The Labour Appeal Court had to determine whether a settlement agreement concluded at the CCMA, extinguished the rights of the employer in so far as it related to a restraint of trade agreement.

The restraint agreement provided as follows:

1. In the event of the termination of my employment with the COMPANY for any reason whatsoever, I shall not be entitled, for a period of 24 (twenty-four) months after date of termination of my employment with the COMPANY to be or become:

1.1 The proprietor of or partner in any business or firm;

1.2 A member or director of any company;

1.3 Connected in any way with any business, firm, company or other organisation (other than as an employee); which competes in any way with the COMPANY or which carries on the practice of quantity surveyor or project manager within a radius of one hundred (100) kilometres from any place of business of the COMPANY at which I was physically employed during the course of the 3 (three) year period which immediately preceded the termination of my employment with the COMPANY.

2. Neither shall I, for a period of 24 (twenty four) months following the date of termination of such employment, be entitled to conduct any business of the nature of the business conducted by the COMPANY, either on my own or as an employee of another business, with any person who was a Client of the COMPANY during the period of 3 (three) years immediately preceding the termination of my employment with the COMPANY. This shall include being employed by such Client.’  

Summary of judgement prepared by Jan du Toit, Director at Labour Guide

In April 2021, the business of the first respondent experienced financial distress which resulted in a management decision that it was financially unviable to increase the salaries of its directors and employees, the parlous financial position having been exacerbated by the Covid-19 pandemic. The respondent thus reduced staff salaries including that of the appellant and his fellow directors. The appellant did not accept the reduction in remuneration and was subsequently retrenched.

At the CCMA the parties settle the dispute. The standard CCMA agreement provided as follows:

“record the settlement of their dispute in the following terms. By signing this agreement the parties acknowledge that the agreement was read to them and interpreted (where necessary) and that they understand the content hereof. This agreement is in full and final settlement of the dispute referred to the CCMA as well as in full settlement of all statutory payment due to the applicant as reflected at paragraph 5 of this agreement…”

The monetary settlement and all other issues were then set out in annexure A to the standard part of the agreement in which the following appeared:

 1. Wheelwright referred a dispute to the Commission of Conciliation, Mediation and Arbitration (CCMA) under case number GAJB14739-21, the primary dispute being the calculation of severance pay due and payable to Wheelwright arising from his retrenchment.

 2. The parties have agreed to the full and final settlement of all matters between them and wish to record the terms of the settlement of this agreement.

 3. The parties acknowledge that they have entered into this agreement freely, voluntarily, without any duress and/or coercion, and after having carefully considered their positions and after having sought and obtained legal advice in respect hereof.

The parties agree to and record the rems of settlement as follows:

Withdrawal of Claim

4.1 Wheelwright withdraws his claims in the CCMA issued under case number GAJB14739-21 against CPDL. Each party shall pay their own costs in respect of the conduct of these matters;

Severance payment by CPDL to Wheelwright

4.2 CPDL will pay Wheelwright the balance of R600 000.00 in respect of Wheelwright’s severance pay due and payable, in addition to an initial severance payment made pursuant to SARS tax directive number 30922167 dated 28 July 2021 (Wheelwright’s tax number being 2309409144);

5. This agreement is in full and final settlement of all and any claims which the parties may have against each other whether such claim arise from contract, delict, operation of law, equity, fairness or otherwise.’

Later, the appellant became involved in business activities with a client of the respondent. The appellant had adopted the attitude that the settlement agreement reached at the CCMA had extinguished the restraint agreement.

It follows that the essential dispute between the parties was the meaning and implications of clause 2 of the settlement agreement as set out in annexure A namely: “the parties have agreed to the full and final settlement of all matters between them and wish to record the terms of the settlement in this agreement”, which was required to be read with clause 5:

‘This agreement is in full and final settlement of all and any claims which the parties have against each other whether such claims arise from contract, delict, operation of law, equality, fairness and otherwise.’

The appellant contends that reference to ‘full and final settlement to all matters between them’ (clause 2) and the further reference to ‘full and final settlement of all and any claims which the parties may have against each other’ (clause 5) included all claims between the parties arising out of the restraint of trade agreement which meant that the first respondent was prohibited from enforcing any rights which it might have had in terms of that agreement.

By contrast, the respondent contended that it had not waived its rights in terms of the restraint of trade agreement and that the settlement agreement brokered by the CCMA was meant only to cover matters that were referred specifically to the CCMA, which manifestly did not, in its view, include disputes concerning the restraint of trade agreement.

Sitting in the court a quo, Mkwibiso AJ accepted the submissions of the respondent that the claim based on a breach of the restraint of trade only arose after the signing of the settlement agreement and accordingly was not a claim in existence at the time that the settlement agreement was concluded.

As it was not in dispute that, were the restraint agreement to have remained alive after the conclusion of a settlement agreement, the court a quo found that the appellant had breached clause 2 of the restraint agreement. It found further that his conduct was prejudicial to the protectable interests of the respondent to the extent that the respondent had lost work on the Nigeria Brewery upgrade project and the revenue that flowed therefrom.

The Labour Appeal Court was required to consider whether the court a quo erred in finding that the settlement agreement did not include a dispute that might arise out of the restraint of trade agreement.

It was held that the wording employed in annexure A went beyond a mere repetition of the words used in the standard form. In particular, as set out in clause 5, the wording referred to “all and any claims which the parties may have against each other whether such claims arise from contract, delict, operation of law, equity, fairness or otherwise”. Manifestly, this clause extends beyond the specific referral to the CCMA which is expressly covered in the standard clause.

It is significant that annexure A was specifically constructed by the parties and their representatives who chose the express words which they considered would represent the purpose they had in mind in reaching a settlement agreement. That the specific words chosen in the agreement (annexure A) were included by the parties to provide the clearest possible indication, when the text is read in context, of the purpose for which the agreement was concluded. A sensible interpretation of the meaning of this phrase cannot be confined to the specific claims which were brought about the intervention of the CCMA.

The appeal was upheld with costs, confirming that the employer had no further recourse in so far as it related to the restraint agreement.

It is important to take notice that the standard CCMA settlement agreement does not include the settlement of matters that may arise from a restraint agreement. In this particular case, an annexure to the standard agreement was prepared and agreed to between the parties. The employer was the author of its own misfortune. 

Wheelwright v CP De Leeuw Johannesburg (Pty) Ltd (JA 81/2022) [2023] ZALAC 6 (21 February 2023)

Submitted by the Labour Guide