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Insurance Brokers and Restraint of Trade

18 February 2024 Donald Dinnie, Norton Rose Fulbright
Donald Dinnie, Norton Rose Fulbright

Donald Dinnie, Norton Rose Fulbright

TWK Agri (Pty) Ltd v Botha and Others (J125/2023) [2023] ZALCJHB 42 (7 March 2023)

Restraint of Trade Upheld.

TWK, the applicant, is a broker of non-life and life insurance, with products marketed by a network of brokers. MRA Brokers, the third respondent, is a competitor broker. Botha and Strydom, the first and second respondents, were brokers in an entity called Platorand Makelaars (Pty) Ltd. TWK purchased Platorand’s business (a non-life insurance book) and the sale was as a going concern, including goodwill. The sale agreement included confidentiality clauses. Botha was the owner and sole director of Platorand. Both and Strydom became employees of TWK, and their employment contracts included confidentiality clauses and a restraint of trade.

Botha and Strydom resigned their employment with TWK and sought to buy a portion of TWK’s insurance book – this offer was rejected. Botha and Strydom then allegedly contacted some of TWK’s clients, soliciting their business. Seventy two of TWK’s clients then cancelled their policies, and allegedly joined MRA Brokers. TWK sued Botha and Strydom for breach of contract and sought to enforce a restraint of trade.

In considering whether the information shared by Botha and Strydom was confidential and was a protectable interest, the court noted that the information clearly has economic value to TWK, confirmed by the fact that Botha and Strydom offered to buy the information from TWK. Part of the client list was originally purchased from Platorand and could not have been easily sourced from a Google search, as alleged by the Botha and Strydom. TWK’s interests were therefore worthy of protection. The court found that soliciting TWK’s clients was dishonest.

The Court found that neither Botha nor Strydom provided any reasons why enforcing the restraint of trade (which runs for 12 months) would be unreasonable. The restraint was upheld and Botha and Strydom were interdicted from directly or indirectly interdicted from soliciting TWK’s customers and clients.

First published by: Financial Institutions Legal Snapshot

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