Coolag (Pty) Ltd v Steenkamp and Another

Coolag (Pty) Ltd (applicant), a thermal insulation and sheet metal contractor, employed Jacobus Johannes Pienaar Steenkamp (first respondent) as a project manager from November 2015 until his resignation on 2 May 2024. His role gave him access to confidential client information and trade connections. The employment contract contained confidentiality (clause 16) and restraint (clause 17) provisions. Clause 17.2 omitted the word 'not', reading 'The EMPLOYEE will...directly or indirectly solicit...obtain the custom...'. On 24 April 2024, while still employed, the first respondent issued quotations to an existing client and a prospective client on behalf of his newly incorporated company, SMTI Projects (Pty) Ltd (second respondent), a direct competitor. After resignation, he continued to solicit the applicant’s clients, including longstanding client Thomo Therm, in breach of the restraint. The applicant sought interdictory relief, arguing the clause should be interpreted or rectified to include a negative prohibition. The first respondent opposed, contending the clause imposed no restraint and any restraint was unreasonably wide in area.

• Whether a valid restraint of trade covenant existed in the employment agreement despite the omission of the word 'not' in clause 17.2
• If the covenant existed, whether the applicant discharged the onus of proving breach by the first respondent
• Whether rectification of clause 17.2 was competent and permissible at a late stage in motion proceedings
• Whether the restraint of trade, as interpreted or rectified, was reasonable and enforceable
• Whether the application was affected by misjoinder or non-joinder of the second respondent entity

1. The second respondent’s citation was amended from SMTI Services (Pty) Ltd to SMTI Projects (Pty) Ltd. 2. The employment agreement was rectified by inserting 'not' in clause 17.2. 3. The first respondent was interdicted for one year from 3 May 2024 from directly or indirectly soliciting or obtaining custom from existing or recent clients (as listed), using his personal knowledge or influence over such clients for his benefit or any competitor, and using or disclosing the applicant’s confidential information. 4. The first respondent was ordered to pay the applicant’s costs on an attorney-and-client scale, with counsel’s fees on Scale B.

1. The interpretation of a written contract is a matter of law for the court, not a factual dispute. When a clause appears under a heading 'Restraints' and is preceded by confidentiality and duty-of-loyalty clauses, it must be interpreted as a prohibitive restraint of trade despite the omission of the word 'not', because the opposite meaning would be absurd and unbusinesslike. 2. A party seeking to enforce a restraint of trade bears the onus of proving the restraint’s existence and breach; once established, the respondent bears the onus of proving unreasonableness. 3. Rectification of a written agreement to reflect the parties’ true common intention may be granted in motion proceedings, even if sought only in reply, where no prejudice is shown and the respondent’s denial of a mistake is far-fetched and inconsistent with prior conduct.

The court observed that the applicant’s abandoned prayer for an interdict against unlawful competition fell outside the contractual case, and the applicant’s request to extend the restraint period from the date of the order rather than the date of resignation would undermine the earlier finding that the application had not been urgent.

This case illustrates that South African courts will interpret and, if necessary, rectify a contractual restraint of trade clause to give it business efficacy, reading it in context rather than allowing a drafting error to defeat its protective purpose. It also highlights that an employee’s post-resignation conduct and dilatory technical defences can lead to punitive cost orders, and that a restraint limited to identified clients may be reasonable even if its geographical scope was originally unlimited.