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[2010] ZAGPJHC 39
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Interpark (South Africa) Ltd v Joubert and Another (09/29946) [2010] ZAGPJHC 39 (17 May 2010)
REPUBLIC OF SOUTH AFRICA
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO:
09/29946
In the matter between:
INTERPARK
(SOUTH AFRICA) LTD
Applicant
and
ANDRÉ
JOUBERT
First Respondent
REALLY USEFUL PARKING COMPANY
(PTY) LTD
t/a EASIPARK
Second Respondent
REASONS FOR DECISION
SPILG, J
:
THE APPLICATION
[1] The
applicant, Interpark (South Africa) (Pty) Ltd (“
Interpark
”)
seeks a final order in motion proceedings against the first
respondent, Mr Joubert, to enforce a restraint of trade agreement.
The substantive prayer reads:
“
The
First Respondent is restrained until 31 October 2010 from being
associated with the business of the Second Respondent, whether
directly or indirectly, and whether as proprietor, principal, member,
agent, partner, representative, shareholder, director, manager,
employee, consultant, adviser, financier, or administrator.
”
[2] The
applicant relies on a written restraint covenant which is for a
period of two years. The restraint became effective when
Mr
Joubert’s employment with it terminated on 31 October 2008.
[3] Mr
Joubert’s current employer, a company that trades under the
name Easipark, is joined as the second respondent. It
employed Mr
Joubert from 15 June 2008 in its internal audit and operations
projects. Easipark provides parking management services
to shopping
centres, hotels and municipalities.
[4] The
application came before me on 6 November 2009 – more than a
year after the restraint period commenced. This explains
why the
applicant did not seek an alternative order to cut down the restraint
period should
it
be found excessive.
[5]
Accordingly, the application must fail if the restraint cannot be
justified for a period of at least a year.
APPLICANT’S ARGUMENT
[6] The applicant contends that:
(a) It has a
protectable interest in the form of proprietary confidential
information to which Mr Joubert was exposed.
(b) Mr
Joubert contractually undertook not to be employed by a competitor
for a period of 24 months precisely because he would
be exposed to
such protectable information.
THE FACTS
[7] Mr
Joubert commenced employment with Interpark as a cashbook clerk on a
temporary basis in March 2006. On 6 May 2006 he obtained
a permanent
position as a car park manager at the Oriental Plaza with a
commencing salary on a cost to company basis of R10 000,00
per month
(from which medical aid, if elected, was deducted in full). The
salary was reviewable in July of each year. He subsequently
applied
for, and was promoted as from 1 November 2006, to the post of
Operations Manager; South Gauteng. This position covered
large
complexes such as the Oriental Plaza with approximately 3 500 parking
bays as well as smaller shopping centres such as The
Wedge with about
400 bays. At the time he resigned from employment, Mr Joubert’s
gross package had increased to R17 876,00
per month.
[8
]
Mr Joubert’s letter of appointment dated 1 November 2007
contained a provision that his engagement was conditional upon
a
restraint being signed.
[
9]
The appointment letter also included:
(a) A term
recognising that the employee would have access to confidential
information which he was required not to divulge.
(b) A notice
period for terminating his employment that varied depending on the
length of actual service. By the time Mr Joubert
resigned the notice
period was four weeks, which he duly gave.
[
10]
The restraint was embodied in a 12 page standard form document
signed some time earlier in May 2006. Presumably it was signed
at
the time he took up permanent employment. In terms of the restraint:
The employee
recognised that he will have access to trade secrets and
confidential information not only in respect of Interpark
but also
of associated companies within the group of which Interpark was a
division, namely the PEM Group which has 12 other
subsidiaries
variously engaged in the software, media or security industries.
The employer
recognised that the PEM Group’s trade secrets will be
prejudiced if the employee was to take up employment
with a
competitor that provided the same goods and services as any company
within the PEM Group. The affected goods and services
, according
to the agreement, were to be identified in an annexure to the
restraint. It is common cause that the annexure was
never provided
to Mr Joubert and accordingly never formed part of the documentation
signed by him nor was he aware of its contents.
Mr Joubert
was
precluded from becoming involved directly or indirectly and as an
employee, proprietor, shareholder or otherwise in any undertaking
that “
carries
on any restricted business or provides the prescribed services
anywhere in the prescribed areas
”.
The terms
“
restricted
business
”
and “
prescribed
services
”
were widely defined to include effectively any activity of any
company or division within the PEM Group. The “
prescribed
area
”
was defined by reference to each of the provinces within South
Africa as well as Swaziland and any other country where
the PEM
Group conducted business “
at
the date of signature of this agreement and/or as at the termination
date
”.
The trade
secrets were identified in clause 2.3 to include know- how processes
and techniques in relation to the PEM Group’s
operational,
manufacturing and distribution activities, details of training
methods and programs. It also included knowledge
of and influence
over the suppliers, principals, clients and business associates of
the PEM Group as well as contractual and
financial arrangements
between them. In addition the term “
trade
secrets
”
included costing and profitability calculations, client lists and
the terms, conditions, value and period of contracts
with clients as
well as the names of prospective clients and their requirements.
Information concerning competitors as well as
other information was
included together with a final omnibus provision within the term’s
definition, that covered:
“
Other
matters which relate to the business of the PEM Group and in respect
of which information is not readily available in the
ordinary course
of business to a competitor of the PEM Group but limited to the
prescribed services as per annexure (1).
”
[
11]
By reason of the view I take it is unnecessary to consider whether
the terms of the restraint are too broad in respect of the
area or
activity. It is also unnecessary to consider the effect of omitting a
document (Annexure (1)) that was integral to defining
the prescribed
services or activities conducted by the Group. It is sufficient to
have regard to the trade secret provisions and
assume for the
purposes of this case and in the applicant’s favour that an
adequate limitation to prescribed services and
activities can be
garnered by reference to the business conducted by Interpark and any
business activity of the PEM Group that
may be construed as
confidential to it and to which Mr Joubert may have had access.
[12] Mr
Joubert does not dispute that Interpark is the country’s
largest and foremost provider of what it terms comprehensive
parking
management solutions.
[13
]
Interpark identifies this term to include the efficient operation of
a successful parking garage within a shopping complex. This
involves
collecting revenues from both casual and prescribed monthly users,
risk management, parking design, entire revenue cycle
audits within
parking facilities, the management and audit of statistics on a daily
basis, credit management of the parking garage
(providing for both
casual and monthly users), the installation and management of what
are referred to as “
conventional
Pay-At-Exit
parking
control equipment and the Pay-on-Foot systems
”
and the provision of car washing and car cleaning facilities within
the parking areas.
[1
4]
None of these activities are said to amount to trade secrets whether
individually or in any unique combination. Nor is it claimed
that
the methods and activities adopted by Interpark in providing a
comprehensive parking management solution are unique to it,
aside
from what can be gleaned from its broad definition of what
constitutes its “
trade
secrets
”.
It is however trite that the determination of what constitutes trade
secrets or confidential information is an objective
one and not the
subjective view of the parties to a signed document even if they are
of equal bargaining strength (although their
views will carry
evidentiary weight). See
Basson
v Chilwan and Others
1993 (3) SA 942
(A) at 768A-C.
[15]
Interpark claimed that on taking up employment with Easipark, Mr
Joubert “
…
commenced putting in place in the business of the second respondent
the same systems and procedures utilised by the applicant
”.
The applicant relies on an undisclosed source. Aside from correctly
pointing out that there is no express allegation
that these systems
and procedures constitute trade secrets or other protectable
commercial interests, both Mr Joubert and Easipark’s
Managing
Director, Mr Clark, denied the accusation and referred to the work
performed by Mr Joubert and the different software
systems used by
Easipark.
[1
6]
Mr Joubert admitted that he was required to know and implement
Interpark’s standard operating procedures and “
proprietary
systems and controls
”.
He was also aware of Interpark’s management information system
but only as the recipient of reports that others
produced from this
system.
[17] Perhaps
the most significant issues raised by Mr Joubert are that the
management of car parks is not a sophisticated business
operation and
that the equipment and software used by the applicant are not
exclusive to it but are utilised by other parking management
companies.
[18] In this
regard the salient averments by Mr Joubert at paragraphs 33 and 34 of
his answering affidavit are:
First, t
he
business is not sophisticated as it involves basically the use of
access control systems, software and pay point equipment
either
prior to users returning to their cars or when exiting the parking
lot.
Industry
operators use t
he
same suppliers for equipment and software. Moreover the software is
backed up by standard financial and accounting systems
that are not
unique.
Although
Interpark has a management information system which generates
reports, Mr Joubert was not involved in their compilation. However
he did use them to monitor the performance of car parks under his
control. Mr Joubert confirms that Easipark generates similar
reports which he understands utilises Easipark’s own systems.
Easipark’s affidavit confirms this.
There is
little to distinguish between Interpark’s and Easipark’s
modes of operation, and, at the level he was employed
as operations
manager, the equipment and software of which he was aware are
relatively standardized.
Although
Interpark uses a different software tool to Easipark, it can only be
implemented if a copy of the program is procured.
Interpark
has its own system for performing the same function. If there is
any other unique proprietary information then the
applicant as
operations manager did not have access to it.
[19] In
reply, Interpark contended that once an employee, in the position of
Mr Joubert, utilised the systems and the reports created
by it he
will be able to appreciate the purpose and advantage of what are
termed “
these
functions
and is able to duplicate these proprietary methodologies when in the
employ of a competitor, even if inadvertently
”
(my emphasis). This is said to be the real danger faced by Interpark
if an employee is not bound to a restraint covenant.
It is however
significant that the applicant has diluted its confidential
information to something that may be applied purely fortuitously.
I
will however assume that the applicant intended to convey that the
performance of the function itself is confidential even if
it might
be witnessed by others.
[20]
Interpark contends that these functions are “
…
made available through the customised software that facilities the
smooth running of the operations
”
(para 30.8). The functions are not identified but appear to relate
to tasks devised by Interpark that its’ staff
is required to
perform in order to overcome the “
perennial
difficulties
”
of ensuring that cash received reaches its intended destination since
major difficulties arise in controlling enormous volumes
of small
transactions.
[21] The
applicant concedes that Mr Joubert did not have access to software
programming or similar data (at para 30.8). However
it contends that
Mr Joubert received specialised training in order to correctly apply
the applicant’s methodology, procedures
and forms, such as
specific cash-up procedures, reconciliation templates and operating
and report back procedures to property owners.
[22] In
summary, Interpark concedes that Mr Joubert did not have access to
the programs themselves but contends that he was exposed
to the
procedures it had devised and which it claims are unique. It is
difficult to appreciate why this was not set out in simple
terms or
why the court was not enlightened as to what made the methodology
confidential or unique. The applicant’s only
explanation is to
claim that it “
can
obviously not divulge the exact details and specifications of the
systems and methodologies referred to, as this would defeat
the
purpose of both this application and agreements in restraint of trade
…
”
I disagree. Procedural means exist to ensure that information
alleged to be sensitive is provided to the court without
being
revealed to a respondent competitor. It is only in this manner that
an allegation can be properly tested and a litigant’s
failure
to make use of these procedures ought to be held against it.
[23] In any
event the applicant appears to have obfuscated the issue. The court
has no interest in the specifications of the systems
that comprise
software information to which only senior management has access. The
case made out is that Interpark adopts unique
procedures to which Mr
Joubert became privy and that they are different from those of its
competitors.
[24] There is
a further difficulty facing Interpark, namely its statement at
paragraph 30.1 that its information, control and reporting
mechanisms
are developed and upgraded on a continuous basis “
…
as more and more sophisticated tools become available
”.
[25] If the
systems are as sophisticated as Interpark indicates and are under
reasonably regular review and upgrade then, on the
case it makes out,
the procedures and methods applied by an operations manager will
consequently be revised on a reasonably regular
basis.
[26] I must
now determine the essential facts before me. This is an application
for final relief and the principles enunciated
in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634I-635C apply. I have no reason to doubt
the genuineness of the facts raised by Mr Joubert nor is there
another basis
to reject them. Furthermore, the applicant did not
request that the matter be referred to the hearing of evidence.
[27
]
In applying
Plascon-Evans
,
I consider that the following factual evidence is before me:
Mr Joubert did not have access to details of the systems and
methodologies utilised by Interpark.
Interpark’s
systems and methodologies are upgraded and revised which is a “
…
continuous effort, as more and more sophisticated tools become
available
”
(at para 30.1).
Mr Joubert
was exposed
to the applicant’s manuals, instructions and forms, but these
are likely to change and become outdated precisely because
“
more and more sophisticated tools become available
”
Mr Joubert
was required to apply and therefore became aware of Interpark’s
functional procedures and methods.
Interpark has
not demonstrated if, and to what extent, the methods and procedures
that
Mr Joubert was required to apply are unique to it.
RESPONDENT
S’
ADDITIONAL SUBMISSIONS
[28] These
may be divided into factual contentions and legal submissions.
[29
]
I deal firstly with the additional factual issues. Mr Joubert
maintains that:
He
left
Interpark’s employ because of concern for his family’s
safety. This arose after employees at parking areas for
which he
was responsible were dismissed when they were caught stealing.
Subsequent to their dismissal, Mr Joubert received threatening
calls
and there were two further disturbing events. As a result, and
although Mr Joubert did not know if the events were linked,
he and
his wife decided that they should not put their family at risk and
he commenced looking for alternate employment.
He resigned
from the applicant in order to join
his
father–in-law’s business. Due to the recession, this
proved unsuccessful despite approaching a number of employment
agencies, and even seeking the position of an operations manager
with the applicant in Cape Town. Mr Joubert became increasingly
despondent and desperate for work.
Mr Joubert’s
financial position deteriorated and he was obliged to put his house
up for sale. It was only at this stage
that he looked for
employment in the parking management sector again. Three companies
in the sector had vacancies. He was interviewed
by two of them and
secured employment with Easipark.
[30]
Essentially
the case made out is that in order to retain his personal dignity
through work and to avoid financial ruin and its adverse
effects on
his family, which includes four children, Mr Joubert was obliged to
take up the only employment available, some six
months since his
father-in-law’s business collapsed. His employment was with a
competitor to the applicant, and at a slightly
higher salary than
received when he left Interpark almost a year previously. This
despite offering himself for employment again
with Interpark.
[31] Mr
Joubert also contends that he was “
instructed
”
to sign the restraint agreement failing which he would not obtain
employment. He did so because he needed to obtain permanent
employment. He felt that he was not in a position to refuse signing
the restraint in its terms.
[32]
Interpark denies that Mr Joubert was “
instructed
”
to sign the restraint agreement and relies on his concession that the
restraint agreement was signed because he wished to
obtain permanent
employment. Interpark avers that Mr Kruger had tendered his
resignation on two previous occasions which were subsequently
withdrawn after Interpark’s representatives advised that they
were not willing to accept these. Save for these facts, the
balance
of Mr Joubert’s allegations constitute the evidence before me.
[33] Although
it is evident that Mr Joubert had previously sought to resign and was
discouraged from doing so, Interpark does not
dispute the significant
averment made by Mr Joubert that he had approached his superior at
Interpark, a Mr Kruger, and informed
him of the threats he had
received. Interpark furthermore did not challenge the veracity or
bona
fides
of Mr Joubert’s statement that, as a result of the threats
which he had mentioned to Mr Kruger, he was concerned about his
family’s safety and that this prompted his resignation (See
para 21 on page 122). Interpark however disputes that Mr Joubert
informed it that these were the reasons for wanting to leave.
[34] On a
careful consideration of Mr Joubert’s affidavit, it is apparent
that he did not advise Interpark of his reasons
for resigning. I am
prepared to accept that there were a number of reasons which prompted
Mr Joubert’s resignation, including
the potential for bettering
himself and the unsettling threats he had received when performing
his duties that resulted in disciplinary
action being taken against
employees for theft.
[35] The
legal issues raised by Mr Joubert are:
Interpark is
not entitled to rely on the conclusion of the restraint agreement in
order to enforce it but must demonstrate that
there is a protectable
interest which is more than just tenuous.
Interpark
only sought to demonstrate a protectable interest in its replying
affidavit which is impermissible. This must be considered
together
with the further submission by Mr Joubert that Interpark bears the
onus
of demonstrating that the restraint is enforceable in law.
The restraint
is unduly broad and is for
a
two year period which he contends is too long, particularly when
regard is had to the extensive geographical area covered by
the
restraint and the extent to which Mr Joubert is precluded from
undertaking work not only within the parking management industry
but
every other industry in which companies within the PEM Group conduct
their activities (which also includes the media and
security
services).
The restraint is defeated by an
undertaking given by both Mr Joubert and Easipark respectively that
any confidential information
will not be disseminated or utilised. I
do not propose dealing with this submission in any detail. It is
clearly wrong. See eg
Reddy
v
Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA)at para [20] citing
BHT
Water Treatment (Pty) Ltd v Leslie and Another
1993
(1) SA 47
(W) at p 57J to 58B:
The person
seeking to uphold the restraint
covenant
bears the
onus
of proving its enforceability.
Mr
Chaskalson
argues that this arises by reason of the rights of the individual
protected under the Constitution with particular reference
to
section 22 (freedom of trade, occupation and profession) considered
with the right to dignity (section 10) as read with those
provisions
of the Constitution which give it horizontal application (section
8(2)) and the court’s duty to develop the
common law in a
manner that promotes the spirit, purport and objects of the Bill of
Rights (section 39(2) which uses the word
“
must
”).
In the alternative, it is argued that at the very least public
policy is informed by the Constitution which in the
present case
involves a consideration of the freedom of occupation, the rights to
dignity and to property (section 25) and the
impact of inequality of
bargaining power and anti-competitive behaviour.
APPROACH TO THE
LEGAL ISSUES
[36] There is
a significant overlap between the various legal issues raised.
Moreover by reason of the conclusions I have reached
I consider it
unnecessary and inadvisable to deal with the suggested change of the
onus
to pre-
Magna-
Alloys
(
infra
)
since in my view this is an
a
fortiori
case.
The question of re-visiting the
onus
appears best left for determination in a case where it is decisive.
RESTRAINTS AND PUBLIC POLICY CONSIDERATIONS
[3
7]
Since
Magna-Alloys
and Research SA (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) a restraint of trade agreement will be enforced
unless it is contrary to public policy. The principle enquiry is
whether or
not the party seeking to enforce the restraint has a
protectable interest, and if so, whether that interest outweighs
public interest
considerations (at p 897F to 898D).
[38
]
While
Magna-Alloys
changed the incidence of the
onus
,
it remained for
Basson
v Chilwan and Others
1993 (3) SA 743
(AD) to identify the underlying principles and to
settle how they were to be applied within the limited context of
terminated employment
and partnership relationships.
[
39]
The issues that require determination when an employment or
partnership relationship ends were identified in
Basson
to
be the following:
A restraint will not be implemented if it conflicts with public
policy.
A restraint will conflict with public policy if its effect is
unreasonable.
The
reasonableness of the restraint is determined by reference both to
the broad interest
s
of the community on the one hand and the interests of the
contracting parties themselves on the other.
The broad
interests of the community involve in turn a consideration of two
conflicting interests, namely:
an
agreement
should be enforced even if it promotes “
unproductivity
”;
(ii)
“
unproductivity
”
should be discouraged even if it wrecks the agreement.
The interest
s
of the contracting parties are determined by reference to whether
the restraining party has a protectable interest which is
properly
served by preventing the restrained party from participating freely
in the commercial or professional world after termination
of their
contract. If it does not, then the restraint is contrary to public
policy.
Whether a
restraint is reasonable
inter
partes
is
determined objectively. Accordingly no provision in a restraint
covenant, however carefully worded, is decisive nor can it
entrench
an otherwise unreasonable provision. At best it is an evidential
fact to be considered in determining the existence
of a protectable
interest and what is to be regarded as reasonable.
Even if a
restraint is reasonable
inter
partes
,
it may nonetheless damage the public interest (for a reason that
might be unrelated to the parties), and
vice
versa
.
[
40]
The mere elimination of competition as such is not a protectable
interest, even if the restraint was required in order to protect
an
investment of capital or expenditure (whether in time or money)
incurred in training the employee. There may be other satisfactory
remedies that are more proportionate to the harm or potential harm
suffered (eg. the repayment of agreed training costs such as
those
incurred by airline pilots). Conversely there are cases of genuine
money compensation directly paid by the employer to sterilise
the
employee from competing after the relationship is terminated, as is
evident when key-personnel resign or retire.
[4
1]
Aside from setting out the basic principles governing restraint
agreements,
Basson
made it clear that the outcome of the enquiry itself is determined
casuistically and is based on a value judgment, the result of
which
may vary from case to case.
[4
2]
Basson
set out four enquiries that needed to be undertaken in each case in
order to give practical effect to the principles enunciated.
They
are:
Does the
restrain
ing
party have an interest, once the agreement is at an end, which
deserves protection.
Is that
interest being prejudiced by the other party.
If so, then
considered both qualitatively and quantitatively, is the restraining
party’s interest stronger than the other
party’s
interest not to be economically inactive and unproductive; and
Is there any
other facet of public policy, that has nothing to do with the
relationship between the parties, which requires that
the restraint
should either be maintained or rejected. If the restrained party’s
interests are greater than those of the
other party (as determined
in (c)), then as a rule it will also be greater than any public
interest unrelated to the relationship
between the parties (as
considered under (d)).
[4
3]
Since it did not arise in that case, the enquiries do not cover the
issue of severability. Wunsh J introduced this further consideration
in
Kwik
Kopy (SA) Pty) Ltd v Van Haarlem and Another
1999 (1) SA 472
(W) at 484E which involves the following enquiry:
“
Whether
the restraint is wider than what is necessary to protect the
applicant’s interest.
”
Nampesca
(SA) (Pty) Ltd and Another v Zaderer and Others
1999 (1) SA 886
(C) at 894I-895B adopted this additional enquiry. The
enquiry recognises the court’s entitlement to restrict an
overly extensive
restraint provision to the confines of what is
necessary to protect the restraining party’s interest, provided
the test for
severability or a reading down of the agreement
satisfies accepted principles (cf
Nampesca
at
896A-C).
POST-BASSON
AND
THE ROLE OF CONSTITUTIONAL NORMS
[4
4]
The principles enunciated in
Basson
and the enquiries that were formulated to give them practical effect
have been extensively applied as borne out by case law.
[45
]
In
Drs
Jacovides and Partners Inc v Dr Moodley and Others
(Case No. 10229/06 (SGHC) delivered on 13 October 2006 unreported) at
para [20] I considered the effect of the Bill of Rights on
public
policy in respect of restraints to be the following:
“
The
determination of the public interest factor and its weight, where it
is an element of a common law principle, must be fashioned
by
constitutional values. See section 39(2) of the Constitution and the
body of now established case law such as Minister of Safety
and
Security v Van Duivenboden
2002 (6) SA 431
(SCA) para [17]; Van
Eerden v Minister of Safety and Security (Women’s Legal Centre
Trust, as amicus curiae)
2003 (1) SA 389
(SCA) at paras [10] to [12],
Du Plessis v Road Accident Fund
2004 (1) SA 359
(SCA) at para [18]
and Rail Commuters Action Group and Others v Transnet Ltd t/a Metro
Rail and Others
[2004] ZACC 20
;
2005 (2) SA 359
(CC) at paras [76] to [88].
”
(at para [20])
[46
]
Dr
Jacovides
concerned a direct challenge to the enforceability of a restraint,
based on the contention that the constitutional right of access
to
healthcare services under section 27(1) of the Constitution was
determinative of the public policy element. This arose because
an
employee respondent was one of very few medical practitioners engaged
in providing HIV/Aids treatment in the region and it was
argued that
the effect of the restraint would prevent his patients from receiving
adequate care.
[4
7]
The subsequent case of
Reddy
v
Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) at para [11] makes it abundantly clear that:
“
All
agreements including agreements in restraint of trade are subject to
constitutional rights obliging courts to consider fundamental
constitutional values when applying and developing the law of
contract in accordance with the Constitution. … Section 8
of
the Constitution is imperative. The Bill of Rights applies to all
law, also private law, and binds, inter alia, the judiciary
(s 8(1)).
Its provisions bind natural and juristic persons if, and to the
extent that, they are applicable, taking into account
the nature of
the right and the nature of any duty imposed by the right (s 8(2)).
In their application to natural and juristic
persons a court must
apply or, if necessary, develop the common law to give effect to the
right when legislation does not do so
(s 8(3)(a)). A court may also
develop the common law to limit the right in accordance with s
36(8)(b)). Section 39(2) requires
a court when interpreting and
developing the common law to promote the spirit, purport and objects
of the Bill of Rights.
”
[
48]
At paragraph [12] Malan AJA (at that time) in
Reddy
indicated that the purpose of the limitation of the exercise of a
right by reason of another person’s own fundamental rights
(in
order to determine whether there has been an unconstitutional
limitation of a right) must be considered by reference to the
purpose
of the limitation in conjunction with all the other factors referred
to in section 36(1) and that such a situation “
…
may occur when the enforceability of agreements in restraint of trade
and the balancing or reconciling of the concurring
private and public
interests are considered
”.
[
49]
While recognising the impact that constitutional rights have in
determining the enforceability of agreements in restraint of
trade,
the court in
Reddy
(at para [14]) left open the question of whether the
onus
still remained with the person seeking to avoid a restraint or
whether this was in conflict with section 22 of the Constitution
which guarantees freedom to engage in economic activity.
[50]
Reddy
left
the question open (at para [14]) because it played no role in the
outcome particularly as the facts had been fully canvassed
and, being
a motion matter effectively for final relief, were to be resolved in
favour of the respondents on an application of
Plascon-Evans
.
[51] Mr
Chaskalson on behalf of the first respondent argued that the
applicant was not entitled to make out a case of pro
tectable
interest for the first time in reply.
Mr
Hopkins
contended
that the applicant was entitled to since the
onus
to
demonstrate that the agreement was unenforceable rested with the
respondent – the applicant only had to demonstrate a concluded
restraint covenant. For this reason I must touch upon the issue of
onus
.
[52] The
starting point is to establish the stage of the enquiry where
onus
becomes relevant.
In my view the
question of what constitutes public policy and which interests are
the stronger (i.e. the restraining or the restrained
party’s or
the public’s) is essentially determined by an application of
substantive law and where
onus
generally
plays little (such as during the formative stages) or no part.
Compare
Second
Restatement of the Law of Contracts
2d, Vol2 Ch8, pp 3-4, 5, and p 37 para186. See also
Dickson
v Pharmaceutical Society of Great Britain
[1970] AC 403
at 441. Whether such public policy considerations are
actually present in a given case is a question of fact which may
depend on
which party bears the
onus
.
[53] However,
in motion proceedings for final relief (or in effect final relief)
the facts are not determined by the incidence
of
onus
but by an application of
Plascon-Evans
which accepts the respondent’s version (including admissions)
unless there are justifiable grounds not to give them credence.
See
Reddy
at
para [14].
[54] In the
present case it involves determining whether proper practice in
motion proceedings requires an applicant employer to
deal with the
issues regarding a protectable interest in its founding papers or
whether it is entitled to tactically overcome
Plascon-Evans
by leaving the aspect of protectable interest for reply. This is an
issue of significant concern because the nature and scope
of the
protectable interest claimed is unlikely to be known to any but the
top echelon of management which makes it difficult ,
if not
impossible, for a respondent employee to anticipate what he must deal
with if the applicant does not deal with it in the
founding papers.
It therefore
becomes necessary to recall the distinction between the burden of
proof and the duty to produce evidence first. See
High Court Rules 39(5), (9) and (13).
[55]
I
n
motion proceedings affidavits “
…
serve not only to place evidence before the Court but also to define
the issues between the parties … This is not
only for the
benefit of the Court but also, and primarily, for the parties. The
parties must know the case that must be met and
in respect of which
they must adduce evidence in the affidavits.
”
See
Swissborough Diamond Mines (Pty) Ltd and Others v Government of the
Republic of South Africa and Others
1999 (2) SA 279
(T) at 323F-G.
[56] More pertinently
the founding affidavit
“
… takes
the place not only of the declaration but also of
the
essential evidence which would be led at a trial
and if there are absent from the petition such facts as would be
necessary for
determination of the issues in the
petitioner’s favour
,
an objection that it does not support the relief claimed is sound
”
(my emphasis). See
Hart
v Pinetown Drive-Inn Cinema (Pty) Ltd
1972
(1) SA 464
(D) at 469C-E.
[57] However in
Sibex
Engineering Services (Pty) Ltd v Van Wyk and Another
1991 (2) SA 482
(T) Stegmann J in a minority decision held that since
the first respondent had the
onus
of proving that the appellants had no protectable interest it did not
matter that it only dealt with this issue in reply (at p
493J-494A).
See also
Swissborough
at 323J-324C.
[58] Although a respondent may
ask a court for leave to file a further set of affidavits if it is
prejudiced by new matter being
raised, this is regarded as an
indulgence. One should avoid the exception becoming the norm. In
restraints the filing of an additional
fourth set of affidavits would
be almost inevitable if an applicant employer is not required to set
out the essential evidence
first. It will be recalled that courts
have frowned on a landlord applicant claiming ejectment by relying in
the founding papers
only on its ownership and the respondent’s
possession (Graham
v
Ridley
1931 TPD 476)
whereas the issue concerned a lease that the applicant had purported
to terminate. In restraint cases the issue generally revolves
on
whether there is a protectable interest extant at the time it is
sought to be enforced.
[59] In my view, in motion
proceedings a party who seeks to enforce the restraint as an
applicant must set out in its founding
affidavit the proprietary
interest it contends requires protection so that it can be
meaningfully dealt with in the answering affidavit
(and if necessary
be dealt with by referral to oral evidence). This would be
consistent with the requirements of placing facts
relative to the
issues in dispute in the founding papers. It would also accord with
the requirement that facts peculiarly within
the knowledge of the
applicant should be produced by it (e.g.
Electra
Home Appliances (Pty) Ltd v Five Star Transport (Pty) Ltd
1972 (3) SA 583
(W) 585A and compare
Cotler
v Variety Travel Goods (Pty) Ltd
1974 (3) SA 621
(A) at 629D. See also
Ricke
v Sack
1978 (1) SA 821
(A) and
Eskom v First
National Bank of SA Ltd
[1994] ZASCA 186
;
1995 (2) SA 386
(A) at 390G.
[61]
In the present case, to the
limited extent that the applicant dealt with the question of a
protectable interest in a manner that
went beyond the allegations of
the Respondent, such averments have been treated with circumspection,
as appears earlier in this
judgment..
PROTECTABLE INTEREST
[62] The restraint is for a
period of two years.
[63] At the time this case was
argued, one year had already elapsed.
[64] The respondent contends
that there is no protectable interest that has survived by the time
this case was argued.
[65] It is clear from the
applicant’s papers that it struggled to identify precisely what
constitutes its protectable interests.
It certainly is not the
software programmes themselves nor is it the customer connections.
At best it is the knowledge acquired
by the respondent in the
day-to-day application of the procedures laid down by the applicant.
The applicant confirms that these
are not static but subject to
ongoing development and change.
[66] In
Reddy
,
the respondent employee was restrained for a period of one year
because he had access to sophisticated intellectual technology
of a
major telecommunication corporation. There are few cases where the
employee receives no compensation for sterilising his labour
and is
restrained for any period longer than a year. Having regard to the
tenuous nature of the protectable interest claimed in
the present
case and the alleged regular developments in the industry it is
sufficient for the purposes of this case to find that
the respondent
has demonstrated on paper that a restraint beyond at most a year is
unreasonable and that the applicant has not
produced evidence that is
not adequately gainsaid by the respondent to demonstrate that the
protectable interests it claims have
survived a year since Mr Joubert
resigned from its employment
I accordingly find that the
restraint is now unenforceable.
CONSTITUTIONAL CONSIDERATIONS
[67] If I am wrong in regard to
the applicant’s protectable interest not surviving the year
since Mr Joubert left its employment,
it is necessary to deal with
the constitutional challenge raised by Mr Chaskalson.
[68] This in turn requires the
application of
Reddy
and
Darkhuizen v
Napier 2007(5) SA 323 (CC)
with consideration being given to the decisions in
Advetech
Resourcing (Pty) Ltd t/a Communicate Personnel Group v Kuhn and
Another
2008 (2) SA 375
(C),
Den
Braven SA (Pty) Ltd Pillay and Another
2008 (6) SA 229
(D&CLD) and
Mozart
Ice-cream Franchises (Pty) Ltd Davidoff and Another
2009 (3) SA 78
(C) with regard to whether there is in effect a
presumption favouring the public policy value of upholding contracts
in restraint
cases. I have already indicated that it is unnecessary
to consider the question of onus since it does not arise crisply for
determination.
[69] I intend following the more
flexible and nuanced approach articulated by Davis J in
Mozart Ice-cream.
In
my respectful view it is more consonant with the import of
Reddy
(particular at para [12]).
Moreover,
Jacovides
is a useful illustration of a case where the assertion of a
constitutional right of access to health care (section 27), if
HIV/AIDS
patients were prevented by a restraint imposed on the only
medical doctor able to treat them, would presumably outweigh as a
matter
of public policy, holding the doctor to his restraint if no
consideration was paid. In that case I found that the area of the
restraint was sufficiently narrow to preclude the infringement of
constitutional rights because the respondent could easily have
set up
his practice beyond the perimeter of the restraint without adversely
affecting the interests of his patients
[70] Conversely, there are cases
where the proprietary interest sought to be protected resulted in a
negotiated restraint, where
the employee was paid a considerable sum
to sterilize his economic activities, which would make it difficult
for a court not to
hold him to his bargain.
[71] In the present case, had it
been necessary, I would have taken the following factors into
consideration and would have regarded
them as outweighing the public
policy consideration of holding Mr Joubert to his contract:
The proven inability of Mr
Joubert to find alternate employment in another industry and the
effect on his ability to earn any
income having regard to the
recessionary climate. While it may have been possible to prevent Mr
Joubert from taking up employment
with a competitor for a period
shorter than one year, balancing the fairly tenuous link between the
applicant’s protectable
interest and Mr Kruger’s
knowledge of or access to it, his constitutional right to be
economically active in order to provide
for his family is a
significant public policy consideration.
The scope of the restraint is
indicative of very little thought going into the particular
circumstances of the specific employee
and the threat he or she
might pose. It will be recalled that Mr Joubert signed the
restraint while he was performing the more
menial tasks of a car
park manager at a very low salary and well before he was considered
for the position of Operations Manager
for a region.
I am alive to the considerations
favouring extensive severing of overbroad restraints mentioned in
Den
Bravin.
Nonetheless
courts should be slow to indirectly sanction clear cases of
over-reaching by reason of unequal bargaining strengths
and where
draftsmen demonstrate scant regard for rational provisions. The
one size fits all approach may also expose the restraint
as
fundamentally flawed because no rational basis exists for the period,
area or scope of the restraint being the same for both
a key
executive and for an administrative staff member.
In the present case, the period
and scope of the restraint is extremely extensive and bears little
relation to the interests that
are sought to be protected. As
indicated earlier, an essential annexure dealing with material
provisions was omitted and at best,
what is left, is the common law
protection afforded to an employer in respect of protecting a
proprietary right. That right has
not been adequately demonstrated in
the papers before me on an application of
Plascon-Evans
.
ORDER
[72] It is for these reasons
that I dismiss the application with costs.
_____________________________
B
S SPILG
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
DATE OF HEARING: 6 November 2009
DATE OF JUDGMENT: 29 March 2010
HANDED DOWN: 30 April 2010
REVISED: 17 May 2010
FOR APPLICANT Adv K HOPKINS
DAVID KAHN & ASSOCIATES
FOR 1
st
RESPONDENT: Adv M CHASKALSON
PKX ATTORNEYS