WHAT TO DO WHEN . . . . Restraint of Trade - Part 1

ARTICLE 39

WHAT TO DO WHEN . . . . Restraint of Trade – Part 2

By Nikki Viljoen of Viljoen Consulting CC August 2009

Following on from last week, we are having a look at a case of “Restraint of Trade” that was upheld by the courts.

In this instance, Mike our favorite protagonist works in a motor vehicle service centre where he does specialized diagnostic testing (let’s call them 123 Motor City).

Again, Mike is offered a position with a competitor ( let’s call them ABC Motor City), but this time he has been enticed across, not because of his work skills but in at attempt by ABC Motor City to gain access to the internal processes of 123 Motor City as well as their client data base.

Again Mike is served with papers to appear in court as 123 Motor City attempt to invoke the “Restraint of Trade” clause.

This time Mike is not successful in defending the application due to (but not Limited to) the following.

· Mike started at 123 Motor City fresh out of school. All of his work skills and diagnostic training was gained when 123 Motor City sent Mike to college and workshops and training courses (and paid for these too). 123 Motor City was therefore able to distinguish between the proprietary to it and Mike’s general knowledge and skills.
· Mike did posses information pertaining to 123 Motor City, that was of a confidential nature, and he had furthermore attended many in house training sessions and the result of this was that many of his skills and knowledge was specifically about the processes and systems and products of 123 Motor City.
· As a direct result of this Mike was in possession of trade secrets and client information – both of which were of a confidential nature. If Mike shared any and/or all of this information with ABC Motor City it could be used against 123 Motor City and also used to their disadvantage.


The bottom line was that as far as the courts were concerned, the fact that there was any risk whatsoever, of disclosure of confidential information, be it of 123 Motor City’s processes and/or product information and/or worth ethics and/or clients, any one of these was sufficient to justify the Court’s decision to prevent Mike from taking up employment with ABC Motor City.

The Court therefore enforced the Restraint of Trade clause.

So remember, be specific with what you want to prevent. Be specific and realistic about the time that your want the restraint to be in force and always be fair.

Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or http://www.viljoenconsulting.co.za