An employer is not entitled to enforce a restraint of trade agreement to prevent an employee from moving to a competing employer if its sole purpose is to retain a competent employee or to prevent a competitor from acquiring his services. The agreement will be unenforceable unless there is a protectable interest.

Ashton International College Ballito (PTY) Ltd v Erasmus and Another (D12967/2022) [2023] ZAKZDHC 1 (23 January 2023)

Case summary

The applicant in this matter is Ashton International College Ballito (Pty) Ltd, an independent private school located in Ballito, South Africa. The first respondent is Mr P. Erasmus, who used to work for the applicant in various capacities – first as the headmaster of the school in Ballito, and later as its managing director. The second respondent is Curro Salt Rock Primary School (Pty) Ltd. It too operates as an independent private school located in Salt Rock, a small town approximately eight kilometres to the north of Ballito.

The applicant sought an order to interdict the first respondent, Mr Erasmus, from breaching a restraint of trade agreement and taking up employment with the second respondent, Curro College, for a period of eight months starting from 15 December 2022. The matter was argued in motion court on 30 December 2022, after which the application was dismissed by the Court with costs, and the reasons for the decision were to follow by the end of January 2023. The outcome was communicated to the parties promptly as both schools were set to resume early in the new year.

According to the deponent to the founding affidavit, Ashton College is a well-established independent, English-medium, co-educational school with a Christian ethos, providing education to students from Grade 0000 to Grade 12. The school is considered one of the biggest private schools on the North Coast. On the other hand, Curro College offers similar services and is considered a trade rival, competing with Ashton College for student attendance and in sporting events. Both schools offer quality education, cultural activities and state-of-the-art facilities.

Mr Erasmus started working at Ashton College in Ballito in January 2010 as the headmaster. In May 2010, he purchased 6% of the shares in the applicant and was promoted to the position of managing director in January 2017. He resigned from the position in August 2021 and was said to be taking early retirement. For the next 16 months, Mr Erasmus was effectively retired, until Curro College announced that he had been appointed as the head of its primary school, with the intention of starting in January 2023.

In December 2022, the applicant’s attorney sent an e-mail to Mr Erasmus, alleging that he was in breach of the confidentiality and restraint undertakings contained in a Mutual Separation Agreement that was concluded between him and the applicant in August 2021. The attorney demanded that Mr Erasmus sign an undertaking to honour the terms, but he declined to sign it based on advice from his attorney that he was under no obligation to do so. The application for an interdict was launched on 6 December 2022 and was opposed by Mr Erasmus. Curro College played no part in the proceedings, except to deliver a notice that it would abide by the outcome.

The agreement on which the applicant relied was concluded on 17 August 2021 and recorded that Mr Erasmus wanted to go on early retirement with immediate effect. The agreement provided for a separation package, which included the purchase of his shares by the applicant, with the purchase price payable over a period of 24 months. The agreement also provided that Mr Erasmus would not be employed by any company that carries on business within a 50-kilometre radius and provides “competing services” for a period of two years.

The agreement was poorly drafted and unclear, with some clauses being meaningless, and the Court found that it was ambiguous and unenforceable, and that the absence of definitions for key terms made it impossible to determine the parties’ intentions.

Additionally, the clause stating that non-compliance would render the agreement null and void was unusual. The Court also noted that there was no evidence of “protectable interest”, and stressed that it must be clearly understood that a school curriculum is by no stretch of the imagination confidential.

The agreement was deemed unenforceable, and Ashton College failed to prove that Mr Erasmus would cause any harm if he took up employment with Curro College.

The Court dismissed the application with costs. 

Submitted by Labour Guide