High Court rules partially in favour of broker
On 19 May 2008 the Cape Town Provincial Division of the High Court ruled in the matter of Glopin Healthcare Consultants (the applicant) versus Clayton Samsodien (first respondent) and Jody Elise Turner (second respondent). The court ruled pending on a final determination in another action.
The circumstances around this case are probably familiar to many companies in the financial services industry. You hire a bright individual to service your key accounts. That individual learns your business from the ground up – and then resigns… And within weeks of the resignation you learn that your ex-employee is soliciting business from your clients. Such activities are usually prevented by restraint of trade and confidentiality agreements. But as this case proves – not everyone is prepared to honour such undertakings.
An unfortunate chain of events
In the case of Glopin Healthcare Consultants one of its key employees acted exactly as described above. The company has been trading as a medical scheme business since 2002. Business was going well and on 2 August 2004 Glopin employed Samsodien as a sales director. A year later (on 12 August 2005) the company hired Turner.
Glopin contends that Samsodien signed a number of confidentiality and restraint agreements while in their employ. “On 7 March 2005 [Samsodien] signed an undertaking which was to from part of the contract of employment.” He agreed that he would not “solicit, induce or attempt to procure any client of Glopin, individual or employer group” in the event he was dismissed (by Glopin) or resigned. More than a year later, on 18 July 2006 Samsodien signed a comprehensive confidentiality agreement in which he “undertook to use all the proprietary information disclosed to him exclusively for the purpose of evaluating the commercial potential of conducting business” with those clients on Glopin’s behalf.
“The first respondent and the second respondents tendered their resignation on 30 July 2007 and 2 August 2007 respectively and were subsequently employed by Mentor Healthcare Planning (Pty) Ltd.” And soon after these resignations, Glopin alleges that the troubles began. Glopin raised four instances which they felt contravened the restraint of trade clause signed by Samsodien.
The court ruling
In the matter of Glopin versus Samsodien the court ruled in Glopin’s favour. “The first respondent is interdicted and restrained for a period of 12 months from the date hereof from soliciting, inducing or procuring any of the [clients contained in the annexure]…” And “the first respondent is interdicted and restraint for a period of 12 months from the date hereof from requesting any of the applicant’s clients as set out [in the ruling] to give their business, which was managed by the applicant at any time during the period of the first respondent’s employment with the applicant, to the first respondent and/or any other party.” The court also ordered that Samsodien pay all the costs of the application, including the costs consequent upon the employment of counsel.
But the court found no reason why Turner had been included. . “In the light of the nature of the relief sought by the applicant it is not clear why the second respondent was cited,” said the Court, noting that Turner had not signed either the restraint or confidentiality agreements. Thus “the applicant’s application as against the second respondent was dismissed with costs.”
Editor’s thoughts:
The costs of a high court ruling, coupled with the loss of clients which have been poached can be financially crippling to a SME business. The situation that led to this court judgement is fairly commonplace in our market. Have you experienced problems with ex-employees using your client database and poaching clients? Did they sign a confidentiality and restraint agreement and did the confidentiality and restraint agreement work for you? Add your comments below, or send them to [email protected]
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