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2015
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[2015] ZAGPJHC 28
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Bone And Arthroplasty Research Centre Development CC v Pretorius and Another (31355/2014) [2015] ZAGPJHC 28 (29 January 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 31355/2014
DATE: 29 JANUARY 2015
In the matter between:
BONE & ARTHROPLASTY RESEARCH
CENTRE
DEVELOPMENT
CC
...............................................................................................................
Applicant
And
STEPHANUS HENDRIK
PRETORIUS
....................................................................
First
Respondent
B BRAUN MEDICAL (PTY)
LTD
..........................................................................
Second
Respondent
J U D G M E N T
MASHILE, J:
[1] This is an application initially
brought by way of urgency. After listening to argument of both
Counsel the court pronounced
that it was not urgent in the conformist
sense but nonetheless sufficiently pressing warranting a hearing
before the December/January
recess. For that reason, the court
referred it to be heard as a special motion matter. It is sheer
happenstance that it came
back to this court again as a special
motion.
[2] The Applicant seeks to interdict
the First Respondent from competing with it in any of its business
activities including the
sale and distribution of orthopaedic
prosthesis implants and approaching any of its customers being
surgeons, hospitals and clinics
with a view to supplying them with
orthopaedic prostheses implants pending the finalisation of the
Applicant’s action against
the First Respondent for a final
interdict and related relief.
[3] The Applicant is claiming no relief
against the Second Respondent unless it opposes the proceedings
directed at the First Respondent.
The Second Respondent is a
competitor of the Applicant and is joined to these proceedings as it
has an interest in the outcome
hereof. The First Respondent is
currently in its employ under circumstances, which the Applicant
alleges constitute a direct infringement
of a restraint of trade
agreement (hereinafter “the restraint”), which was
concluded between it and the First Respondent.
[4] The background facts is that the
Applicant’s business is, as it has been during the last
twenty-three years, to supply
medical prostheses (hereinafter
“prosthesis”) to orthopaedic surgeons primarily, knees
and hips. The Applicant has
fifteen such surgeons as regular
customers, all of whom have, for the period of the First Respondent’s
employment with the
Applicant, been serviced by him as a sales
person. For that reason, it is common cause that they are well known
to the First Respondent.
[5] The Second Respondent is a South
African representative of a European company that produces and
supplies some of the prostheses.
In South Africa, the Second
Respondent’s role is to act as both a wholesaler and retailer
of the prostheses. When the Second
Respondent deals with the
Applicant, it acts as a wholesaler of the prostheses and it is a
retailer in those instances when it
sells the prosthesis directly to
orthopaedic surgeons.
[6] The Applicant avers that it
employed the First Respondent as a sales representative on 13 April
2007, which employment came
to an end on 31 July 2014. On 11 and 17
May 2007, the First Respondent and the Applicant respectively
concluded two written agreements,
a contract of employment and a
restraint. The former was deemed to have commenced on 13 April 2007.
[7] Save to state that the conclusion
of the two agreements to which I have referred above are a common
cause between the Applicant
and the First Respondent, I do not deem
it necessary at this stage to scrutinize their terms and conditions
particularly, the restraint
of trade. Although the Applicant has
fervently argued that the contract of employment and the restraint
should be viewed discretely,
it is not possible as the reference to
the employment agreement in the restraint is too conspicuous to
ignore.
[8] The First Respondent has contended
that he does not regard himself as bound by the restraint. Assuming
that the court were
to conclude that a valid and binding agreement
between the Applicant and the First Respondent was concluded, he
argues that such
agreement would have terminated a year after his
employment with the Applicant – 31 May 2008. He cites among
his reasons
for that contention the following:
8.1 The Applicant employed him on 13
April 2007 and he received his first and only salary in terms of that
agreement on 30 April
2007;
8.2 His employment with the Applicant
having come to an end on 31 May 2007, it follows that if the
restraint was for a period of
one year from termination of his
employment, it would have come to an end on 31 May 2008;
8.3 The agreement of employment that he
concluded with the Applicant, made a provision that depending on his
performance he would
become a permanent employee, this was not done
and was therefore not entitled to those benefits that permanent
employees would
normally enjoy;
8.4 The above could not be done because
Ms Webber of the Applicant insisted that he should sign certain
documents with Highveld
PFS without disclosing the nature thereof.
It later transpired that the outcome of signing up with Highveld PFS
was that it henceforth
became his employer and the Applicant’s
consultant;
8.5 According to his contract of
employment with Highveld PFS, which he signed towards the end of May
2007, his employment was deemed
to have commenced on 1 May 2007. The
First Respondent was unhappy with the amounts that Highveld was
deducting from his salary
consequently he requested the Applicant if
he could transfer his employment to another close corporation, which
would charge him
less;
8.6 Thus, on 30 June 2009 the
Applicant’s employment with Highveld terminated and another
employment relationship with Eneleg
CC begun on 1 July 2009. It is
this employment relationship that the First Respondent asserts
culminated on 14 July 2014;
8.7 On 17 May 2007, the Applicant and
the First Respondent entered into a restraint. The restraint alludes
to a contract of employment
concluded between the Applicant and the
First Respondent.
[9] The Applicant asserts that the
contract of employment between Highveld PFS and later, Eneleg CC with
the First Respondent was
a charade whose main objective was to
relieve the Applicant of certain administrative duties by
transferring them to a third party.
The intention has always been
that the First Respondent would be employed by the Applicant.
Probably as an alternative, the Applicant
also contends that the
restraint should be regarded as distinct and separate from the
contract of employment.
[10] The central issue to be decided in
this matter is the enforceability of the restraint between the First
Respondent and the
Applicant. That issue, however, cannot be
independently decided without resolving who the actual employer of
the First Respondent
was – has it always been the Applicant or
Highveld and later Eneleg? The approach that this court adopts is
that since the
aforesaid issue could be dispositive of the whole
case, it is sensible to consider it first.
[11] The additional defence that the
undertakings contained in the restraint are not enforceable as they
do not serve a protectable
interest, more particularly that the First
Respondent did not establish a special relationship with the
applicant’s clients
and/or customers which will see such
customers leave the applicant in order to follow the First
Respondent, will be unnecessary
to decide if the First Respondent is
not bound by the terms and conditions of the restraint.
[12] I have already mentioned
previously that the contents of the restraint make reference to
employee and employer relationship.
The anomalous thing about that
presupposed employee-employer relationship is that it is not
supported by a contract of employment
concluded specifically by the
two parties.
[13] The contract of employment that
was entered into on 11 May 2007 recorded as having commenced on 13
April 2007, was replaced
by the one concluded by the First Respondent
and Highveld PFS. It is in this context that the Applicant is
persuading this court
to disregard that between Highveld PFS and the
First Respondent in favour of that between itself and the First
Respondent.
[14] That kind of interpretation cannot
find favour with this court as to agree with the Applicant will be to
ignore what the parties
intended besides, it will, as the First
Respondent has asserted, disentangle and complicate other agreements
that the Applicant
has with other parties and these are -
14.1 between Highveld and the
Applicant;
14.2 between Eneleg CC and the
Applicant;
14.3 between the other salesperson in
the employ of the Applicant, Ruan Pretorius, and Eneleg CC.
[15] There are a whole host of factors,
which suggest that the First Respondent was in fact employed by
Highveld PFS and not the
Applicant. Among these are the following:
15.1 Highveld PFS paid the salary of
the First Respondent for the period for which it engaged his
services, 1 May 2007 to 30 June
2009. For the month of July 2009,
the First Respondent was paid by Jip Consulting CC as Eneleg CC was
still in the process of
being registered. And from 1 August 2009
Eneleg CC then took over as the employer of the First Respondent;
15.2 His contract of employment with
Highveld PFS did not have a provision that the contract was a sham as
it is a mere way of relieving
the Applicant of its administrative
duties;
15.3 The IRP5 was issued by Highveld
PFS. Moreover, it was Highveld PFS, which paid tax to the South
African Revenue Service, and
not the Applicant. Jip Consulting CC
assumed the role previously played by Highveld PFS for the month of
July 2009 and thereafter
Eneleg CC took over.
15.4 Highveld PFS attended to payment
of Workman’s Compensation Fund and Unemployment Insurance Fund;
15.5 The 11 May 2007 contract of
employment between the Applicant and the First Respondent provided
that the latter would be assessed
and if the Applicant was satisfied,
he would be employed permanently, so that he would enjoy the status
of permanent employees.
The assessment did not occur as per the
provisions of the employment contract. That suggests that it was
because he ceased to
be the Applicant’s employee on 30 April
2007 and the assessment therefore became unnecessary;
15.6 The Applicant was pleased to
advise the South African Revenue Service when its tax affairs came
under scrutiny that the tax
of the First Respondent was paid by a
labour broker, Eneleg CC at the time, by which he was employed;
15.7 On the advice of one Mr Venter
during the first quarter of 2012, the Applicant directed Eneleg CC to
transpose its particulars
on the contract that was concluded between
the Applicant and Highveld PFS such that the agreement became a
replica of that between
it and Highveld PFS.
[16] All these, in my opinion, are
strong indications that militate against the argument that the First
Respondent has always been
employed by the Applicant. The
arrangement is highly structured to be simply discounted. The only
cogent support for the notion
that the First Respondent was employed
by the Applicant and not Highveld PFS IS Section 198 of the Labour
Relations Act No. 66
of 1995 (hereinafter “the Act”).
This, in my opinion, requires closer examination.
[17] During the hearing of this
application, the applicant argued that the definition of a temporary
employment service outlined
in Section 198 of the Act could be
invoked to demonstrate that in the case in casu, the relationship
between the First Respondent
and Highveld PFS did not qualify as a
temporary employment service and accordingly, the first respondent
was in fact not an employee
of Highveld.
[18] The Applicant sought to rely on
Vasco Dry Cleaners v Twycross
1979 (1) SA 603
(A) for his contention.
His reliance on the said case is misguided. It is true that the
case dealt with the need to enquire into
the intention of parties to
establish whether or not it is a facade. In this case, however, the
agreement between Highveld PFS
and the First Respondent is not a sham
as it expresses the true intention of both parties. It does not even
state, which would
have been illegal most probably, that while the
First Respondent was employed by Highveld PFS in reality he would
remain employed
by the Applicant. There is thus no question of the
agreement itself being a sham. The relationship between the parties
is that
of an employer-employee relationship.
[19] It is also noteworthy to mention
that the cases to which Counsel for the Applicant referred this court
concerned themselves
with the protection of employees. For example,
in Khululekile Dyokwe v Coen de Kock N.O. and Others (Case Number:
C418/11, a case
yet to be reported, the employee had been an employed
by Mondi for three years when he was suddenly asked to sign a
contract of
employment with Adecco changing his three year old
relationship with Mondi to an independent contractor leaving him with
no benefits.
[20] On the facts of that case the
transaction could be characterised as in fraudem leges. It must be
borne in mind that each case
should be determined on its own facts.
A case that is more in line with the facts of this case is LAD
Brokers (Pty) Ltd v Mandla
[2001] 9 BLLR 993
(LAC), to which I intend
to refer later in this judgment.
[21] The other cases to which this
court has been referred dealt with a situation where an employer
attempts to alter its employment
relationship with an employee to
that of an independent contractor to the disadvantage of the latter.
Again, I emphasise that
the client-independent contractor
relationship is not akin to the facts of this case. Highveld PFS or
Eneleg CC subsequently,
procured the service for and provided it to
the Applicant.
[22] The fundamental nature of the
applicant’s argument is that unless a labour broker prompts the
appointment of the employee
with a client, the Applicant in this
instance, there cannot be an employment contract between the labour
broker and the employee.
I agree with the First Respondent that the
aberrant upshot of the Applicant’s approach will be that if a
client such as the
Applicant approached a labour brokerage with a
request that it finds a contractor for a specific position with it,
such contractor
would not be an employee of the labour brokerage.
[23] Indeed, in the midst of that
contention seems to be confusion between recruitment consultants,
which enlist employees on behalf
of their clients, with labour
brokers/temporary employment services who not only procure but also
provide employees to their clients.
[24] Furthermore, and in any event, the
applicant’s argument loses sight of the fact that Section 198
of the Act speaks of
“procures for” or “provides
to”. The two concepts and separated by the word “or”
indicating
that they are two very distinct concepts. Either one will
suffice for an employment contract to come into being between a
labour
broker and an employee.
[25] To bring the analogy closer to the
case in casu, I am in complete agreement with the First Respondent
that Highveld PFS “provided”
the service to the applicant
and was therefore the employer of the First Respondent.
[26] I am indebted to Counsel for the
Respondents for referring this court to the very useful case
authority, LAD Brokers supra.
Save to state that the facts and
applicable law of the aforesaid case are ‘on all fours’
with the present matter,
I do not deem it necessary to describe the
facts. The case is directly pertinent and I have no doubt in
following on its footsteps.
[27] The Respondents’ Counsel
also drew this court’s attention to the introductory portions
of Section 198(1) and (2]
of the Act) both of which are introduced by
the phrase, “In this section” and “For the purposes
of this Act …”
respectively. The Respondents argued
that the legislature meant to be explicit that it did not intend to
change the common law
definition of an employee and employer.
[28] Furthermore, that the provisions
and definitions relating to labour brokers in the
Labour Relations
Act were
only meant to deal with rights and obligations emanating
from the Act. It does not have an effect on the law of contract by
which
restraints of trade are managed.
[29] The introductory phrases are there
to give a particular meaning to the section and that is that their
application should be
limited to this Act. Taking it out of the
context of the Act where they express a certain meaning may result in
far reaching unintended
consequences. See in this regard,
Commissioner For Inland Revenue v Estate Hullet
[1990] ZASCA 23
;
1990 (2) SA 786
(A).
Had the Legislature’s intention been that the definition should
govern all relationships of employment by a labour
broker, it would
not have limited the definition to the section and to the Act as it
did. The Applicant’s contention on
Section 198 of the Act is
thus rejected as devoid of any merit.
[30] The conclusion that the contract
of employment between Highveld PFS and later Eneleg CC is valid,
allows this court to focus
squarely on the restraint. When the
contract of employment and the restraint between the Applicant and
the First Respondent were
concluded, the intention was unmistakable –
contrary to the Applicant’s belief, the existence of the
restraint was
dependent on the contract of employment. This is
obvious from the provisions of the restraint itself as it makes
reference to
an employee-employer relationship.
[31] As a matter of course, it should
follow that if the contract of employment between the First
Respondent and the Applicant is
replaced by another, the restraint
cannot continue to have a life of its own. The fact that Highveld
PFS and later Eneleg CC took
over the role played by the Applicant
makes it solid and concrete that they became the employers of the
First Respondent.
[32] The natural consequences of an
employer-employee relationship must flow from that contract. The
purpose and role of the restraint
was dislodged by the conclusion of
a contract of employment with other entities – Highveld PFS and
Eneleg CC. The contracts
of employment with Highveld PFS and Eneleg
CC were not coupled with a restraint. Even if they were, once this
court has made a
decision that the First Respondent was employed by
those entities and not the Applicant, a restraint would not assist
the Applicant.
[33] The restraint between the
Applicant and the First Respondent fell away at the conclusion of the
contract of employment with
Highveld, 1 May 2007. That being the
case and in line with the provisions of the restraint of trade
agreement itself, the period
of restraint came to an end on 30 April
2008. Accordingly, the First Respondent could not have been under
any form of a restraint
of trade when he resigned on 31 July 2014.
[34] In the circumstances I find that:
34.1 The Applicant and the First
Respondent concluded a contract of employment and a restraint of
trade agreement on 11 May and
17 May 2007 respectively;
34.2 The relationship between the
Applicant and the First Respondent created by the aforesaid
agreements terminated on 30 April
2007 at which stage the First
Respondent entered into another contract of employment with Highveld;
34.3 Highveld PFS became the employer
of the First Respondent from 1 May 2007 and that relationship came to
an end on 30 June 2009;
34.4 Jip Consulting CC stepped in for
the month of July 2009 until 1 August 2009 when Eneleg CC assumed the
role previously played
by Highveld PFS;
34.5 In consequence of the dependent
nature of the restraint upon the contract of employment between the
First Respondent and the
Applicant, it could not have survived the
contract of employment on which it depended;
34.6 The restraint cannot be enforced
against the First Respondent as the period of restraint ended a year
following the termination
of the employment relationship with the
Applicant, 30 April 2008;
34.7 The First Respondent was not under
any form of restraint when he resigned on 31 July 2014.
[35] In view of this conclusion, I find
it unnecessary to make any additional pronouncements based on the
other arguments advanced
by the Applicant. In the premises I make
the following order:
1. The application is dismissed with
costs.
B MASHILE
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
Date of Hearing: 14 November 2014
Date of Judgment: 29 January 2015
Counsel for the Applicant: Adv. J
Daniels
Instructed by: Gordon Holtman
Attorneys
Counsel for the Respondent: Adv. X
Stylianou
Instructed by: DJ Greyling
Incorporated