Grundvos (Pty) Ltd v Thiart and Another

The applicant, a water technology and pumping systems company, sought to interdict a senior employee, its General Manager and a director of the company, from taking up a role with a direct competitor. The employee had resigned, and after a protracted period of correspondence between the parties, confirmed his last working day and his intention to join the competitor a day later.

His employment contract contained a 12-month restraint of trade clause preventing him from working for a list of named competitors, applicable across the whole of Sub-Saharan Africa, Denmark, and any other country in which the group conducted business. In exchange, the restraint was coupled with a compensation mechanism whereby the Employer would pay the employee 50% of his last annual base remuneration, payable monthly over the restraint period.

Before the matter reached court, the employee tendered a detailed written undertaking through his attorneys which included that he would not to engage in strategic or advisory work touching the applicant’s core products, not solicit the applicant’s key accounts, not induce staff to leave, not retain confidential documents, and not use or disclose trade secrets. The employer rejected this undertaking without providing reasons and proceeded with urgent interdict proceedings.

The Legal Framework: A Balancing Exercise, not a Presumption

The Court reaffirmed the position established in Magna Alloys and Research (SA) (Pty) Ltd v Ellis that restraints of trade are not presumptively invalid in our law. Each restraint must instead be assessed on its own facts to determine whether its enforcement would be contrary to public policy.

Applying the well-known four-stage enquiry from Basson v Chilwan, a court asks:

1. Does the party seeking to enforce the restraint have an interest deserving of protection after termination?
2. If so, is that interest actually threatened by the other party’s conduct?
3. Does that interest, weighed qualitatively and quantitatively, outweigh the other party’s interest in remaining economically active?
4. Is there a broader public policy consideration, unrelated to the relationship between the parties, that favours upholding or striking down the restraint?

Critically, the enquiry proceeds in stages. The employer bears the onus of proving, first, that a valid restraint exists, and second, that it has been breached. Only once breach is established does the onus shift to the employee to show that the restraint is nonetheless unreasonable, unlawful or contrary to public policy.

Where the Employer’s Case Fell Short

The Court’s reasoning turned on two connected findings.

First, the alleged breach was not made out on the facts.

The employee had not simply ignored his restraint obligations; he had proactively tendered a comprehensive written undertaking addressing every category of harm the employer might plausibly fear:

• no solicitation of clients
• no involvement in competing core products
• no use of confidential pricing, tender or customer information; and
• no inducement of staff.

The Court held that the employer’s blanket rejection of this undertaking, without any stated justification, rendered its opposition unreasonable in the circumstances. Speculative harm, without more, was not sufficient to establish a breach.

Second, and independently, the geographic scope of the restraint was found to be unreasonably wide.

A clause preventing a former General Manager from working anywhere across the whole of Sub-Saharan Africa, Denmark, and any other jurisdiction in which the group happened to operate went well beyond what was necessary to protect the employer’s legitimate proprietary interests. The Court linked this directly to the constitutional right set out in section 22 of the Constitution, being the right of every citizen to choose their trade, occupation or profession freely, noting that contractual freedom and the right to earn a livelihood are both expressions of the constitutional value of dignity, and that an overbroad restraint tips the balance against enforcement.

The Court was also unmoved by the fact that the employer had offered to pay the employee 50% of his annual remuneration not to compete, observing pointedly that “life is not all about money”, reinforcing that a restraint’s reasonableness cannot simply be bought off with compensation if its scope remains unjustifiably wide.

The Outcome

Rather than striking down the restraint in its entirety, the Court adopted a proportionate middle path. It declined to enforce the non-competition clause itself, permitting the employee to take up the competing role, but instead converted the employee’s own tendered undertakings into an enforceable court order. For 12 months from his start date with the new employer, he remains interdicted from soliciting the applicant’s clients, engaging in strategic work touching the applicant’s core products or specified utilities, inducing staff to leave, retaining confidential business information, or disclosing trade secrets.

In substance, the Court preferred a narrowly tailored, undertaking-based protection of the employer’s genuine interests over a geographically sweeping non-competition bar that could not be justified on the facts.

Practical Takeaways for Employers

This judgment offers several practical lessons for businesses drafting or seeking to enforce restraint of trade provisions:

• Tailor the geographic and temporal scope to the actual footprint of the role.
  A restraint covering territories or markets in which the employee had no real involvement invites exactly the kind of unreasonableness finding made here.
• Engage substantively with undertakings.
  Where a departing employee tenders a considered, comprehensive undertaking addressing the employer’s real concerns, an unexplained rejection may itself undermine the employer’s position both on the merits and, as this case shows, even on urgency.
• Identify the protectable interest with precision.
  Trade connections, confidential pricing and tender information, and customer goodwill are legitimate interests, but the restraint must be no broader than necessary to protect them. A desire simply to keep a competent employee out of the market, without more, will not suffice.
• Consider consent orders early.
  Where an employee’s undertakings genuinely address the employer’s risk, converting those undertakings into a court order, rather than pursuing a blanket non-competition bar, may achieve effective protection while avoiding the risk of the restraint being struck down as unreasonable altogether.

Restraint of trade litigation remains highly fact-specific, and outcomes turn heavily on the precise drafting of the clause and the conduct of the parties in the lead-up to litigation. Employers should review existing restraint clauses against this developing body of case law, and seek advice before rejecting undertakings or launching urgent proceedings.

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.