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AFROX WINS RESTRAINT OF TRADE AGREEMENT APPEAL

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MBABANE - African Oxygen Limited (Afrox) has succeeded in its appeal against a decision of the High Court dismissing its application to enforce a restraint of trade agreement on its former branch manager.


Tony Coster was employed by African Oxygen but he resigned and joined Elcor Industries (Pty) Limited. According to African Oxygen, Coster’s act of joining Elcor Industries was in direct breach of the Restraint of Trade Agreement he and his former employer signed when he was employed in 2014.


These companies are in direct competition and they sell and distribute liquid petroleum gas. In terms of the agreement, Coster was not to disclose to any person whatsoever any information of a confidential or protected nature without the prior consent of African Oxygen.


He was also not expected to engage in business with African Oxygen’s competitors in which he may use his specialist knowledge to the disadvantage of his former employer within a period of six months from the termination of his employment contract and within a radius of 100km from the branch for which the company was responsible.


According to African Oxygen’s submission, when Coster resigned from African Oxygen, he informed the company that he intended to join his stepfather in their timber business. However, he joined Elcor Industries, which is located a stone’s throw from Oxygen Africa, in direct breach of the Restraint Trade Agreement.

African Oxygen told the court that at the end of June 2018, it was surprised to learn that Coster was actively pursuing its customers to do business with Elcor Industries by offering low prices than those that were offered by his former employer. They submitted that Coster was able to do this because he had intimate knowledge of the customers’ requirement, the pricing and trade secrets since he had gained same during his course of employment with the former.


“First respondent (Coster) is unlawfully and constantly utilising the information he got from his employment by the appellant (African Oxygen) to the benefit of second respondent (Elcor Industries) which information constitutes trade secrets of the appellant,” argued African Oxygen.


Coster denied this and submitted that he had gained his skills and working knowledge in his 23 years experience. He also denied breaching the Restraint Trade Agreement and submitted that the agreement was unreasonable in so far as it relates to the 100km radius.  He further denied using the information to the prejudice of his former employer.


In the High Court, Judge Maxine Langwenya dismissed African Oxygen’s application to restrain Coster from breaching the trade agreement. The judge considered that the agreement banished Coster from finding employment in the country.


African Oxygen filed an appeal of the decision and Supreme Court Judge Majahenkhaba Dlamini said the High Court viewed Coster’s freedom to trade as more important than his contractual obligations. In his reasoning, Dlamini JA stated that the judge in the High Court considered the lack of employment caused by the 100km radius.

This, according to Dlaminin JA, ‘does not seem justified in light of the nature of the interest the applicant established it has’. Dlamini stated that African Oxygen’s interests were purely contractual arising from the restraint of trade agreement.
   

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