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[2017] ZAWCHC 91
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Bidfood (Pty) Ltd t/a Bidfood Western Cape v Govender and Others (2264/2017) [2017] ZAWCHC 91 (28 March 2017)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
[WESTERN
CAPE DIVISION, CAPE TOWN]
Case
No: 2264/2017
In
the matter between:
BIDFOOD (PTY) LTD
t/a
BIDFOOD WESTERN
CAPE
Applicant
and
THAVAKUMARI
GOVENDER
First
Respondent
CHAPMANS SEAFOOD COMPANY (PTY)
LTD
Second
Respondent
JUDGMENT DELIVERED: 28 MARCH 2017
LE
GRANGE, J
:
[1]
In this matter the Applicant, Bidfood Western Cape, seeks to enforce
by means of an interdict, a restraint of trade agreement
against the
First Respondent, one of its erstwhile employees.
[2]
The Applicant is a branch division of Bidfood (Pty) Ltd (“the
Company”) whose principal place of business is in
Sandton,
Gauteng Province. The Company operates a number of regionally based
businesses that covers the whole of the Republic of
South Africa,
Botswana and
Namibia
.
In this instance the regional sales manager, James Edward Smith
(“Smith”), filed the founding affidavit on behalf
of the
Applicant.
[3]
The Company, including the Applicant sells dry groceries, catering
equipment, liquor as well as a range of frozen and chilled
products
to various clients. The Applicant supplies customers in the Western
and Northern Cape.
[4]
The First Respondent was employed as a Sales Representative and had
commenced her employment with the Applicant in January 2016.
She
worked for different branches of the Company in Gauteng and Kwa-Zulu
Natal during the period 2011- 2015 before relocating to
the Western
Cape. The restraint agreement was signed in December 2015. The
restraint agreement is operative until 27 November 2017.
[5]
The relevant paragraphs of the restraint read as follows:
“
[3] I
shall not for a period of twelve (12) months after the termination of
my employment with the company for whatever reason,
including summary
dismissal, be directly or indirectly engaged or employed in, or
associated in any way with business similar to
any of the various
businesses of the company in which I was engaged either at the date
of termination of my employment or at any
such time during the twelve
(12) months period preceding termination.
[4] The area to
which the restraint referred to in paragraph 3 hereof is applicable
to is Republic of South Africa including Province
of KwaZulu Natal,
Northern Cape, Free State, Northern Province, North West, Eastern
Cape, Mpumalanga, Gauteng, Western Cape, Namibia
and Botswana.
[5] The restraint imposed on me in
paragraph 3 hereof shall:-
5.1 in respect of each part thereof
be entirely separate, severable and separately enforceable in the
widest sense from the other
parts;
5.2 be enforceable at the instance
of the company in respect of each of the magisterial districts in the
area mentioned in paragraph
3 and the fact that such restraint is not
enforceable or enforced in any of the said areas of any of the said
activities shall
not affect its enforceability or validity in respect
of the other areas or activities;
5.3 be and are
for the benefit of the company and shall also be deemed to be a
stipulation alteri for the benefit of each of the
company’s
subsidiary companies, any one or more of which shall be entitle to
enforce such restraint.”
[6]
The Applicant is seeking to enforce the restraint only in the Western
Cape region. To this end, the Applicant in its replying
affidavit
conceded that to enforce the restraint outside of the Western Cape it
would probably be a risk as it may be regarded
as unreasonable.
[7]
The Second Respondent, an importer, exporter and wholesaler in the
seafood industry had initially opposed the Application. It
subsequently filed a Notice of Withdrawal and is abiding the decision
of this court. The Second Respondent did however file an
affidavit to
clarify some aspects of its core business functions and related
issues raised in this matter.
[8]
The First Respondent in opposing the relief sought, raised a number
of defences
inter alia
,
that the Application was not urgent; the Applicant which is a Branch
division lacks
locus standi
as it is not an independent legal entity with juristic personality of
its own, separate and distinct from the Company; the First
Respondent
did not breach the terms of the restraint of trade agreement in that
the Second Respondent is not a business similar
to the Western Cape
branch of the Company; the restraint of trade agreement is invalid
and unenforceable as the restraint was too
wide and therefore
unenforceable; the severability provisions contained in the agreement
is unable to save it from invalidity;
the rights and interests sought
to be protected by the Applicant are not worthy of protection by way
of a restraint and no risk
exists of disclosure of information and or
trade secrets to the Second Respondent; and that the Applicant was
relying on new and
inadmissible evidence in its replying affidavit.
[9]
As a result of the view taken in this matter, I deem it unnecessary
to deal with all of the defences raised by the First Respondent.
[10]
The opposition to the enforcement of the restraint by the First
Respondent, on the grounds that the restraint agreement viewed
as a
whole is so far-reaching and extensive in the constraints it imposes
upon her, that its enforcement in any respect would be
unreasonable
and contrary to public policy, and that the rights and interests
sought to be protected by the Applicant are not worthy
of protection
by way of a restraint as no risk exists of disclosure of information
or trade secrets to the Second Respondent exists,
requires closer
scrutiny.
[11]
It is now well accepted in our law that the reasonableness or
otherwise of a restraint of trade agreement is a matter for the
Court
to determine. The fact that parties may accept and choose to describe
it as reasonable is no longer the decisive factor.
In this regard see
Advtech Resourcing t/a Communicate
Personnel Group v Kuhn
2008 (2) SA 375
(CPD) at 382 G and the cases cited therein.
[12]
In considering the reasonableness of a restraint the following four
questions are ordinarily asked, namely: (a) Does the one
party have
an interest that deserves protection after termination of the
agreement? (b) If, so, is that interest threatened by
the other
party? (c) In that case, does such interest weigh qualitatively and
quantitatively against the interest of the other
party not to be
economically inactive and unproductive? (d) Is there an aspect of
public policy having nothing to do with the relationship
between the
parties that requires that the restraint be maintained or rejected?
Where the interest of the party sought to restraint
weighs more than
the interest to be protected, the restraint is unreasonable and
consequently unenforceable. It follows that the
enquiry a Court needs
to undertake at the time of the enforcement covers a wide field and
includes the nature, extent and duration
of the restraint and the
factors peculiar to the parties and their respective bargaining
powers and interests. In this regard see
Reddy
v Siemens Telecommunications
(Pty) Ltd
2007 (2) SA 488
SCA, at para [16] and the cases referred to therein.
[13]
The reasonableness of a restraint also entails a value judgment. This
is factually driven and premised upon the facts of each
case. In
Reddy
supra,
the following was held at para [15]-[16]:
“
A court
must make a value judgment with two principal policy considerations
in mind in determining the reasonableness of a restraint.
The first
is that the public interest requires that parties should comply with
their contractual obligations, a notion expressed
by the maxim pacta
servanda sunt. The second is that all persons should in the interests
of society be productive and be permitted
to engage in trade and
commerce or the professions. Both considerations reflect not only
common law but also constitutional values.
Contractual autonomy is
part of freedom informing the constitutional value of dignity, and it
is by entering into contracts that
an individual takes part in
economic life. In this sense, freedom of contract is an integral part
of the fundamental right referred
to in s 22 …. In applying
these two principal considerations, the particular interest 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. Moreover,
a restraint which is reasonable as between
parties may for some other reason be contrary to the public
interest.”
[14]
Returning to the facts: The Applicant avers that one of its sales
managers, by the name of Angelika De Bruyn, (“De Bruyn”)
was advised that the First Respondent had attended to some of its
customers in the Western Cape to solicit business.
[15]
According to the Applicant, sales representatives are the backbone of
its business and the First Respondent had apparently
little or no
knowledge of or experience in the business in which the Applicant is
involved insofar as being a sales representative
goes and had to be
trained. To this end the Applicant took the First Respondent to
customers and showed her how to deal with them.
The First Respondent
was also trained how to upsell an advance product sales. In doing
this, the Applicant avers it was investing
and parting with its
intellectual property to the First Respondent when she joined it.
[16]
According to the Applicant, it and its predecessors have devised and
developed a unique sales strategy over the past 50 years
in the
hospitality industry. Potential clients are divided into various
groups each with its own needs for example restaurants,
hospitals,
schools, coffee shops, clubs and hotels. Some standard items which
can be acquired at a number of places are sold to
customers. Their
value is known to customers and these commodities are known as known
value items (KVI).
[17]
According to the Applicant, its predecessors and it would have
contracts with individual customers by using statistics that
are
specifically obtained and kept by the Applicant for this purpose. The
cost price of these items are apparently revised and
kept up-to-date
on a daily basis.
[18]
The Applicant further states that there is huge competition in the
hospitality industry insofar as these KVI’s are concerned
and
in order to survive and to be successful, it is important for any
seller of the goods to sell these KVI’s for competitive
and
market related prices. According to the Applicant, customers would
specifically compare the prices of the KVI’s to select
a
supplier.
[19]
The Applicant claims it had spent a substantial amount of time and
effort to establish what the KVI are and their market related
prices.
According to the Applicant, the identity of these KVI’s and the
market related prices are extremely confidential
and of great value
to competitors. Moreover, the profit margin on the KVI is fairly
small and the Applicant relies more on volume.
The Applicant now
alleged that the data documents and methodology of conducting
business is highly confidential and that this information
is made
available to the sales consultants including the First Respondent in
order for them to perform their functions. It was
further alleged
that it would be very easy for the First Respondent to exploit the
information pertaining to the data relating
to cost and price
structures of the applicant which could diminish the applicants
business and erode its goodwill.
[20]
The Applicant further avers that the First Respondent is gifted at
obtaining business and with its training and support, became
a force
to be reckoned with in the sales market area of the Applicant’s
business. The First Respondent came to know the Applicant’s
customer base, the customers’ requirements, products that they
are interested in, the duration of the contracts and the different
pricing structures for the different customers.
[21]
The First Respondent took issue with the Applicant’s contention
that the Second Respondent is a direct competitor of
the Applicant.
According to the First Respondent, the Applicant is in the retail
business and sells approximately 5000 different
products ranging from
dry groceries, catering equipment, liquor, confectionary, cleaning
products, meat, poultry, frozen seafood,
savouries and various other
chilled food. Moreover, according to the First Respondent, the Second
Respondent is a wholesaler; it
has an operating fishing vessel, makes
use of a fishing processing plant and sells frozen as well as fresh
seafood products in
bulk quantities to its customers. The Applicant
in contrast sells frozen seafood and other products to any purchaser
irrespective
of the quantity of the order. In reply, the Applicant
expressed a view that the Second Respondent’s goods are also
available
to the ordinary public and not only to wholesalers.
[22]
The First Respondent also took issue with the Applicant’s
apparent lack of candidacy to state in its founding affidavit
that it
is a customer of the Second Respondent. To this end the Applicant
denied in its replying affidavit it has a customer relationship
with
the Second Respondent but admitted it occasionally purchased products
from the Second Respondent when it was unable to access
its normal
line of supply.
[23]
According to the First Respondent, during her tenure at the
Applicant, she was part of a sales-team that serviced a specific
geographical area in the Central Business District of Cape Town,
which comprised of businesses within the Buitengracht Street,
Kloofnek Street to Lower Long Street in the CBD to certain parts of
Victoria Street in Woodstock in Cape Town. Her area of marketing
excluded the V&A Waterfront, Sea Point, Green Point, Camps Bay
the areas further north of Hout Bay, including the Atlantic
seaboard.
According to the First Respondent, she was given a list with
names and a mandate to approach them for business
and to find new
customers.
[24]
The First Respondent further recorded that the Applicant’s
business practise was that all customers details, whether
active,
inactive or potential were retained and stored on a database. As a
sales representative she was required to visit all these
customers
periodically to solicit business on behalf of the Applicant.
According to the First Respondent, the Applicant did not
hold
exclusive rights of supply in relation to any particular customer on
her list except for two major clients, being Parliament
and the
International Convention Centre in Cape Town. The majority of
customers retained the right to purchase goods from other
food
service providers of their choice. The First Respondent also denied
that she was privy to the Applicant’s financial
information
relating to costs price of goods generally and seafood in particular.
The First Respondent recorded that the Applicant
failed to
demonstrate in its founding affidavit that she sold frozen seafood
during her period of employment and that she acquired
knowledge of
its pricing structure for frozen seafood.
[25]
The Second Respondent in its affidavit clarified certain aspects of
its business. It further recorded that the Applicant is
one of its
big corporate clients and it will be commercial suicide to compete
with it.
[26]
According to the Second Respondent, a sales representative in its
business requires specialised, in-depth knowledge of a wide
range of
seafood products as it only specializes in the selling of frozen and
fresh seafood products. According to the Second Respondent,
the First
Respondent at the commencement of her employment lacked this
knowledge and had to undergo training, which included amongst
others,
the nature and types of seafood products, evaluating and advising
clients on the storage requirements for bulk seafood
products,
transportation process and procedures, the expiry date of different
seafood, and other requirements of a specialised
seafood sales
representative.
[27]
At the heart of the Applicant’s case is that it and the Second
Respondent are ‘direct competitors’. This
averment was
based exclusively on the allegations in its founding affidavit that
‘
Second Respondent focuses
primarily on wholesale frozen seafood products to restaurants and
other recipients in the food and beverage
industry in the Western
Cape.’
This allegation was
placed in dispute by the First and Second Respondent. In the
replying affidavit the Applicant indeed
attempted to amplify its case
by advancing substantial new information and evidence to support its
contention that the Second Respondent
is in competition with it.
[28]
It is now well established in our law that an Applicant must make out
its case in the founding papers with regards to the essential
material required to sustain the relief sought. In this regard see
Bapedi Marota Mamone v Commission of
Traditional Leadership Disputes and Claims and Others
[2014] 3 All SA 1
(SCA) at para [16].
[29]
As the Applicant seeks a final order, such order can only be granted
in motion proceedings if the facts stated by the Respondent
together
with the facts admitted in the Applicant’s affidavits justify
the order. This applies irrespective where the onus
lies. See
Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
634H-635B; Reddy supra at para [4]. The contention by the First
Respondent that the Applicant and the Second Respondent
are not in
direct competition with each other cannot be rejected as far fetched
or implausible.
[30]
On a conspectus of all the evidence it appears that the only
commodity the Applicant and the Second Respondent have in common
is
the sale of frozen seafood. The Applicant on its own version sells in
excess of 5000 other products to a variety of customers.
The Second
Respondent specialises only in frozen and fresh seafood products. On
the objective evidence, it is difficult to envisage
or define the
Second Respondent as a ‘direct competitor’ of the
Applicant in the true sense of the word, if they have
only one
product of sale in common with a potential overlap of the same
customer base. Moreover, the fact that the Second
Respondent on
a number of occasions supplied the Applicant with certain frozen
seafood products detracts from the notion that the
parties are in
direct competition with each other. In fact, it rather gives credence
to the First Respondent’s view that
the Applicant and the
Second Respondent has a customer’s – client relationship.
[31]
However, even if it is accepted that the Second Respondent is in
direct competition with the Applicant in the frozen seafood
market,
the claim by the First Respondent that the restraint is remarkably
wide and unreasonable is not without merit. I
am aware that in
cases of this nature Courts must avoid the temptation to think that a
former employee ‘is just a salesperson
and to treat the attempt
to enforce the restraint as a case of the employer taking a
sledgehammer to crack a nut’. Public
policy indeed requires
that lawful contracts be enforced where its terms are reasonable and
not offensive to the Constitution.
This will be consistent with our
constitutional values of dignity and autonomy. In this regard see
Den
Braven SA (Pty) Ltd v Pillay and Another
2008 (6) SA 229
D&CLD para [11].
[32]
In the present instance, the First Respondent’s marketing area
whilst in the employ of the Applicant was limited to a
particular
portion of the CBD in Cape Town. The list of customers was therefore
limited to that specific area. The infraction complaint
about in the
founding affidavit was that the First Respondent visited some of the
Applicant’s customers and left her business
card with them. It
needs to be mentioned that some of the alleged customers visited by
the First Respondent fell outside the geographical
area in which she
operated as a salesperson for the Applicant. Moreover, on the
evidence in the founding affidavit, there is no
suggestion that the
First Respondent was selling frozen seafood and that she acquired
confidential knowledge of the pricing structure
for frozen seafood
during her period of employment. The Applicant’s complaint
about its pricing structure and general sales
operation was
essentially generic in nature.
[33]
The Applicant seeks to enforce the constraint in a narrower
geographical area, being the Western Cape, than that provided for
in
the restraint agreement. In terms of clause 4 of the agreement, the
restraint is applicable to all the provinces in South Africa,
including Namibia and Botswana. In terms of the agreement, the
restraint is not only for the benefit of the Company but all also
for
all its subsidiary companies and any one or more is obliged to
enforce the restraint. Clause 5.1 stipulates that each part
of the
restraint imposed in paragraph 3 shall be separately enforceable in
the widest sense. Clause 5.2 stipulates that the restraint
is
enforceable in respect of each magisterial district in the area
covered by clauses 3 and 4 and even if
such
restraint is not enforceable or enforced in any of the said areas of
any of the said activities shall not affect its enforceability
or
validity in respect of the other areas or activities.
[34]
The question now is whether the relevant clauses read as a whole is
reasonable and whether in the present instance it would
be proper to
enforce the restraint partially despite its wide scope of operation.
[35] The general approach to
severability was set out in the matter of
Sasfin (Pty) Ltd v
Beukes
1989 (1) SA 1
(A) at 16H-17A, where the following was
held:
“
In any
event, it is in my view not open to parties to a contract to say to a
court ’take our agreement, such as it is, excise
from it all
that is bad, and retain what is good, and provide us with a contract
which is legal and enforceable, even though it
may not be what we
originally had in mind.”
[36]
The restraints in this instance, viewed as a whole are extensive and
covers a multitude of forms of conduct the Applicant was
trying to
prevent. On the face of it, and having regard to the particular area
of the CBD, the First Respondent operated in as
a salesperson, the
terms of the restraint does appear to be unduly oppressive towards
her. On a conspectus of all the relevant
evidence, this matter is not
merely whether a geographical area could be refined. In my view, if
the relief sought in terms of
the notice of motion is granted, it
will indeed constitute a radical departure from the terms of the
restraint.
[37]
In Sasfin supra, the Court confirmed that a party should not be
entitled to draft such an all–encompassing contract which
on
its own wording is plainly unenforceable for being over-broad, too
wide in scope and then seek under the guise of a severability
clause,
as in this instance, that the court to develop what is in effect, an
entirely different contract.
[38] In my view the remarks in Advetch
supra at para [45]-[46] is apposite in this instance:
“
[45]..On
what conceivable basis can it be concluded that an employee should be
compelled to sign an agreement so wide, so vast in
scope and
application, and be compelled to be restrained from working on so a
vague a basis, namely that a court will take care
of the width of the
agreement and read it down so as to render it reasonable? That is
surely incongruent with the principles of
transparency and fairness
which are inherent in our constitutional framework and part of the
test of proportionality.”
[46]
Given the nature of the restraint clause and the needs for courts to
balance the contractual provisions against the right to
be a
productive worker, a restraint clause should be drafted to reflect
this balance.”
[39]
With regard to the question of confidential information, the First
Respondent denied that she was in possession of any confidential
information. According to the First Respondent, the information she
received was of a generic nature. Moreover, the customer was
not
regular clients of the Applicant. Some were active, others not and
some were only potential clients.
[40]
In determining the weight to be attached to confidential information
the Court in
Meter Systems Holdings Ltd
v Venter and Another
1993 (1) SA 409
(W) at 428 D-F, held the following:
”
Customer
lists drawn up by a trade and kept confidential for the purposes of
his own business contain confidential information,
the property of
the trader … The legal protection afforded to this type of
confidential information is limited by the fact
that the law, whilst
prohibiting an employee from taking its employer’s customer
lists, or deliberately committing its contents
to memory,
nevertheless recognises that, on termination of the employee’s
employment, some knowledge of his former employer’s
customers
will inevitably remain in the employee’s memory; and it leaves
the employee free to use and disclose such recollected
knowledge in
his own interests, or in the interests of anyone else, including a
new employer who competes with the old one”
[41]
On the evidence in this matter there is nothing to gainsay that the
clients which the First Respondent visited never came from
her memory
and as a result utilized it to the benefit of the Second Respondent.
[42]
For these stated reasons, the Applicant failed to prove the
requirements for the relief sought.
[43]
It follows that the Applicant cannot succeed.
[44]
In the Result the following order is made:
The Application is dismissed with
costs.
________________
LE
GRANGE, J
For
the Applicant :
Adv G Quixley
For
the Respondents :
Dr F Moosa (Attorney)
Date
(s) of Hearing :
28 February 2017
Judgment
delivered on :
28 March 2017