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[2016] ZAWCHC 28
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Credit Matters CC v Debt Experts and Others (14772/2015) [2016] ZAWCHC 28 (22 March 2016)
SAFLII
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Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
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THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 14772/2015
DATE:
22 MARCH 2016
In
the matter between:
CREDIT
MATTERS
CC
..........................................................................................................
Applicant
And
THE
DEBT
EXPERTS
.....................................................................................................
1
st
Respondent
GREZELLE
JANSEN
....................................................................................................
2
nd
Respondent
ID
No: [8…………….]
SHANAAZ
ABRAHAMS
................................................................................................
3
rd
Respondent
ID
No: [7…………….]
NAWAAL
HENDRICKS
.................................................................................................
4
th
Respondent
ID
No: [8…………….]
RUSHAAN
ABRAHAMS
................................................................................................
5
th
Respondent
ID
No: [9…………….]
NASIPI
SAM
....................................................................................................................
6
th
Respondent
ID
No: [9…………..]
SADIQUA
SOLOMONS
.................................................................................................
7
th
Respondent
ID
No: [7…………..]
ILHAAM
WILLIAMS
....................................................................................................
8
th
Respondent
ID
No: [9………….]
ELISDA
MOTOUN
..........................................................................................................
9
th
Respondent
ID
No: [8………….]
NOMBULELO
SAM
.....................................................................................................
10
th
Respondent
ID
No: [8………….]
KHUMBULA
SYLVIA
MALGAS
................................................................................
11
th
Respondent
ID
No: [6…………]
Coram
:
KOEN AJ
Heard:
17 March 2016
Delivered:
22 March 2016
JUDGMENT
KOEN
AJ
[1]
The applicant in this matter seeks to
enforce restraint of trade agreements it has concluded with certain
former employees. It cited
The Debt Experts CC, the present employer
of those employees, as the first respondent but seeks no relief
against it. Initially,
ten former employees were cited as respondents
but by the time the matter came to be heard the applicant sought
relief only against
four of them. These are the third, fourth, fifth
and ninth respondents.
[2]
The restraint of trade clause in each of
the relevant employment agreements reads as follows: “
You
hereby undertake that, for a period of two (2) years after you leave
the employer
(sic)
of
the Company, and anywhere in the region of South Africa, you will not
engage, directly or indirectly, in any activity or obtain
employment
with any firm that competes in any way with the activities pursued by
the Company.”
Although the
agreement refers to the applicant as a company it was accepted by all
parties that what was intended was a reference
to a close
corporation.
[3]
In the founding affidavit deposed to on
behalf of the applicant by one of its members the activities it
pursued were described as
the provision of debt counselling services
in terms of the National Credit Act 34 of 2005 (“the NCA”).
Its services,
so the founding affidavit went on to allege, were
marketed through a team of sales staff who actively contact and
follow-up potential
clients. Its employees received trading and
guidance in the sale of the debt counselling service it offered and
its sales staff
were paid a basic salary and received a commission
for sales concluded.
[4]
In the founding affidavit the applicant
alleges that the first respondent, too, engages in debt counselling
services in terms of
the NCA and also charges debt counselling fees.
Moreover, the founding affidavit describes the first respondent as “
a
direct competitor of the Applicant in that it provides debt
counselling services in terms of the
National Credit Act 34 of 2005
.”
[5]
The first point taken by the respondents
was that it was not lawful for the applicant to conduct business as a
debt counsellor.
The argument was based upon the provisions of
section 44
of the NCA which provides that only natural persons may
apply to be registered as a debt counsellor, and that “
a
person must not offer or engage in the services of a debt counsellor
in terms of this Act, or hold themselves out to the public
as being
authorised to offer any such service, unless that person is
registered as such…”
.
Moreover, in terms of section 47 of the NCA, juristic persons may not
be registered as debt counsellors. It was not in dispute
that the
provisions of sections 44 and 47 of the NCA prohibited the applicant
from carrying on business as a debt counsellor.
[6]
In a marked change of stance, the applicant
adopted a different approach in the replying affidavit filed on its
behalf. It stated
that the debt counselling services it provided are
not the same services as those rendered by a debt counsellor. The
replying affidavit
went on to say that the applicant is engaged
through its sales staff in the selling of the product of debt
counselling as well
as rendering all the services and assistance
which goes with it. Later in the replying affidavit, and more
coherently, the applicant
explains that its function was to provide
debt counsellors with administrative assistance in order successfully
to place debtors
under debt review and monitor payments received from
those debtors.
[7]
The two different descriptions of the
business the applicant conducts are impossible to reconcile. There is
no question, in my view,
that in its founding affidavit the applicant
contended that it was in the business of rendering debt counselling
services. Its
attempts, in the replying affidavit, to evade the
inescapable conclusion that it is unlawful for it to conduct such
business are
unconvincing. Its own documentation, put up in reply,
reinforces the conclusion that it is in the business of debt
counselling.
Thus, in a form it requires consumers to complete for
debt review, under the heading “Debt Counselling Fee Structure”
it states that it subscribes to the fee guidelines prescribed by the
National Credit Regulator, and explains that it debits to
consumers
who make application through it an application fee of R50, a
restructuring fee of an amount equivalent to the first instalment
of
a debt rearrangement plan to a maximum amount of R6000, and the
monthly so-called “after care” fee. All of the fees
exclude Value Added Tax. These are plainly not fees for the “sale”
of debt counselling services.
[8]
I should add that if I am wrong on this
conclusion it helps the applicant not. If its business is not the
provision of debt counselling
services then the respondents, and
their new employer, who do provide debt counselling services, do not
compete with it. If this
is the case the provisions of the restraint
of trade clause do not come into play.
[9]
In
Reddy v
Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) it was held that the evaluation of the
reasonableness of a restraint of trade agreement entails a value
judgment. In making
this value judgment
Reddy
requires that a Court weigh two contrasting considerations of public
policy. These are, firstly, the public interest in holding
persons to
contracts they have solemnly concluded, and secondly, the public
interest which is served by allowing persons to engage
freely in
competitive economic activity.
[10]
Reddy
explains
that “
In applying these two
principal considerations, the particular interests must be examined.
A restraint would be unenforceable if
it prevents a party after
termination of his or her employment from partaking in trade or
commerce without a corresponding interest
of the other party
deserving of protection. Such a restraint is not in the public
interest.”
[11]
Can it be said that the applicant’s
interest in a business it conducts unlawfully is deserving of the
protection of a restraint
of trade agreement? The answer, in my view,
is self-evident. The public interest is not served by the protection
of unlawful business
activity through the mechanism of restraint of
trade agreements. The enforcement of a restraint of trade agreement
with this as
its object cannot be said to be reasonable. Indeed, the
public interest would require that restraint of trade agreements
which
are intended to protect unlawful business activity should not
be enforced. I would regard that proposition to be axiomatic.
[12]
It follows, therefore, that on this ground
alone the application cannot succeed. However, I propose for the sake
of completeness,
to deal very briefly with a number of other grounds
which militate against granting the application.
[13]
The applicant alleges that the respondents
have breached the confidentiality clauses contained in their
employment agreements and
that they have sought to acquire
confidential information from current staff members. There is nothing
in the papers, which provides
a factual basis for this allegation.
The confidential information allegedly in issue is not described with
any precision by the
applicant. There are no affidavits from any
staff member to corroborate the allegation that they have been
approached by any of
the respondents who have sought to acquire
information which might be confidential. In
Hirt
and Carter (Pty) Ltd v Mansfield and Another
2008 (3) SA 512
(D) the point was made that information falling into
this category should be “
something
which is unique and peculiar to the employer and which is not public
property or public knowledge, and is more than just
trivial”
(at para [57]). The only information which might be considered to be
confidential is the list of the applicants existing clients.
This
information is stored electronically on the applicant’s
computers to which none of the respondents have access. If the
respondents cannot access the lists they can do no harm. I did not
understand this to be the subject of any serious dispute.
[14]
An analysis of the positions occupied by
the respondents during their employment by the applicant is also
instructive. None of them
held positions of seniority. The third,
fourth, and ninth respondents were appointed as “debt
counselling sales consultants”.
They earned a basic salary of R
2500 per month plus a small commission for every client they
garnered. The papers do not indicate
them to have any form of close
attachment or personal relationship with the financially distressed
consumers who approached the
applicant for assistance. In fact the
papers indicate that any contact between the applicant and a
financially embattled consumer
was often initiated by way of “cold
calling”. In my view it cannot be said that the relationships
between clients and
these respondents were personal to a degree which
might militate in favour of the enforcement of a restraint agreement,
as adverted
to in
Hirt and Ca
rter.
Nor is there any indication of “
customer
contact”
of the personal kind
referred to in
Rawlins and Another v
Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541D being present.
[15]
The fifth respondent was employed by the
applicant as a temporary data capturer earning R4000 per month. She
had no special skills
which were imparted to her by the applicant.
She states affidavit that she did not build up her own client base
within the applicant
and that she was given no training by it to be a
data capturer. She had acquired these skills herself, through her own
labours.
[16]
I cannot see that it is reasonable to
enforce a restraint of trade agreement against former employees who
performed relatively unsophisticated
work requiring no special
skills, who acquire through their employment no knowledge of the
industry in which they are engaged which
is not in the public domain,
and who are not in a position to occasion any material degree of harm
to the applicant. The enforcement
of a restraint of trade in these
circumstances is nothing other than a purely anti-competitive device
of the kind frowned upon
by our law.
[17]
To turn, finally, to the question of costs.
Counsel for the respondents sought to persuade me that an order for
costs on the attorney
and client scale should be made on account of
the applicant’s obdurate persistence in this matter, even after
the answering
papers had been filed. I am not inclined to accede to
this request. I am not able to say from the papers why the applicant
persisted
in the matter, and I would regard it in any event to be
unfair to expect of the applicant or its legal representatives to set
themselves
up as the judge of their own case. The applicant was
entitled to make its case and the fact that I have found against it
is not
in itself a good reason for the award of costs on a punitive
scale.
[18]
One last matter requires attention. The
matter was enrolled for hearing on 16 November 2015 when it was
postponed. On that day an
order was made that the costs of the
postponement stand over for determination at the hearing. The matter
did not proceed on that
date because the applicant had not complied
with the practice directions relating to an early allocation of the
matter on account
of the volume of the record. There is no reason
that whatever costs were wasted on that occasion should not be borne
by the applicant.
[19]
In the circumstances I make the following
order:
The
application is dismissed with costs including the wasted costs
occasioned in connection with the aborted hearing on 16 November
2015.
KOEN
AJ
APPEARANCES
For
the Applicant : Mr K Munro
As
Instructed by : R M Brown Attorneys
For
the 3rd, 4th, 5th, 7th & 9th Respondents : Mr W Vos
As
Instructed by : Brits Dreyer Inc