Restraint of trade – duress

December 1st, 2019
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Thomas NO and Others v Christians and Another (FB) (unreported case no 2177/2019, 28-6-2019) (Mhlambi J)

In the case of Thomas, the respondent raised the defence of duress when the applicant sought the enforcement of a restraint of trade agreement.

Mrs Christians, an employee of Bloemsec Trust, worked as a salesperson. The business was a service provider in the security industry. Mrs Christian’s employment with Bloemsec commenced on 3 February 2014. As at that date, and until 9 May 2018, there was no written contract of employment in place between the parties. At the latter date, due to ‘a change in management’ a written contract of employment, backdated to 2014, was given to Mrs Christians by a human resource manager of Bloemsec. She refused to sign it on the spot as she wished to read through it. The contract contained a restraint of trade clause. Broadly stated, it stipulated that Mrs Christians would not, during the period of her employment and, thereafter, for a period of 12 months, be engaged in/or concern herself in activities that would compete with Bloemsec and/or make use of confidential information of Bloemsec’s prescribed customers, clients, suppliers etcetera, within the area of Bloemfontein. The restraint would operate against her at the termination of her employment regardless of the cause of such termination.

She was told that failure to sign the contract would lead to the loss of her employment. She signed the contract on the following day under protest. In so doing, she was moved by the threat of unemployment. On 24 April 2019 she gave a notice to terminate her services with Bloemsec, her reason being that she accepted employment from another company. In consequence of this, Bloemsec sought enforcement of the restraint.

Mrs Christians pleaded that she signed the contract under duress. In the alternative, she pleaded that the restraint was unreasonable and unconstitutional due to its scope of operation in relation to the period and area covered by it.

The court, per Mhlambi J, stated that duress is a recognised ground that vitiates a contract that is otherwise valid. The court stated the requirements for the remedy –

  • the fear must be reasonable;
  • it must be caused by a threat of some considerable evil to the person or his family;
  • it must be a threat of an imminent or inevitable evil;
  • the threat or intimidation must be unlawful or contra bonos mores; and
  • the moral pressure must have caused damage (see also Experian South Africa (Pty) Ltd v Haynes and Another 2013 (1) SA 135 (GSJ)).

The court referred to Paragon Business Forms (Pty) Ltd v Du Preez 1994 (1) SA 434 (SE). This case dealt with a scenario where a former employee had alleged that he felt that he had no option but to sign an agreement containing a restraint of trade. The threat of dismissal was not expressed. The court there was of the opinion that there was no threat of dismissal and that the alleged fear by the respondent was illogical and unreasonable.

Mhlambi J concluded that, in the present case, the coercion was not real. The court then dealt with the law on the enforcement of restraints of trade and concluded that there was an increased risk of harm to the applicant’s commercial interests.

As a remedy, duress has presented difficulties in the scenario of duress of goods and economic duress. This may be attributable to the stated elements of the remedy. Moreover, historically, this remedy has not enjoyed success in the courts. However, the Supreme Court of Appeal (SCA) has stated that the threat of economic ruin, in appropriate circumstances, may form grounds for a valid defence of duress (Medscheme Holdings (Pty) Ltd and Another v Bhamjee 2005 (5) SA 339 (SCA)). In the present case, Mrs Christians stood to suffer economic harm: The loss of her employment in the event of her not signing the written contract presented to her. In other words, her economic well-being was at stake. It can be said with some certainty that had the employer not made a threat of dismissal, Mrs Christians would have been at liberty to elect whether to sign the contract on the proffered terms or not.

In Bhamjee, the SCA held that, in general, it is not unlawful to cause economic harm. The courts continue to state the requirements of duress in the traditional framework that refers to ‘a fear of some considerable evil to the person or his family.’ In Thomas the court’s discussion of the principles of duress did not include any discussion of economic duress. In the Paragon Business Forms case the court stated that, depending on the circumstances, a threat of dismissal from employment might well constitute a threat of considerable evil.

The question of what needs to be proved in order to successfully invoke the remedy of duress is still determined by an outmoded 20th century test. On the question of what should be regarded as duress, G Glover has submitted that the ‘exercise requires making normative judgments about the conduct of both the party exerting the pressure and the party who chose to succumb to the pressure and contract’ (G Glover ‘The test for duress in the South African law of contract’ (2006) 123 SALJ 98 at 108)). To avoid this issue, I submit that the current test is inadequate particularly in cases of economic duress.

One is then left with the feeling that the employer’s conduct in Thomas amounted to an illegitimate use of their superior bargaining position to extract a benefit they did not have prior to the existence of the written contract.

Stephens Molekwa LLB (cum laude) (Unisa) LLM (UKZN) is a legal practitioner in Johannesburg.

 This article was first published in De Rebus in 2019 (Dec) DR 28.