Greendale Hardware & Electrical (Pvt) Ltd v Goodfellow Bangaba

The appellant company, a member of the Crundal Group, carried on business in retail and wholesale of general hardware, specialized mining and industrial cutting tools and protective clothing. The respondent was employed as a clerk/counter salesman on 28 August 1998 and later promoted to external sales representative. Upon employment, the respondent signed a restraint of trade agreement preventing him from being involved in any similar business for two years after termination of employment. On 31 October 2004, the respondent left the appellant's employment and joined RG Tools Zimbabwe as a salesman. RG Tools carried on business in mining and industrial tools and general hardware, similar to the appellant's business. The respondent placed an order with SANDVIK Tools (one of the appellant's customers he had dealt with during his employment) on behalf of RG Tools. The appellant demanded cessation of the respondent's employment with RG Tools based on the restraint of trade clause. The respondent rejected the demand, arguing the restraint was unreasonable and unenforceable. The appellant applied to the High Court for an order enforcing the restraint of trade.

• Whether the restraint of trade clause in the employment contract was reasonable and enforceable
• Whether the restraint was no more than reasonably necessary to protect the appellant's proprietary interests in trade connections
• Whether a no-competition restraint was appropriate where a severable anti-solicitation restraint already existed to protect the same proprietary interests
• Whether the restraint was too wide in scope, time and area to be enforceable

The appeal was dismissed with costs.

A restraint of trade in an employment contract is prima facie valid, but the employee can challenge it as unreasonable and against public interest. The test for validity is whether there are proprietary rights requiring protection and whether the restraint is no more than reasonably necessary for such protection. An employer is entitled to protect proprietary interests such as trade secrets and trade connections, but not against mere competition from a former employee using general skills and knowledge acquired during employment. Where separate, severable restraints exist (such as an anti-solicitation clause protecting trade connections), a broader no-competition restraint covering the same proprietary interests will be unreasonable and unenforceable as it goes beyond what is necessary for protection. A no-competition restraint that prevents an employee from carrying on his trade anywhere in the country requires exceptional justification. Where such a restraint is directed primarily at preventing competition and the use of personal skills and knowledge rather than protecting specific proprietary interests already covered by other enforceable restraints, it is invalid and unenforceable.

The Court observed that the unreasonableness of a restraint of trade is a question of law determined by applying a legal standard to the facts, assessed according to circumstances existing at the time enforcement is sought insofar as they affect public interest. What constitutes public interest changes over time. The Court noted that a restraint which is otherwise unreasonable would not become reasonable merely because of a provision requiring the covenantee's consent before the prohibited conduct is undertaken - this is a question of legality, not of consent. The Court emphasized that it is the freedom to use to the full a person's improving ability and talent which lies at the root of the policy of law regarding employment restraints. Additional knowledge and skill acquired during employment belong to the employee and cannot be lawfully restrained as they are not the employer's property. The Court also commented that precluding a former employee from carrying on his natural trade in any part of the country is a very strong prohibition requiring exceptional justification.

This case is significant in Zimbabwean (and by extension South African) labour and contract law for establishing clear principles on the enforceability of restraint of trade clauses in employment contracts. It affirms that: (1) Employers cannot use restraint of trade clauses merely to prevent competition or to restrain employees from using general skills and knowledge acquired during employment; (2) Where specific, narrower restraints (such as anti-solicitation clauses) adequately protect the employer's proprietary interests, broader no-competition restraints will not be enforced as they go beyond what is reasonably necessary; (3) Each restraint clause must be assessed for its specific purpose and whether it is severable from other restraints; (4) Courts will scrutinize the reasonableness of restraints particularly regarding their scope, geographical area, and duration; (5) The burden is on the employee to prove unreasonableness, but once proprietary interests can be protected by less restrictive means, broader restraints will fail. The judgment reinforces the public policy favouring freedom of trade and employees' ability to use their skills and experience in their profession.