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[2016] ZAWCHC 135
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Fridge Foods Group (Pty) Ltd v Van Kradenburg and Another (8325/2016) [2016] ZAWCHC 135 (14 October 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Reportable
CASE NO: 8325/2016
In
the matter between:
FRIDGE
FOODS GROUP (PTY) LTD
Applicant
And
GABRI VAN KRADENBURG
First
Respondent
N1 RESTAURANT SUPPLIERS MEATS
(PTY) LTD
T/A
N1 MEATS
Second
Respondent
JUDGMENT:
14 October 2016
DAVIS
J
Introduction
[1]
Applicant
seeks to enforce the provisions of a contractual restraint of trade
contained in an employment contract together with
a separate
restraint of trade agreement that first respondent concluded with
applicant, who was his erstwhile employer.
Second
respondent, which applicant alleges trades in competition with the
applicant has been joined in this application in that
it is the
current employer of first respondent. The relief sought
by applicant is in the form of a final interdict
such that until 31
March 2017 first respondent is sought to be restrained from
continuing employment with the second respondent
and further
restrained:
‘…
from
directly or indirectly carrying on or being interested in or engaged
in or being concerned with or employed by any entity in
the Western
Cape, which is in any manner involved in the distribution and/or
wholesale of foodstuffs or which competes in any manner
with the
applicant, including but not limited to the second respondent
.’
[2]
Applicant
seeks further relief in terms of the application, namely that first
respondent should be restrained from directly or indirectly
in any
capacity or in any part of the Eastern Cape or Western Cape from:
1.
soliciting
orders from customers of the applicant; or
2.
canvassing
business from customers of the applicant, or
3.
sell
or otherwise supply any services to any customer of the applicant; or
4.
render
any services to any customer of the applicant.
Factual
Matrix
[3]
Applicant
is a distributor of wholesale and other food stuffs in the food
service industry and has been in this business for more
than 40
years. I shall return to the details therefore presently.
[4]
First
respondent was employed by applicant in July 2009 as a branch manager
in Cape Town. At the time of the termination
of his
employment on 22 March 2016, following a one month resignation and
notice period, first respondent headed applicant’s
Western Cape
regional operations as its regional manager, which was its most
senior employee of in the Western Cape.
[5]
On 27
July 2009 applicant entered into a contract of employment with the
first respondent. Of relevance is clause 15 of the
contract
which reads thus:
‘
CONFIDENTIAL
AND ENTICEMENT
The
employee hereby undertakes:
15.1
that he/she shall not either during or after the termination of
his/her employment with the company,
divulge or communicate any of
its secrets or other confidential information, which he/she may
receive or obtain in relation to
the company’s affairs to any
third person.
15.2
That he/she shall not for a period of 3(three) years after
termination of his/her employment, solicit
or entice any of the
company’s employees or persuade them to leave the company’s
employ;
15.3
that he/she shall not entice or attempt to entice any of the
company’s customers for 3(three)
years after termination of
his/her employment.
15.4
that he/she may not take up employment with any company which
distributes or wholesales foodstuffs
in the provinces of the Eastern
Cape and Western Cape, for a period of 1 year after termination of
his /her employment with the
Fridge Foods Group.’
[6]
On
the same day, a further agreement regulating a restraint of trade was
entered into between the parties. The relevant
provisions
provide thus:
‘
RESTRAINT
AS TO EMPLOYMENT
Without
derogating from the obligations of the employee under the employment
agreement entered into with the company, the employee
shall not
during the course of this employment with the company or during the
period directly or indirectly carry on or be interested
in or engaged
in or be concerned with or employed by any entity in any capacity.
3.
RESTRAINT AS TO EMPLOYEES
The
employee undertakes that neither he nor any entity in which he is
directly or indirectly interested in or employed by during
the period
shall directly or indirectly:
1.
encourage
or entice or incite or persuade or induce any employee of the company
to terminate his employment with the company; or
2.
furnish
information or advice to any employee then employed by the company or
to any prospective employer of such employee or use
any other means
which are directly or indirectly designed, or in the ordinary course
of events calculated, to result in such employee
terminating his
employment with the company and/or becoming employed by or directly
or indirectly in any way interested in or associated
with any entity.
5.
RESTRAINT
AS TO CUSTOMERS
The
employee undertakes that neither he nor any entity in which he is
directly or indirectly interested or concerned or by which
he is
employed will during the period directly or indirectly in any
capacity in any part of the territory:
1.
solicit
orders from customers of the company; or
2.
canvass
business from customers of the company; or
3.
sell
or otherwise supply any services to any customer of the company; or
4.
render
any services to any customer of the company.’
In
limine
objection
[7]
First
respondent raised an objection
in
limine
to any order which the court might grant in favour of the
applicant. Mr Ferreira, on behalf of the respondents,
contended
that first respondent’s employment with the applicant
had terminated on 26 March 2016. It was only two months
later that applicant launched the present application which was
served on respondents on 17 May 2016: Mr Ferreira noted that
the applicant was aware a week before the first respondent left its
employment that he was to be employed by second respondent.
Nonetheless, it delayed the launch of the application. The
notice of motion did not contain a specific date for set down
in the
fast lane of the High Court as would have been expected in a case of
this kind. Applicant then sought a further postponement
of the
application, the first date having been agreed upon being 5 August
2016. The case was finally heard on 13 September
2016 which was
some six months after the termination of first respondent’s
employment.
[8]
Mr
Ferreira contended that, given the lapse of time to restrain
respondent, it would now amount to a pointless exercise in that
it
was inconceivable that any protectable interest of applicant would
exist or may have existed which now stood to be protected.
At
the very least, the only viable remedy at this stage would be an
action for damages which was not the basis upon which this
case was
heard before this court.
[9]
By
contrast, Mr Steenkamp, on behalf of applicant, submitted that when
the matter was postponed for hearing on the semi-urgent roll
on 03
June 2016, this was done pursuant to an order granted by Hlophe JP by
agreement between the parties. The further
postponement
on 05 August 2016 which was also granted by the learned Judge
President followed an agreement between the parties
and accordingly
the delay could hardly be placed at the door of the applicant
alone.
[10]
Mr
Steenkamp also referred to a notice delivered to respondents in terms
of Rule 35 (12) of the Uniform Rules of the High Court,
on 30 June
2016 in which applicant requested a number of documents referred to
in the answering and confirmatory affidavits.
By 12 July 2016
these documents had not yet been provided. They were only
delivered on 287 July 2016 in the form of two discovery
affidavits of
thirteen pages to which was attached approximately 421 pages of
annexures. Hence, by this time the periods
provided for
in applicant’s replying affidavits in terms of the order
granted in June 2016 had long been exceeded.
The hearing
date of 23 August 2016 was therefore not realistic. It is
for this reason that the dispute was postponed.
Mr Steenkamp
also submitted that, if the court finds that the applicant has a
protectable interest, the fact that six months remained
in terms of
the current restraint agreement was a factor which would still favour
the granting of the application.
[11]
For
this reason it is important then to examine the protectable interest
sought to form the basis of the relief of applicant as
I have
outlined it.
Protectable
interest
[12]
The
applicant alleges that it has a protectable interest for the
following reasons which are set out in the founding affidavit of
Mr
Mark Rogers, a director of applicant:
1.
The
applicant enjoys a unique relationship with its customers and
suppliers or to put it in Mr Rogers’ words “there
is a
unique relationship between the applicant’s sales and buying
personnel and management (especially senior executive positions
like
first respondent held) on the one hand and its customers and supplies
on the others.”
2.
This
unique relationship, particularly with customers, “derives from
and is also based on the particular service strategy,
pricing,
product range and negotiated trading terms with them.”
3.
Mr
Rogers continues “it is a supplier relations, pricing and trade
terms of the supplier that are of most value to the Applicant,
and
that enables it to channel products to its customers at a reasonable
and foreseeable mark-up.”
4.
Furthermore,
Mr Rogers contends that first respondent gained access to applicant’s
confidential information regarding business
methods and techniques.
[13]
Bearing
in mind that applicant seeks a final interdict, it is required to
show that it is entitled to relief sought on the facts
stated by the
respondent together with the admitted facts contained in the
applicant’s founding affidavit. See
Reddy
v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) at para 4 together with the cases cited at
footnote 2 of this judgment.
[14]
In
his answering affidavit the first respondent raised fourteen grounds
of opposition to the application. Of particular relevance
to
the present component of the dispute was the averment that second
respondent and applicant are not in direct competition due
to
material differences in their respective business operations,
business plans and the products they distribute. I
shall
return to this shortly.
[15]
The
information pertaining to applicant’s customers in the view of
first respondent, is in the public domain and generally
easily
available: “It is generally available in the industry and
easily accessible to the public especially considering the
relatively
small industry within which N1 operates within the Western Cape
Province.” Furthermore first respondent
points out that
the applicant has approximately 80 suppliers of which second
respondent only utilizes two, both of whom were suppliers
prior to
the commencement of his employment with second respondent. All
the contact details and other details and other information
pertaining to suppliers of first respondent falls within the public
domain and is easily accessible. Hence it is in his view
not
worthy of protection. The further denied that the alleged
customer relationships which is alleged to exist between applicant’s
employees and customers is unique or that the customers have
exclusively relationships with applicant’s employees.
[16]
In
amplification of these objections first respondent said the
following:
‘
FFG
purchase approximately 1500 different products in large quantities
from approximately 80 suppliers. FFG then stocks these
products
in a warehouse and thereafter sell those items to its customers at a
profit. To the contrary, N1 is primarily a
food manufacturing
and distributing business that purchases red meat an chicken from
producers and/or farmers (“Raw Products”)
and then
reproduces the raw products by cutting, trimming, vacuum sealing and
re-packing the products into N1’s branded packaging
material at
N1’s factories (“Primary Products”). N1 is in
essence a wholesale butchery which supplies its
primary products to
the Food Service Industry (“the industry”). Through
the years, N1 indeed added a limited
number of finished foods which
primarily consist of Frozen Chips and vegetables, in an attempt to
deliver a value added service
to its customers (“add-on
products”).
’
[17]
He
further stated that none of applicant’s customers exclusively
purchased all their food stuffs from applicant.
He
further says that all ‘
role-players
with the industry know exactly who all the potential consumers of
such products are and it is easily ascertainable
...’.
customers of both applicant and second respondent ‘
primarily
consist of restaurants, school, hospitals, old age homes,
universities and hostels … these are easily located and
identified as if it is common knowledge that all these business are
consumers of the products that N1 manufacture and distribute
the same
situation applies to the FFG’s customers in that they target
the same industry as N1
.’
[18]
First
respondent then referred to applicant’s reaction to the loss of
a previous employee as follows:
‘
I
find the applicant’s attempt to enforce my restraint of trade
to be peculiar considering that a previous employee of the
applicant,
Marguerite Lezar (“Lezar”) who was employed by the
applicant as a sales representative until 2012 also left
the
employment of the applicant and commenced employment with N1 during
March 2013. I was personally instructed by Rogers
to call Lezar
and remind her of the very same restraint of trade incorporated in
her contract of employment and Restrain of trade
Agreement, contained
in annexures MR 2 and MR3. Lezar at that point in time raised
the very same arguments as I have done
in this affidavit, explaining
the material differences in the business operations products marketed
of the applicant and N1.
I
accordingly reported back to Rogers subsequent to a telephone
discussion between Lezar and myself. Rogers conceded that
there
are indeed material difference in the business concepts of the
applicant and N1 and instructed me not to take any further
actions
against Lezar. I attach hereto a confirmatory affidavit of
Lezar confirming the aforegoing.
’
[19]
It is
apparent from this reproduction of evidence from the two key
affidavits that there is considerable dispute between the parties:
hence the question of the use of a lengthy replying affidavit
by applicant was hotly contested. Suffice it to say that
Mr
Steenkamp justified its length on the basis that applicant was
required to address fourteen substantive separate grounds of
opposition raised in the answering affidavit. In
particular, be a submitted that the replying affidavit showed that
the first respondent was “plainly untruthful in his
answering affidavit” by, inter alia, claiming falsely that
the
parties were not in direct competition. As shown in emails of
2013 relating to Ms Lezar, first respondent had accepted
that the
applicant and second respondent were direct competitors.
Evaluation
[20]
Much
was made by both parties of a decision of
Random
Logic (Pty) Ltd t/a Nashua Cape Town v Dempster
[2008]
ZAWCHC 74.
In that case, respondent was employed by the
appellant as a sales representative for three years until his
resignation.
In a matter of weeks thereafter, he began
working for a competitor of appellant within the designated franchise
area.
Of particular relevance to the present dispute was
the argument by respondent that appellant’s claim for trade
secrets and
confidential information could not be justified.
He further contended that, when he took up his position with the
competitor
he had undertaken contractually not to employ any of the
information to which he had access while he was employed by appellant
nor to divulge such information to his new employer.
[21]
Bozalek
J carefully considered the relevant law and concluded that, where an
enforcement of a contractual provision would be unreasonably
unfair
in the light of fundamental constitutional values of freedom and
dignity, the clause would be contrary to public policy
and could not
be enforced. (see para 19) Bozalek J concluded as
follows:
‘
Respondent
concluded the restraint agreement for no consideration as a junior
employee. When he left some three years later
to work in the
same industry, but in a different area of Cape Town, he was still a
relatively junior sales person. He
undertook not to use
his customer connections during the term of the restraint and there
was no indication that he would do so.
I have previously noted
that the reach of the restraint was wide, particularly its duration
of two years. As Wallis AJ pointed
out in
Den
Braven,
a two year term constitutes the upper – limit of such
proscriptions. The geographical reach of the restraint,
although
apparently only limited to a portion of Cape Town is, in
practice, extended by virtue of the fact that most major suppliers of
office automation equipment will in all likelihood look to do
business in central Cape Town and the southern suburbs having regard
to the amount of economic activity carried on in those areas.
A further important factor is appellant’s acceptance
that the
limit of the risk which it faced should respondent remain
unrestrained, was no more than that of his inadvertently, or
art
worst even deliberately, supplying information regarding his former
customers to fellow employees of this new employer
.’
[22]
Mr
Steenkamp contended that the same conclusion did not apply to the
present dispute. In the first place first respondent
had not
commenced employment in a junior position as branch manager in Cape
Town. He had some seven years’ experience at
a number of major
companies in relatively senior positions prior to his employment with
applicant. He had worked for a much
longer period than the
employee had done in
Random
Logic,
that is from July 2009 to March 2016. When he left the employ
of the applicant he did so in a key position; that is as the
most
senior manager in the employ of the applicant in the Western Cape in
charge of the Western Cape operations with its main focus
being on
sales and procurement. He was remunerated by way of a
substantial salary. Furthermore, there was no indication
that
first respondent, as was the case in
Random
Logic,
had undertaken not to use his customer connections during the terms
of his restraint.
[23]
Furthermore
it was contended by Mr Steenkamp that first respondent would operate
in the very industry with one of applicant’s
fiercest
competitors and would engage directly with applicant’s
customers or clients but not exactly in the same position
as he had
when employed by applicant.
[24]
The
question which requires determination in the present case should be
less concerned with the respective status of the employee
in
Random
Logic
compared to the present dispute and more with attempting to divine
the distinction between the need to protect information which
stands
to be protected as confidential on the one hand and that of
precluding a person from making use of his or her own skills
and
abilities on the other.
[25]
Kroon
J set out the position clearly in
Aranda
Textile Mills (Pty) Ltd v Hurn
[2000] 4 All SA 183
(E) at para 33 as follows:
‘
A
man’s skills and abilities are a part of himself and he cannot
ordinarily be precluded from making use of them by a contract
in
restraint of trade. An employer who has been to the trouble of
expense of training a workman in an established field of
work, and
who has thereby provided the workman with knowledge and skills in the
public domain, which the workman might not otherwise
have gained, has
an obvious interest in retaining the services of the workman.
In the eye of the law, however, such an interest
is not in the nature
of property in the hands of the employer. It affords the
employer no proprietary interest in the workman,
his know how or
skills. Such know how and skills in the public domain become
attributes of the workman himself do not belong
in any way to the
employer and the use thereof cannot be subjected to restriction by
way of a restraint of trade provision.
Such a restriction,
impinging as it would on the workman’s ability to compete
freely and fairly in the market place, is unreasonable
and contrary
to public policy
.’
[26]
Striking
this balance is vital for the determination of the reasonableness of
a restraint of trade provision. Recall the test
set out in
Basson
v Chilwan
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767 G-H, namely the necessity to engage by way
of the interrogation of the following four questions:
(a)
Is
daar ‘n belang van die een party wat na afloop van die
ooreenkoms beskerming verdien?
(b)
Word
so ‘n belang deur die ander party in gedrang gebring?
(c)
Indien
wel, weeg sodanige belang kwalitatief and kwantitatief op teen die
belang van die ander party dat hy ekonomies nie onaktief
en
onproduktief moet wees nie?
(d)
Is
daar ‘n ander faset van openbare belang wat met die verhouding
tussen die partye niks te make het nie maar wat verg dat
die
beperking gehandhaaf moet word, al dan nie?
[27]
Mr
Steenkamp sought to locate the nature of the protectable interest in
two emails generated by first respondent, and which were
sent to Mr
Rogers relating to the resignation of Ms Lezar. Mr Rogers
writes, regarding Ms Lezar; ‘
may
still be worth speaking to him before we decide a route – the
doc that she signed would be difficult to enforce but he
would not
know that.
’
First
respondent replies, ‘
ok
I will phone him just think that he will Never be adhered to –
making it almost pointless (my opinion) Competition is fierce
they will do everything in their power to take customers from us and
use in info supplied by Margie to target our customers.
’
[28]
In an
earlier email generated on the same day, 26 June 2013, first
respondent tells Mr Rogers, ‘Please note this is N1 Restaurant
supplies – not a supplier to us direct opposition you must be
thinking of N1 Meat.’ There was a further
discussion concerning the overlap between the business of applicant
and second respondent.
[29]
It
appeared to be common cause that, during the first half year of 2016,
there was an overlap in the two business, that is in the
areas in
which they competed with each other, which totalled approximately R
11 million out of second respondent’s complete
turnover of R
68 747.176; Mr Ferreira submitted that this was
effectively an overlap of 16% of second respondent’s
turnover
whereas Mr Steenkamp contended that over a year this would have
amounted to a turnover of R 22 million in competition
with applicant;
a significant similarity between the business to justify the
protection sought in the relief.
Conclusion
[30]
It is
useful to commence an evaluation of this case by examining the nature
of the two businesses respectively. In his founding
affidavit
Mr Rogers describes the business of applicant thus:
‘
The
applicant is a distributor and wholesaler of foodstuffs to food
service companies and institutions such as restaurants, contract
caterers, canteens, old-age homes, prisons, schools, hospitals,
retailers and ship chandler’s based in the Western
and Eastern
Cape. The applicant’s products range from poultry, fish,
meat, frozen vegetables (including house brands),
pies, pastries and
snacks, dairy products and ice cream, cooking oil, spices and sauces,
mayonnaise and dressings, sachets, pasta,
canned and tinned goods,
baking range, cereals and porridge, deserts and other groceries.’
[31]
By
contrast first respondent says of second respondent’s business:
‘
N1’s
core business remains fresh red meat wholesale and distribution
roughly 90% of N1’s business constitutes reproduction
and
manufacturing as opposed to FFG which merely only sells finished
products.
’
This
claim is confirmed by Mr Youlton, on behalf of second respondent, who
notes that N1 ‘
purchases
its lamb carcasses locally and from New Zealand, its beef from local
abattoirs and European abattoirs, chicken from local
producers and
South America and Europe. N1 is known for its self-manufactured
burger patties and sausages. N1 predominantly
use the chicken
that it procures from the producers to manufacture its own signature
chicken burger, sausages, mince, goulash and
strips.’
Insofar as the
other overlap, namely vegetables is concerned he says, ‘
Second
Respondent is an importer of vegetables in bulk quantities which the
second respondent then processes and repackages in its
factory.
The Applicant does not even import vegetables at all. The
Second Respondent also reprocesses the vegetable
inter alia into baby
food which is manufactured in our factory
.’
[32]
Mr
Steenkamp was constrained to accept that a party must make out its
case in the founding papers. But he urged this
court to
consider the contents of the replying affidavit which, given the
answers about the competing businesses clearly was required
to be
read into applicant’s case if the latter was to justify the
final relief which it seeks.
[33]
In
this connection Mr Steenkamp referred to
Finishing
Touch 163 v BHP Billiton Energy Coal SA
2013
(2) SA 204
(SCA) at para 26 where Mhlantla JA (as she then was) said:
‘
Counsel
for Finishing Touch urged us to reject this explanation as it had
been raised for the first time in the replying affidavit.
It is
true that the explanation was proffered by BHP in reply, but the rule
that all the necessary allegations upon which the applicant
relies
must appear in his or her founding affidavit is not an absolute one.
The court has a discretion to allow new matter
in a replying
affidavit in exceptional circumstances. A distinction
must be drawn between a case in which the new material
is first
brought to light by the applicant who knew of it at the time when his
founding affidavit was prepared, and one in which
facts alleged in
the respondent’s answering affidavit reveal the existence or
possible existence of a further ground for
the relief sought by the
applicant.
’
[34]
By
contrast, Mr Ferreira referred to the observation of Schutz J
A
in Minister of Environmental Affairs and tourism and others v
Phambili Fisheries (Pty) Ltd v Minister of Environment and Tourism
2003
(6) SA 407
(SCA) at paragraph 80:
‘
There
is one other matter that I am compelled to mention – replying
affidavits. In the great majority of cases the replying
affidavit should be by far the shortest. But in practice it is
very often by far the longest – and the most valueless.
It was so in these reviews. The respondents, who were the
applicants below, filed replying affidavits of inordinate length.
Being forced to wade through their almost endless repetition
when the pleading of the case is all but over brings about
irritation, not persuasion. It is time that the Courts declare
war on unnecessarily prolix replying affidavits and upon those
who
inflate them.’
[35]
The
legal position can be summarised thus: there is no absolute bar to a
court refusing to exercise a discretion to allow new matter
in a
replying affidavit see Erasmus Superior Courts Practice D1-66 and the
cases cited in footnote 2 thereof. But a distinction
must be
drawn between a situation which the new materials are first brought
to light by the applicant in the replying affidavit,
particularly
where the applicant knew of the material at the time when the
founding affidavit was prepared and the case in which
facts alleged
in the first respondent’s answering affidavit reveal the
existence or possible existence for a further ground
for relief
sought by the applicant.
[36]
This
question is relevant to the determination of the question of the
protectable interest. The only component of the replying
affidavit that appears to me to falls within the scope in which the
court can exercise its discretion favourably towards the applicant
is
where applicant was able show in the replying affidavit that in terms
of the 2013 emails relating to Lezar first respondent
had conceded
that the applicant and second respondent were competitors.
[37]
On
this basis the question arises as to whether the factual edifice as
set out in the founding affidavit as well as the facts admitted
by
the respondents in the answering affidavits together with the 2013
Lezar emails is sufficient to answer the question positively,
namely
that applicant has an interest which is deserving of protection and
that the interest is prejudiced by the other party of
course the two
further questions posed in Basson’s case supra must also be
answered in favour of the applicant.
[38]
A
further consideration in answering these questions is first
respondent’s description of his employment with second
respondent.
In his answering affidavit he writes:
‘
My
employment entailed the overseeing of all sales and sale
administration of N1’s Western Cape and Gauteng operations
although
I was specifically informed that my main focus would
initially be to establish and grow the new Gauteng focus area of N1’s
business. The aforesaid prioritising of the Gauteng area has
subsequently led thereto that I have spent the majority of my
time
since I commenced my employment with N1 in Gauteng and I confirm that
this will remain the position for at least the next
3 to 5 years.
I however concede that N1’s head office is situated in Montagu
Gardens, Cape Town and that I am also
responsible for sales in the
Western Cape Province.’
[39]
Finally,
consideration must be given to the nature of the content of the
restraint agreement and what Mr Ferreira described as the
extremely
loose language employed therein. As is evident from
clause 3, which is reproduced earlier in this judgment,
the
prohibition during the period of a year after the employment of first
respondent with second respondent is that he cannot ‘be
interested in or engaged in or be concerned with or employed by any
entity or in any capacity’. Entity is defined as
any
company firm or close corporation, undertaking or concern in the
territory (the Western Cape) which is in any manner involved
in the
distribution and/or wholesale of foodstuffs
or
which competes in any manner whatsoever with the company in the
territory. (my emphasis)
[40]
He is
further restrained from dealing with customers of applicant.
This is set out specifically in clause 5. There
are two
observations must be made about these clauses.. In the first
place the concept ‘entity’ is extremely
widely defined.
Foodstuffs is not defined in the agreement and, while applicant
describes its product range fairly widely,
it is not an entirely
clear definition. What is clear however is that the detailed
restraint as to customers says nothing
with regard to suppliers.
That may be an omission. It may be possible to read
clause 3 as opposed to clause 5
to include suppliers but this is
hardly clear. Furthermore, clause 3 refers to the
prohibition of being involved in
any entity “in any capacity”
and that to reveals the use of very vague and undefined language.
[41]
On
its own, the sloppy employment of words in a contract in restraint of
trade which has been signed by two parties is not fatal.
As
Nienaber
JA said in CTP Ltd v Argus Holdings Ltd
[1995] ZASCA 32
;
1995
(4) SA 774
(a) at 787 (EG):
‘
Viewed
in
vacuo
the precise line between the concepts of ‘regional’ and
‘local’ is doubles difficult to define. But
does
that make the restraint clauses void for vagueness? Three
points need to be made. One, the words in the contract
must not
be interpreted in the abstract and out of context (of
Swart
en ‘n Ander v Cape Fabris (Pty) Ltd
1979 1 SA 195
(A) at 202 C). Two, a restraint which in general
terms may be unduly wide or imprecise can be trimmed to fit the
common understanding
and perceptions of the parties in the light of
the circumstances prevailing at the time of its enforcement (cf
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 4 SA 874
(A) at 896 A-E, 898D). Three, a conclusion of
invalidity will only be reached as a last resort (cf
Haviland
Estates (Pty) Ltd and Another v McMaster
1969 2 SA 312
(A) at 337H;
Lewis
v Oneanate (Pty) Ltd and Another
[1992] ZASCA 174
;
1992 4 SA 811
(A) at 819 E-J).’
[42]
In
the final analysis it would appear to me that there is a protectable
interest, given a clear competitive intersection between
the
businesses of applicant and second respondent, at the very least to
an extent sufficient to justify the positive finding.
And, in
view thereof the second question posed in
Basson
should also be answered in favour of the applicant, subject to a
qualification. In reading the clause to render it
meaningful to the bargain struck between the parties, the omission of
suppliers is not a component that can necessarily be fixed
by way of
a court intervention. This therefore renders the factual
edifice upon which the entire case of applicant rests
somewhat less
sturdy than that which was argued for by Mr Steenkamp.
[43]
In
summary, there is a protectable interest, although it is narrowly
constrained to those areas where there is an overlap between
the
businesses as I am able to divine it from the founding, answering
affidavit supplemented by the component of the replying affidavit
which in my view is relevant. To an extent the interest
is prejudiced by first respondent who has knowledge of these
components of the business, although, again, there is considerable
difficulty in precisely ascertaining from the factual matrix
of which
I am entitled to take account as to the extent of this prejudice,
particularly because of the averments of significant
information
which respondents contend is already in the public domain and further
because much of the activity of the first
respondent in terms of his
new contract of employment with second respondent is located outside
of the territory as defined in
the restraint agreement.
[44]
There
is the further consideration that there is less than six months to
run on the restraint. For more than six months, the
first
respondent has been employed by second respondent and there is no
suggestion in the voluminous replying affidavit as to the
prejudice
which has been caused to the business of applicant during this
period. At the very least, the injury actually committed
after
seven months or which might have reasonably been apprehended as a
result of the conduct could have been made clearer in this
affidavit,
particularly in the light of the sheer detail traversed in this
affidavit.
[45]
All
of these considerations, taken together, militate against an order
which will now endure for a further short period; that is
of less
than six months. In the context of this case, a more
satisfactory remedy would probably be the institution
for a claim for
damages in the event that this could be proved.
[46]
I
have sought to determine this case in terms of precedent. That
precedent was set in the decision in
Magna
Alloys and Research (SA) Pty Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) in which contracts in restraint of trade were
held not to be contrary to public policy. Accordingly a
restraint of trade
such as any other contractually term should, in
principle, be regarded as enforceable and not to be contrary to the
public interest.
It is clear from a reading of the judgment of
Rabie CJ that a major concern of the court in
Magna
Alloys, supra
was to purge this area of law of English influence. After an
exhaustive investigation of existing law as well as the English
law
and references to Roman-Dutch authorities Rabie CJ concluded:
‘’
n
Mens kan dus met veiligheid aanvaar dat daar in ons gemene reg niks
is wat verklaar dat ‘n bepaling in ‘n ooreenkoms
wat die
handels vryhied van ‘n party inkort bloot om daardie rede
ongeldig of onafdwingbaar is nie. Dit volg
dus dat daar
in ons gemene reg nie gesag te vind is vir die benadering wat al so
lank deur ons Howe gevolg word nie, naamlik dat
‘n bepaling in
‘n ooreenkoms wat ‘n beperking op die handelsvryheid van
‘n party plaas, prima facie ongeldig
of onafdwingbaar is.
Dit is ‘n benadering wat in navolging van die Engelse reg
gevolg word.’
(at
891 B-C)
[47]
One
searches in vain in this judgment for any discussion of whether the
English approach in which the employer was required to establish
that
the restraint was fair and reasonable is appropriate in a modern
economy. Nonetheless,
Magna
Alloys
has survived into our constitutional era. The consequence that
a standard form restraint clause now applies in many employment
contracts, drafted as in this case, in somewhat vague language, and,
in many cases, in an obscure and impenetrable language in
which it is
hardly possible for a lay person to understand the contents
perfectly, remain to be proved to be unenforceable by the
employee.
It is regrettable that this area of law has remained in stasis,
notwithstanding the occasional vigorous nod in
the direction of
constitutional values, which sadly then receives very little focussed
engagement.
[48]
That
having been said, in this case, on the standard approach adopted to
restraint clauses as posed in the questions which this
court is
obliged to follow in terms of
Basson
,
I do not consider that the case made out in the founding papers,
together with the facts to which I am entitled to take account
in the
answering and replying papers, has justified the relief which
applicant has sought.
[49]
For
these reasons, the application is dismissed with costs.
______________
DAVIS
J