Restraint of trade conditions and debarments

DM writes as follows:

I read through your interesting article concerning restraint of trade conditions. This is a subject I believe should be addressed in much more detail.

I am in a situation where I left my previous employer, and, in view of my contract with them, have not contacted my previous clients even though, after 16 years of being their insurance advisor on short-term, many of them have become friends.

I am now faced with many phone calls as my cell phone number hasn’t changed. They are insisting that I come see them as they would like me to continue servicing them. I have to tell them that I cannot do this and I am being told how on earth can the law refuse the client the freedom of choosing their own service provider? The company has changed their way of dealing with clients which has not been well received, so most of these clients are leaving the company any way, but I cannot assist.

I truly feel this is something that should be looked at very carefully as it must be a common occurrence.

We recently discussed the matter of restraint of trade in an article titled “Whose client is it anyway?”

The presentation by Webber Wentzel at the Moonstone Regulatory Update workshops discusses two practical examples to show that there is far more at play here than just legal terminology.

An important consideration is the reasonableness of the restraint, which is normally tested against four questions, one of which concerns the interests of the ex-employer. Will the restraint result in the ex-employee becoming economically inactive or unproductive?

This was the case in a recent court case involving a major bank where the judge ruled that the restraint should not be enforced in view of the personal circumstances of the ex-employee.

The second case discussed by Webber Wentzel is equally interesting and addresses, amongst other matters, the issue of whether an underwriting agency’s clients are the brokers or the policyholders. It also clarifies the issue of “solicitation”, which is at the heart of the issue raised by the reader above.

Due to copyright issues and in fairness to those who paid to attend the Regulatory Update workshops, I can regrettably not expand on this any further.

Sadly, as pointed out by DM above, it is often the clients who lose out by not being able to pursue a relationship which they were happy with.

Please click here for a copy of the judgment in the court case referred to above.


This highly contentious matter led to proposals to replace the entire section 14 on debarments with regulations to ensure that due process is followed by employers.

In its presentation, Webber Wentzel provides a refresher on current legal principles versus the new legal principles and also provides practical considerations for delegates at the Regulatory Update workshops.

As noted previously in an article by Alan Holton, aggrieved representatives currently have no recourse against debarment by a FSP other than to apply to the High Court for a review of the debarment.

The proposed amended S 14 envisages a right of appeal against a debarment. The FSP will be required to notify the person of his or her right of appeal to the internal appeal mechanism established by the Authority, and the right to a subsequent review of the decision of the Authority to the Tribunal.

Please click here to read Alan’s article published on 11 January 2016.

If you live in or around Pretoria, there are still a few seats available for the Moonstone Regulatory update workshop at this venue on 31 March 2016. Click here for more information and to book your spot.

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