In August 2020, CDH discussed the decision in Slo Jo Innovation (Pty) Ltd v Beedle and Another (J737/22) [2022] ZALCJHB 212 (Beedle), regarding the transfer of restraint of trade agreements in employment contracts. The court ruled that a restraint of trade agreement included in a contract of employment was transferable under section 197 of the Labour Relations Act 66 of 1995, as amended. The decision in Beedle was upheld by the Labour Appeal Court in Beedle v Slo-Jo Innovations HubHub (Pty) Ltd [2023] JOL 60553 (LAC).

At a glance

• In August 2020 in Slo Jo Innovation (Pty) Ltd v Beedle and Another (J737/22) [2022] ZALCJHB 212 the court ruled that a restraint of trade agreement included in a contract of employment was transferable under section 197 of the Labour Relations Act 66 of 1995, as amended.
• However, in the recent judgment of Avis Southern Africa (Pty) Limited and Others v Porteous and Another (2023/0817898) [2023] ZAGPJHC 1160, the High Court arrived at a different conclusion.
• Avis is important for all employers who seek to enforce restraint of trade agreements in cases where the new contracts do not specifically include a restraint of trade clause.

In the recent judgment of Avis Southern Africa (Pty) Limited and Others v Porteous and Another (2023/0817898) [2023] ZAGPJHC 1160, Bester AJ in the High Court, arrived at a different conclusion. In this matter, the first and second respondents were married to each other. The applicants were Avis Southern Africa (Pty) Ltd, (Avis), Zenith Car Rental (Pty) Ltd (Zenith), and Zeda Car Rental (Pty) Ltd, (Zeda).

Although the matter was brought under one case number, it really concerned two applications with discrete restraint covenants arising from the employment relationship with each respondent based on their own set of facts and the adjudication of separate heads of relief.

The first respondent (David Porteous) commenced his employment with Avis on 1 October 1988. Avis was later acquired by Barloworld South Africa (Pty) Limited. By the time of his resignation on 31 May 2023, which took effect on 31 August 2023, he held the position of Chief Operations Officer of the Avis car rental and leasing business.

The second respondent (Belinda Porteous) assumed employment with Zeda in 1999 and on 10 December 2008, she became the Manager of International Sales for the Avis Rent-a-Car business of Barloworld, a position which she retained until the transfer of her employment to Zenith with effect from 7 September 2021. She remained in the employ of Barloworld until her resignation on 26 April 2023, which took effect on 31 May 2023. Upon resignation, she did not seek employment from a direct competitor of the applicants but rather commenced the process of registering a company in Mauritius with the intention of providing consulting services in the mobility and tourism industry. The first respondent intended to provide consulting services through this entity to the likes of Dollar Thrifty on a contract basis.

The urgent application against the first respondent was dismissed with costs, on account of a lack of urgency. Regarding the second respondent, the applicants filed an urgent application, seeking to prevent her from breaching a “non-compete” clause for a period of 12 months. The main issue before the court was whether the benefit of the restraint of trade undertaking was transferred to Zenith.

When the second respondent transferred to Barloworld, she signed a new employment contract. The contract included a confidentiality agreement, but not any restraint undertakings – her employment was subsequently transferred to the second applicant (Zenith) with effect from 7 September 2021 until her resignation on 31 May 2023. The new contract recorded that it superseded all previous contracts of employment. The applicants argued that the restraint of trade undertakings were included in the second respondent’s contract of employment with Zeda, and continued to apply when she was employed by Zenith in 2021.

Findings

Bester AJ disagreed and held that the cession of rights was a factual question. The applicants had to prove that the terms of the agreement between Avis and Barloworld included the restraint undertakings. The restraint of trade undertakings were part of Avis’s goodwill. The intention of the parties must be determined by the vows they took, i.e. the wording of the agreement they concluded. Bester AJ was not persuaded that the applicants had proven that there was cession of the restraint of trade undertakings to Barloworld.

Bester AJ also considered the Labour Appeal Court in Beedle and distinguished it from the Avis case. He held that on the facts of the matter before it, the Labour Appeal Court found that there was no transfer of a business to a third party – thus it did not have to consider whether the restraint of trade undertakings was ceded from employer A to B.

As discussed in the previous alter on Beedle, the legal debate about transfers of restraint of trade undertakings is developing. Avis is important for all employers who seek to enforce restraint of trade agreements in cases where the new contracts do not specifically include a restraint of trade clause. To succeed, employers must prove that the parties intended to cede the restraint of trade undertakings as part of goodwill.

Written by Thabang Rapuleng, Counsel and Malesela, Associate at Cliffe Dekker Hofmeyr