. The Court however gave consideration to the fact that at the time the urgent application was heard, Morgan was no longer employed by a competitor of Michelin. The Court emphasised that it is necessary to point out that his finding that Michelin is not entitled to the relief as set out in their application, does not mean that the Restraint of Trade provisions are unconstitutional, unreasonable or unenforceable.

5. The Court therefore ordered that the application be dismissed and each party to bear their own costs.

From the above, it would appear that there can be ground for the Courts to enforce a Restraint of Trade under particular circumstances, and if certain considerations are met.  Once should not enter into such agreements without carefully considering the content thereof, and further the enforcement by the Company as well as the disregard thereof by an ex-employee can have severe and material effects on both parties.

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