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[2018] ZAWCHC 157
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Pepkor Speciality (Proprietary) Limited and Another v Van Huyssteen and Others (16806/2018) [2018] ZAWCHC 157 (7 November 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
Number:16806/2018
In
the matter between:
Pepkor
Speciality (Proprietary) Limited
Pepkor
Holdings Limited
First
Applicant
Second
Applicant
And
Abraham
Johannes Van Huyssteen
First
Respondent
Bernard
Eugene Mostert
Second
Respondent
Michael
Brown
Third
Respondent
Gert
Christoffel Claassens
Fourth
Respondent
David
Van Niekerk
Fifth
Respondent
AJVN
Holdings (Pty) Limited
Sixth
Respondent
JUDGMENT DELIVERED ON
7 NOVEMBER 2018
BAARTMAN,
J
[1]
The applicants seek to enforce a modified version of the terms of
restraint of trade agreements they allege the respondents
are in
breach of pending the final determination of the dispute at trial.
The applicants seek the following relief:
‘
1. The
non-compliance by Applicants with the Rules relating to form and
service is condoned, and this application is heard as one
of urgency
in terms of Uniform Rule 6(12).
2. The trial of the
action to be instituted shall be heard as an expedient trial on dates
to be agreed between the parties in consultation
with the Judge
President.
3. Until the conclusion
of the trial, or until any further Order by the trial Court, the
First to Fifth Respondents, and each of
them, are interdicted and
restrained from being interested in, or concerned with, any business
which, anywhere within South Africa
or Namibia, stocks, or offers for
sale, the footwear listed on annexure “A” hereto.
4. The parties are
directed to keep annexure “A” confidential as between
them.
5. Costs, including the
costs of two counsel.’
[2]
At the hearing, the applicants committed to issue summons by Monday,
5 November 2018. They have done so. Below, reference to
the
respondents excludes the sixth respondent as no relief is claimed
against it.
Urgency
[3]
The application was brought on an urgent basis. The respondents
contend that the matter was not urgent. The application was
postponed
and the parties filed further affidavits. I am persuaded that the
application was sufficiently urgent.
Background
[4]
It was common cause that Mr Van Huyssteen (
the first respondent
)
was the founder member of Tekkie Town (Proprietary) Limited (
Tekkie
Town
). At times relevant to this judgment, Tekkie Town was,
and still is, a successful ‘branded footwear’ retailer
with 380 stores in South Africa, Namibia and Lesotho. On 29 August
2016, the respondents were the senior executive and managers
of
Tekkie Town. On that date, Tekkie Town’s shareholders, not the
respondents, exchanged (sold) their shares and claims (
the
exchange agreement
) in Tekkie Town for shares in Steinhoff
International NV (
Steinhoff
). Tekkie Town became a
wholly-owned subsidiary of Steinhoff.
[5]
Steinhoff transferred the Tekkie Town shares to Steinhoff Investment
Holdings Limited, which in turn transferred the shares
to Steinhoff
Africa Holdings (Proprietary) Limited. The latter ‘sold and
transferred’ the Tekkie Town shares to K2017221869
(South
Africa). On 1 July 2017, Tekkie Town became a wholly owned subsidiary
of the second applicant. On 21 September 2017, the
second applicant
listed on the Johannesburg Stock Exchange at the time it owned Tekkie
Town and the first applicant was a wholly-owned
subsidiary of the
second applicant. On 1 October 2017, the first applicant bought the
business of Tekkie Town. It follows that
Steinhoff International as
the holding company has an interest in the business of Tekkie Town
through its subsidiaries, the first
and second applicants and Tekkie
Town.
[6]
The respondents were employees in senior management capacity of
Tekkie Town and remained so employed through the transfers.
They were
so employed when the first applicant acquired the business of Tekkie
Town. They had entered into restraint of trade
agreements with
Tekkie Town; I deal in more detail with the restraint contracts
below. It is in issue whether those restraint agreements
survived the
transfer to the first applicant.
[7]
The respondents left the applicants’ employ in May and June
2018. They are now trading under a new retail outlet (
Mr Tekkie
)
similar to Tekkie Town. It is in issue whether they are doing so in
contravention of the restraint of trade agreements assuming
they had
survived the transfers.
[8]
The applicants seek interim relief; the well-known requirements for
it are:
(a) a
prima facie
right though open to some doubt;
(b) a well-grounded
apprehension of irreparable harm if the interim relief is not granted
and the ultimate relief is eventually
granted;
(c) that the balance of
convenience favours the granting of an interim interdict;
(d) the absence of
another adequate remedy.
Employment history
[9]
The first respondent founded Tekkie Town. On 25 September 2012, he
was employed as Tekkie Town’s managing director. On
14 September 2016, the first respondent signed the addendum to
his contract of employment with Tekkie Town. The terms of the
addendum (
the Addendum
), dealt with below, are similar for all
the respondents. On 24 May 2018, the first respondent’s
employment with the first
applicant was terminated. At the time, he
was a director of the first applicant. However, the first respondent
has alleged, in
correspondence and other litigation to which I shall
refer to the extent necessary below, that he was in the second
applicant’s
employ. Therefore, ‘as an abundance of
caution [second applicant] has been joined…in this
application’.
[10]
Mr Mostert (
the second respondent
) joined the business of
Tekkie Town in 2012 and was its chief executive officer with effect
from 1 November 2014. On 14 September
2016, he signed the
Addendum. In September 2017, he was the first applicant’s chief
executive officer. The second respondent’s
employment
terminated on 25 June 2018.
[11]
Mr Brown (
the third respondent
) joined Tekkie Town as a buyer
and moved through the ranks to chief procurement officer in November
2014. On 14 September 2016,
he signed the Addendum. The third
respondent held the position of chief procurement officer at the
first applicant until 25 June
2018 when his employment terminated.
[12]
Mr Claassens (
the fourth respondent
) joined Tekkie Town and
moved through the ranks to marketing manager in 2005, to project and
marketing manager in 2009 and to head
of store merchandise and
development with effect from 1 November 2014. On 14 September 2016,
the fourth respondent signed the Addendum.
His employment terminated
on 25 June 2018.
[13]
Mr van Niekerk (
the fifth respondent
) joined Tekkie Town as
store manager of its Somerset West branch. He left Tekkie Town in
2014 but returned in 2015 to the position
of chief operating
officer. On 14 September 2016, he signed the Addendum. On
25 June 2018, his employment with the first
applicant was terminated,
at which time, he held the position of chief operating officer.
[14]
The relevant terms of the contracts in issue are as follows:
The contract of
employment with Tekkie Town
‘…
22.
Non-Solicitation of Tekkie Town Employees
The Employee undertakes
that neither he/she nor any company, close corporation, firm
undertaking or concern in which he/she is directly
or indirectly
interested or by which he/she is employed will, during the term of
this Agreement and for a period of 12 months after
expiry or
termination of this contract (howsoever caused), and whether for
reward or not, directly or indirectly encourage or entice
or persuade
or induce any employee of Tekkie Town to terminate his/her employment
with Tekkie Town.’
The sale of shares and
claims agreement – 29 August 2016: [the exchange agreement]
‘…
2.2.8 the
Business- the business conducted by the Company at the Premises under
the name and style of “Tekkie Town”
as retail shoe
outlet; …
2.2.11the Company
Tekkie Town Proprietary Limited, Registration …
3.1.6 by not later than
30 September 2016, written service agreements, which agreements shall
include a minimum term of 5(five)
years, confidential provisions and
a restraint which shall subsist during their period of employment and
for a period of 3(three)
years from the date upon which such
employment ceases, between each of Key Management and the Company are
concluded, which service
agreements shall supersede all other
contracts presently subsisting between Key Management and the
Company; …
16 Restraint in favour of
the purchaser
16.1 In order to protect
the proprietary interest of the Purchaser in the Company and the
Business, each of the Sellers hereby irrevocably
undertakes in favour
of the Purchaser, that it shall not, for a period of 5(five) years
after the Effective Date [1 October 2016]:
16.1.1
whether as proprietor, principal, member, agent, partner,
representative, shareholder, director, manager, employee, consultant,
advisor, financier, administrator and/or in any other like capacity,
be directly or indirectly associated and/or concerned with,
…any
firm…which carries on any restricted business anywhere within
South Africa and Namibia (“the Territory”);
16.1.2
be interested in or concerned with any business which, in the
Territory,
is competitive with or similar to the Business
;(my
emphasis)
16.1.3
draw away, canvass, solicit or entice, or employ, or appoint, or
procure the employment or appointment of, in the Territory,
in
respect of any business which, in the Territory, is competitive with
or similar to the Business, any person who is at the Effective
Date
or was during the 2(two) years prior to the Effective Date, an
employee, officer or agent of, or consultant or supplier to
the
Business;…’
[15]
In compliance with the exchange agreement, the first to fifth
respondents entered into the following:
Addendum to Contract of
Employment [14 September 2016]
‘
As from 1
September 2016 the following changes to your Contract of Employment
with the Company will be effected;
Your contract of
employment will be amended to a fixed Term Contract effective 1
September 2016 to 30 September 2021. …
In addition, it is agreed
that there will be a 3 (three) year Restraint of Trade from the last
day of your employment (be it through
dismissal or your contract
expiring.) The restraint is as defined in the Steinhoff Sale of
Shares and Claims agreement and covers
any retail or commercial
activities in which Steinhoff may have a direct or indirect interest.
…’
Restraint enforcement
[16]
The
applicants seek to enforce restraint of trade agreements. The issues
central to a decision on the enforceability of a restraint
of trade
agreement are as follows
[1]
:
‘
(a) Does the one
party have an interest that deserves protection after the termination
of the agreement?
(b) If so, is that
interest threatened by the other party?
(c) If there is a
protectable interest which is threatened, how does that interest
weigh qualitatively and quantitatively against
the interest of the
other party not to be economically inactive and unproductive?
(d) Is there any aspect
or public policy having nothing to do with the relationship between
the parties that requires the restraint
to be upheld or not?
(e) Does the restraint go
further than necessary to protect the interest?
[2]
[17]
Below, I deal with conduct allegedly in breach of the restraint, the
defences raised to the restraint and the requirements
set referred to
above.
The alleged impermissible
conduct
[18]
The applicants alleged that the respondents had conspired through the
first respondent to harm the first applicant’s
business and to
force a sale of the business. The respondents at the time felt hard
done by because the Steinhoff share price had
dropped dramatically.
In these papers, they have described the price paid for the Tekkie
Town shares as ‘fools gold’.
[19]
Towards the end of June 2018, there was an alleged attempt to
sabotage Tekkie Town’s 380 branches by disabling its sales
systems. Werner de Bruin (
De Bruin
) deposed to an affidavit in
which he said that he had been employed by Tekkie Town and the first
applicant for the past 8 years.
He has a BSc in Mathematics. On 18
June 2018, he attended a meeting at which the first respondent said
that he intended to evict
Tekkie Town from premises leased from an
entity in which he had an interest. At the time, a number of Tekkie
Town staff had resigned
following the first respondent’s
resignation in May 2018.
[20]
At that meeting, the first respondent guaranteed those ex Tekkie Town
employees that they would receive their salaries. It
is common cause
that the first respondent had established a trust for the Tekkie Town
employees and that the salaries would be
paid from that trust. On
19 June 201[8], De Bruin and other Tekkie Town specialists,
Roetz and Wait, started copying Tekkie
Town data onto hard drives
supplied by the second respondent. On 21 June, the second respondent
addressed Tekkie Town staff and
said that plans to buy back the
business were in progress. On 24 June, De Bruin resigned as part of a
mass resignation that occurred
on 26 June. The first respondent had
guaranteed his salary. The second respondent resigned on 26 June and
others followed. On 29
June, the first respondent’s attempts to
reach a settlement to buy back Tekkie Town failed. [First respondent]
was angry
and there were ‘speculations that he wanted to hurt
the business.’
[21]
On 30 June, the second respondent provided extra hard drives ‘in
order to clone the data’. De Bruin was to ‘get
network
access/VPV, through a branch login detail. …Luke, who still
works at Tekkie Town.’ On 1 July 2018, De Bruin
confessed and
since has assisted the applicants in this litigation. Eben Bothma,
‘IT Executive in charge of Infrastructure
for Steinhoff Africa
Retail Limited group’, confirmed the interference with the IT
system as De Bruin alleged.
[22]
Thereafter, the first respondent, with knowledge of the Tekkie Town
leases, attempted to evict Tekkie Town from premises owned
by
entities to which he was affiliated. By 14 August, the plan to roll
out Mr Tekkie stores was made public. Mr Tekkie
has opened
its doors in St George’s Mall, Cape Town, in a store that was
formerly occupied by Tekkie Town. The first respondent
is affiliated
to the entity that owns the property. Against that background, the
applicants seek to protect their alleged interest
as follows:
(a) The first respondent
was the founder and managing director of Tekkie Town. His intimate
knowledge of the business includes knowledge
of:
(i)
the pricing structure and Tekkie Town pricing formula;
(ii)
profit margins and other financial information;
(iii)
supplier and business model detail.
(b) The second
respondent, in his position as chief executive officer of the first
applicant, has knowledge of the Tekkie Town brands
that he oversaw
until his resignation.
(c) The third and fourth
respondents were responsible for ‘distribution of stock, they
understand how much of what stock to
buy, when to buy, the proper
price to buy and sell at, when and which shops should be stocked with
what stock, how much stock to
send to each shop, and the assortment
of products that should be sold in each shop. …’
(d) The fifth respondent
‘was responsible for running of the stores, staff and
properties…[he knows] how many employees
are required per
store, shop discipline…how to display products, the management
of stock losses and profitability of stores…’
[23]
The applicants alleged that the respondents have and will continue to
use that information in Mr Tekkie, contrary to the restraint
of trade
agreement, and so harm its interest in Tekkie Town.
[24]
The respondents have denied that Mr Tekkie competes with Tekkie Town;
instead, they alleged that it would complement Tekkie
Town. They are
optimistic about the chances of success in litigation to have Tekkie
Town returned to its former owners. Therefore,
so the argument went,
they would not harm the business.
Alleged admitted
contravention
[25]
However, the second respondent has admitted, in the answering
affidavit, that Mr Tekkie is a business similar to that of Tekkie
Town. The applicants submitted that the respondents operate contrary
to their undertaking in clause 16.1.3; it bears repeating:
‘
draw
away, canvass, solicit or entice, or employ, or appoint, or procure
the employment or appointment of... in respect of any business
which,
…is competitive with or similar to the business…’
Were the restraint
benefits transferred?
[26]
I accept as
common cause for purposes of this application that the respondents
have entered into employment contracts and an Addendum
thereto in
identical terms to those referred to above with Tekkie Town. The
applicants alleged that those contracts of employment
were
transferred to them via the provisions of the Labour Relations
Act
[3]
. The section provides as
follows:
‘…
(a)
the new employer is automatically substituted in the place of the old
employer in respect of all contracts of employment in existence
immediately before the date of transfer;
(b) all the rights and
obligations between the old employer and an employee at the
time of the transfer continue in force
as if they had been rights and
obligations between the new employer and the employee;…’
[27]
In
litigation, under case numbers 14423/18 and 13507/18, the first and
second respondents accept that their respective employment
contracts
were transferred. In the circumstances of this matter, having regard
to the positions the respondents held when their
employment
terminated, I am persuaded that their contracts of employment
survived the various transfers. It follows that the applicants
would
have
locus
standi
if the restraint agreements were also transferred. Mr Dominy SC,
the respondents’ lead counsel, who appeared with Mr Traverso
and Mr Quixley, submitted that the transfer of a restraint is ‘not
essential to the achievement of any purpose of the LRA’
[4]
.
However, he cautioned that the issue was ‘a complex
question of law that need not be answered definitively at the
interim
interdict stage’.
[28]
However,
the vexed question has already received judicial attention
[5]
as follow: (the Securicor position)
‘
[12] The legal
position…is thus that, in order to determine whether a
restraint agreement survives the transfer of a business
under s 197
of the [LRA], it needs to be determined as a matter of fact whether
the restraint formed part of the goodwill of the
business and whether
that goodwill formed part of the business being transferred as a
going concern in terms of the section. This
is an objective factual
enquiry which will depend on the circumstances of each case.
If this factual enquiry
establishes that the restraint formed part of the transfer of the
business the employee’s obligations
under the restraint are
owed to the new employer and the new employer is entitled to enforce
the restraint against the employee.
…’
[29]
However,
the Laser judgment
[6]
differed.
It is important to bear in mind that that court first ‘…accepted
[respondent’s] evidence that the
restraint fell way.’
That was so because the respondent had entered into a new contract
with the buyer who became his employer.
Nevertheless, the court
continued the investigation and said at paragraphs 21–22:
‘
Only contracts of
employment are transferrable under s 197 of the LRA. What is a
contract of employment? Section 4 of the Basic
Conditions of
Employment Act 75 of 1997(BCAE) stipulates that contracts of
employment may contain conditions of employment as provided
in the
BCEA or a sectoral determination, and any law or term in a contract
that is more favourable to the employee….In the
hands of [the
employer] …the real and only purpose of the restraint
agreement was to wield it as a weapon to discourage
him from
leaving…’ (the Laser position)
[30]
The matter
at hand is distinguishable from the Laser matter in that no new
contract was entered into. There is no evidence that
the restraint
serves only to discourage the respondents from leaving. If it did,
public policy would militate against it
[7]
.
Enforcement of the modified restraint would also not leave the
respondents unemployed.
I
am persuaded that the Securicor position is a correct statement of
the law.
[31]
The contract of exchange between Tekkie Town and Steinhoff, as well
the contract of sale of the business to the first applicant,
refer to
the goodwill of Tekkie Town. The applicants alleged that a
substantial part of the R3 billion purchase price for the shares
of
Tekkie Town was allocated to its goodwill. The respondents alleged,
in the second respondent’s answering affidavit, that
only R20
million was apportioned to the ‘goodwill of the Tekkie Town
business’. However, the respondents alleged that
the purchase
price represented ‘fool’s gold’ because the
Steinhoff shares plunged to a record low in late 2017
due to alleged
accounting irregularities/fraud. Mr Kuschke SC, the applicants’
lead counsel, who appeared with Mr Smallberger
and Mr Fritzgerald,
cautioned that the reason for the drastic decline in Steinhoff shares
was still under investigation.
I need not resolve that dispute in
this application. As indicated above, both parties alleged that a
value was attributed to Tekkie
Town’s goodwill in the exchange
contract. Therefore, I accept that the goodwill of Tekkie Town formed
part of the consideration
paid in the exchange agreement and
subsequent transfer agreements.
[32]
The sellers
of Tekkie Town were corporate entities. The second and third
respondents were not ‘affiliated to the sellers and
did not
benefit from the value paid in respect of goodwill’. Goodwill
attaches to a particular business although it can be
separately
valued. It has been described as ‘the attractive force which
brings in custom
[8]
’. It
is sold with the business even when it has not been separately
valued. It follows that only those capable of disposing
of the
business can dispose of its goodwill.
[33]
The ‘force which brings in custom’ consists of a variety
of elements, e.g. skill, quality of the product, knowledge
of
customer profile and location among others. It can be infringed by
someone other than the seller. It is therefore not surprising
that
the respondents entered into the restraint agreements as part of the
transfer/sale to Steinhoff seemingly to protect
the
goodwill of Tekkie Town which it acquired with the business. In the
circumstances of this matter, I consider that the respondents
are
experienced business persons and apparently appreciated the import of
the agreements they had entered into. Ordinarily, as
a matter of
public policy, one must be held to an agreement entered into freely
and voluntarily.
[34]
The agreements relevant to these proceedings are directed at the
protection of information about pricing, customer profile
and lease
agreements among others. The respondents are able to influence some
or all the categories. In the circumstances of this
matter, for
purposes of the interim relief sought, I am persuaded that the
goodwill of Tekkie Town was sold with the business as
a going
concern.
[35]
I have considered the allegations of the fraud-induced sale to
Steinhoff and the reality of the dramatic reduction in the Steinhoff
share price. Although, these are issues that will be determined at
the trial and in the various pending litigation between the
parties,
it is a factor in determining the balance of convenience.
Nevertheless, I am persuaded that the applicants have
locus
standi.
The restraint is too wide
[36]
The restraint prohibits the respondents from involvement in any
‘retail or commercial activities in which Steinhoff may
have a
direct or indirect interest’. It is common cause that Steinhoff
has interests in a variety of retail and commercial
activities that
have no relation to the interest in the ‘retail shoe outlets’
that the applicants seek to protect.
Therefore, I agree with the
respondents’ submission that the restraint is unreasonably
wide.
Should a ‘trimming
and cutting’ of the restraint be allowed?
[37]
The applicants realised that the ‘over-breadth’ complaint
had merit and have attempted to bring the relief sought
within
reasonable limits. At the hearing, Mr Kuschke handed up a draft order
which sought substantially less than the applicants
did in the Notice
of Motion. On the second day of the hearing, he handed up a second
draft which further limited the relief sought,
this time within
reasonable limits. The record of this urgent application runs
into 1 9 7 4 pages
excluding heads of
argument – 100 useful pages, no complaint there. The
respondents had to deal with the ‘over-breadth’
which the
applicants abandoned at a very late stage. I deal with this aspect in
respect of costs below.
[38]
It is in
issue whether the applicants have ‘impermissibly engaged in
“cutting and trimming a manifestly over-broad restraint
at the
behest of the party which drafted it”’. The respondents
relied on the Henred Freuhauf matter
[9]
for that submission. In that matter, the court correctly criticised
as undesirable and not to be encouraged any practice ‘of
cutting and trimming a manifestly over-broad restraint…’
conveniently when the shoe pinches at court.
[39]
However,
this matter can be distinguished. The applicants now seek to restrict
the restraint to the business of Tekkie Town which
falls within the
ambit of the restraint and is exactly what the respondents undertook
to abstain from
[10]
. The
respondents would be able to continue operating Mr Tekkie stores and
roll out as envisaged. It would only be prohibited
from dealing
in those brands listed in the order. Mr Tekkie is projected as much
more than a branded shoe outlet. It envisages
a head-to-toe outfit.
There is no indication that Mr Tekkie would be without shoes if the
restraint is modified. In its modified
form the restraint would also
allow the respondents to engage in their trade of choice with limited
restrictions. I accept that
it might be inconvenient and possibly
have cost implications for the respondents and Mr Tekkie.
Nevertheless, I am persuaded
that the restriction would not present
an insurmountable obstacle to Mr Tekkie’s business.
[40]
In the
circumstances of this matter, it is entirely plausible, given the
Steinhoff empire, ‘that the draftsman was seeking
to be as
prescient as possible and to cover all possible situations in which
the employer’s interest might need protection
against the
possible conduct of the particular employee’
[11]
.
In addition, the proposed order envisages a relatively shorter period
than originally agreed to in the restraint of trade agreements.
Were the restraints
triggered?
[41]
The respondents alleged that because their employment was not
terminated ‘through dismissal or [their] contract expiring’
the restraints were not triggered. The relevant section of the
addendum bears repeating:
‘…
In
addition, it is agreed that there will be a 3 (three) year Restraint
of Trade from the last day of your employment (be it through
dismissal or your contract expiring.)’
[42]
The first
to third respondents resigned ‘in consequence of the
applicants’ repudiation’ and the fourth and fifth
respondents resigned. Mr Dominy submitted that the restraints were
not triggered. In the circumstances of this matter, where the
buyer
paid at least R40million for the goodwill of the business, I am not
persuaded that the interpretation for which Mr Dominy
content is
‘commercially sensible’
[12]
.
I consider that the issue will be fully ventilated at the trial. I am
persuaded that at this stage there is
prima
facie
a
commercially sensible interpretation that favours the one which the
applicants contended for, namely that the restraints were
triggered
on the last day of employment irrespective that it was not through
dismissal or the expiry of the contract term. In the
circumstances of
this matter, without more, the alternative is not ‘commercially
sensible’.
Have the respondents
encroached on a legitimate protectable interest?
[43]
The respondents have admitted that they are engaged in a similar
business to that of Tekkie Town. They do so in breach of the
restraint agreements. That, so the argument went, erodes Tekkie
Town’s goodwill. The respondents concede: ‘…
goodwill
passes from the seller to the purchaser and is reflected in the price
paid. Competition by the seller will impinge on that
value and,
…might be reasonable to enforce a restraint to prevent that
from happening’.
[44]
The third
party who enters into a restraint of trade agreement with the
purchaser cannot escape enforcement of an otherwise valid
agreement
solely on the basis that she/he did not receive any payment for the
undertaking. That would offend public policy. However,
that is a
factor considered in the decision whether to enforce the
restraint
[13]
. The senior
positions the respondents held at the time of concluding the
agreements are also relevant. Three of the respondents
had an
interest in the entities that sold the Tekkie Town shares. They were
a formidable team operating a very successful business.
Application
[45]
I am persuaded that the applicants have an interest that deserves
protection. It is apparent that the respondents have already
engaged
in a similar business and have employed ex Tekkie Town staff. Despite
the obvious skill the respondents have, their knowledge
of the Tekkie
Town brands and pricing, among others, is an interest worthy of
protection. That interest is threatened. As indicated
above, the
interest can be protected without too much interference in the
respondents’ economic activities. Public policy
dictates, in
the circumstances of this matter, that the respondents be held to
their contracts. In coming to that conclusion, I
have considered the
litigation for the return of Tekkie Town is pending. An orderly flow
of the legal process must be allowed to
take place. The restraint is
too wide but, in the circumstances of this matter, ‘cutting and
trimming’ would achieve
the real purpose of the restraint
without unnecessarily burdening and restricting the respondents in
their economic life.
[46]
I am persuaded that the applicants have established a
prima facie
right. The apprehension of irreparable harm if no relief is granted
is well-grounded. Mr Tekkie is operating a similar business.
In the
circumstances of this matter, the anticipated harm is in the ability
to draw away customers with the Tekkie Town brands.
It has been
suggested that the applicants have a claim for damages as an
alternative. The applicants disagreed. I share the pessimism;
the old
Tekkie Town team command loyalty, and as employees followed them,
some old customers will too. I will not engage in speculation
on the
issue save to accept that, in the circumstances of this matter, the
claim is not really an option.
[47]
The draft order, paragraph C, provides for a list containing the
footwear subject to the restraint. Various dates were canvassed.
The
relevant section provides:
‘
16.1.4 …utilise
or directly or indirectly divulge or disclose or make available to
any person, any of the intellectual property,
know-how or
confidential information of the Business existing as at the effective
Date or prior thereto.’
[48]
The effective date is 1 October 2016. I have considered that prior to
that date, the respondents have employed entrepreneurial
skill,
talent and have achieved much success. They provide much needed
employment. They should not be hampered in their economic
activity
beyond the effective date.
Costs
[49]
As indicated above, the record in this application is voluminous. The
applicants only limited the relief sought at the hearing.
The
respondents had to deal with an extensive application on an urgent
basis. Their lead counsel had to be replaced which caused
prejudice.
The application was set down for one day with no real possibility of
argument finishing within a day. This was foreshadowed
in the
practice note in which the applicants indicated that the issues
raised were complicated.
[50]
I consider that the applicants’ success is substantially less
than initially prayed for in the Notice of Motion. I am
persuaded
that each party should pay its own costs of the second day.
CONCLUSION
[51]
I, for the reasons stated above, make the following order:
(a) The non-compliance by
Applicants with the Rules relating to form and service is condoned,
and this application is heard as one
of urgency in terms of Uniform
Rule 6(12).
(b) The trial of the
action to be instituted shall be heard as an expedient trial on dates
to be agreed between the parties in consultation
with the Judge
President.
(c) Until the conclusion
of the trial, or until any further Order by a Court, the First to
Fifth Respondents, and each of them,
are interdicted and restrained
from being interested in, or concerned with, any business which,
anywhere within South Africa or
Namibia, stocks, or offers for sale,
the footwear listed on annexure “A” hereto. [footwear
that existed as at 1 October
2016 and before]
(d) The parties are
directed to keep annexure “A” confidential as between
them.
(e) Costs of 30 October
2018, including the costs of two counsel.
_____________________________
BAARTMAN
J
[1]
Henred
Freuhauf (Pty) Ltd v Davel & Another
(2011) 32 ILJ 618 (LC) at para 15.
[2]
Reddy v
Siemens Telecommunication (Pty) Ltd
2007 (2) SA 486
(SCA) at para 17.
[3]
Section 197
Labour Relations Act, 66 of 1995
.
[4]
Laser
Junction (Pty) Ltd v Fick
(2017) 38 ILJ 2675 (KZD) and
MacGuire
v Commissioner, South African Revenue Service
2009 (4) 345 (SCA) at para 22.
[5]
Securicor
(SA) (Pty) Ltd and Others v Lotter and Others
2005 (5) SA 540
(E) at para 12.
[6]
Laser
Junction (Pty) Ltd v Fick
(2017) 38 ILJ 2675 (LZD).
[7]
Mozart Ice Cream Franchises (Pty) v Davidoff
2009 (3) SA 78
at 82
G-J.
[8]
Agreements in Restraint of trade in South African Law, John Saner
SC, Lexis Nexis South Africa, Chapter 7.2.
[9]
Henred
Feuhauf (Pty) Ltd v Davel & Another
(2011) 32 ILJ 618 (LC).
[10]
Den
Braven SA (Pty) Ltd v Pillay and Another
2008 (6) SA 229.
[11]
Ibid at para 52.
[12]
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
2010 (2) SA 498 (SCA).
[13]
Agreements in Restraint of trade in South African Law, John Saner
SC, Lexis Nexis South Africa, Chapter 7.2.