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[2020] ZAGPJHC 116
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Compressor Valves and Accessories (Pty) Limited v Thackeray (43240/2019) [2020] ZAGPJHC 116 (30 March 2020)
IN
THE HIGH COURT OF SOUTH AFRICA,
LOCAL
GAUTENG DIVISION, JOHANNESBURG
CASE
NO: 43240/2019
In the matter between:
COMPRESSOR VALVES AND
ACCESSORIES
(PTY)
LIMITED
Applicant
and
MACHE
LOUISE THACKERAY
Respondent
JUDGMENT
MIA, J
[1]
This is an application in
which the applicant seeks to enforce a restraint of trade agreement
it concluded with the respondent.
The application is opposed on the
basis that the restraint was not enforceable as there was no threat
of immanent harm and the
restraint was unreasonable as it was signed
under duress. The orders sought in this application by the applicant
are the following:
“
2 The
applicant seeks an order interdicting and restraining the respondent
until 20 September 2020 being a period of
twelve months from the date
of the termination of employment with the applicant from:
2.1 Being concerned,
engaged or interested in any business similar or competing with the
business of the applicant in the field
of compressors within the area
known as Gauteng;
2.2
Directly or indirectly
accepting any benefit, whether in money or otherwise, for any service
the same or similar to any service
provided by the applicant,
supplied to any person, firm or corporation which is as at the date
of termination of the respondent’s
employment, or at any time
during the period of one year immediately preceding such date was a
customer or client of the applicant;
2.3
To reveal to any person,
firm or corporation any technical know- how or information concerning
the organisation, functions, transactions
or affairs of the applicant
or any details of the customers or clients of the applicant and/or
the requirements of the services
or internal systems, and motivation
techniques, provided to them by the applicant and from utilising or
attempting to utilise any
such information in any manner which may
harm or cause loss either directly or indirectly to the applicant or
may be liable to
do so;
2.4
Directly or indirectly for
herself or any other person approaching in any way any person, firm
or corporation which the respondent
had personally assisted during
the course of his/her employment with the applicant at any time;
2.5
Directly or indirectly for
herself or any other person approach in any way, any person, firm, or
corporation which was a client
of the applicant at the time;
2.6
Enticing
or attempting to entice or encourage in any way any employee
employed by the applicant from leaving the employ of
the applicant or
to take up employment with any business similar to or competing with
the business of the applicant in the field
of compressors;
2.7
Interdicting and
restraining the respondent from
3.1Interfering with the
applicant’s customer relationships;
3.2 Utilising the
applicant’s confidential information including but not limited
to the pin numbers and reset numbers in respect
of Dalgakiran and
Hertz compressors as disclosed to her by the applicant;
4. Alternatively
to the aforegoing, granting the relief set out in 2 and 3 above as
interim relief pending an action to be
instituted within 30 days from
the granting of this order.”
[2]
The
applicant, Compressor Valves and Accessories (CVA), sells, rents and
services compressors of all makes and manufacture and sells
spare
parts for such compressors.
The
respondent, Mache Louise Thackeray (Ms. Thackeray) was employed as a
junior sales representative by CVA from February 2015 until
September
2019. She visited CVA clients to check on their service requirements
and to procure further sales. She handed in a letter
of resignation
in September 2019.
[3]
The application was originally launched as an urgent application set
down for 28 January
2020. The respondent filed an affidavit
addressing the urgency. Upon hearing the matter on urgency the Court
postponed the matter
sine die.
The respondent was granted
leave to file a supplementary affidavit on or before 7 February 2020.
The parties were granted leave
to approach the Deputy Judge President
for an expedited date to be allocated. The applicant was also ordered
to pay the wasted
costs of the postponement. A special allocation was
granted by the Deputy Judge President for 16 March 2020.
[4]
CVA have operated since 1987 and are the sole supplier of Dalgakiran
and Hertz compressors within
the Republic of South Africa.
Their
direct competitor Integrated Air Solutions sells Elgi compressors and
also maintains and services compressors of all makes
and manufacture
of compressors.
[5]
Ms. Thackeray was interviewed for the position of sales
representative with CVA by Eddie Swart
the owner and Mr. JP Van
Vuuren (Mr. Van Vuuren), the Human Resource Manager. She requested a
salary ranging between R8 000.00
and R10 000.00 and a commission on
sales of compressors. They discussed her salary, commission, medical
aid cover and pension fund
contribution during the interview. Mr.
Swart informed her CVA would look at covering medical aid and a
pension fund contribution
after five years as she was entering in a
junior position at that stage. She was informed to commence
employment on 16 February
2015.
[6]
When Mr. Van Vuuren presented her letter of appointment on 20
February 2015 she noticed her position
was not inserted. Her
commencing salary was R6000.00 per month, and was less than she
requested. The commission percentage was
less than they had discussed
in respect of sales of compressors as well. A few days later on 24
February 2015 she was requested
to sign a document with the heading
“Restraint of Trade”. She informed Mr. Van Vuuren that
the restraint of trade agreement
was not discussed as part of the
conditions of her employment. He informed her that she was required
to sign it or leave the employment
of CVA. She was not given an
opportunity to read the document and feared losing her employment if
she did not sign the document.
[7]
Ms. Thackeray had little experience in the compressor sales industry
prior to her employment with
CVA, having trained as a cabin crew
assistant with Qatar airlines. At CVA, she was trained on certain
technical specifications
of the compressors. These technical aspects
related to the sale and service information required to sell
compressors. She was introduced
to CVA’s existing clientele.
She had to visit clients to check on service requirements of existing
compressors and engage
clients to procure new sales. She initially
used the “buyer’s car” and later was permitted the
use of one of
CVA’s vehicles to travel to clients. Her
travel was tracked regularly and consistently.
[8]
Ms. Thackeray asserts that Mr. Swart became abusive and aggressive
after a medical
operation and intimidated her by swearing and kicking
the doors of the vehicle she used for travel purposes. On 6 September
2019
she handed in a resignation letter informing CVA she intended to
stop working for the company on 20 September 2019. She indicated
to
Mr. Swart that she was leaving in order to sell mushrooms as she was
afraid of him. She refused to furnish a copy of her letter
of
appointment when requested by Mr. Swart. He sent her home to retrieve
a copy. She left and did not return to CVA that day. He
called later
on the same day and was abusive to her. She handed the phone to her
grandfather to deal with Mr. Swart. Ms. Thackeray
did not return to
the company thereafter. CVA sent an employee to collect the company
vehicle later that same day.
[9]
CVA asserted it was contacted by an employee from Option Springs on
15 October 2015,
who indicated they had received a quotation from
Integrated Air Solutions sent by Ms. Thackeray. CVA further asserted
it received
a call on the 18 September 2019 from an employee of
Mpact, one of its clients, who forwarded a conversation between Ms.
Thackeray
and an employee of Mpact where Ms. Thackeray indicated she
was fired and was badmouthing CVA. The WhatsApp message was not
attached
to the founding affidavit. A further client of CVA
also indicated that they had received quotes from Ms. Thackeray but
had
not sent those through to CVA. CVA communicated by way of email
with Ms. Thackeray and requested that she stop badmouthing CVA and
refrain from contacting its clients.
[10]
CVA then followed this communication with a cease and desist letter
to prevent Ms. Thackeray
from breaching the restraint of trade
agreement. When no response was received, CVA contacted
Integrated Air Solutions to
determine whether Ms. Thackeray was
employed there but were not successful in obtaining a positive
response.
[11]
Mr.
Dobie, appearing for the applicant, argued that CVA was compelled to
pursue this application to protect its proprietary interests
with
regard to their client connections and confidential information. Ms.
Thackeray had a complete understanding of CVA’s
products as
well as its pricing structures, strategies, strengths and weaknesses
and could use this information to compete unfairly
with CVA whilst
employed with its competitor. It was apparent that Ms. Thackeray had
already breached the restraint of trade covenant
by furnishing a
quote to Option Springs, a client of CVA. CVA had also
received information from other clients that
Ms. Thackeray either
spoke badly about the company or furnished competing quotations.
[12]
He argued further that the restraint covenant is valid and
enforceable
[1]
unless
the respondent showed that it was unreasonable and contrary to public
policy and should not be enforced. The restraint of
trade agreement
was signed at the commencement of the employment relationship on the
24 February 2015. Paragraphs 1.1.1 to 1.1.7
all record that the
respondent would acquire knowledge and know-how of the company, it
activities, clients, needs of clients, prospective
clients, and will
derive benefit from technical training and marketing experience. It
acknowledged further that with that knowledge
she will have influence
over the company operations, business and clientele and customers and
be responsible for maintaining goodwill
built up. Therefore to
protect the company she accepted it was necessary to sign the
restraint of trade agreement.
[13]
He argued further that Ms. Thackeray had the option of not accepting
employment with CVA if she
did not agree with the restraint of trade
agreement. It was a term of employment negotiated at the outset of
the contract and there
could be no duress. The requirement that she
sign the restraint was merely hard bargaining or commercial
bargaining.
He argued that she undertook to treat company
information as confidential and that she was willing to accept
company rules and
disciplinary codes. She was thus bound by the CVA’s
requirement that she sign a restraint of trade agreement and the
contents
thereof. The onus was on Ms. Thackeray to prove that
there was duress and that the restraint of trade agreement was
unreasonable.
[14]
Mr. Dobie argued that Ms. Thackeray’s complaint that she was
treated badly is not a valid
reason the restraint covenant should not
be enforced. He argued further that her undertaking not to
communicate with CVA’s
clients in future could not be accepted
in good faith as her past conduct demonstrated that she did not
uphold the agreement she
signed. Her past conduct reflected her
breach of the restraint of trade agreement she signed the first time
when she accepted employment
with a competitor of CVA and the second
time when she referred CVA’s client to her current employer for
a competing quotation.
He argued that it mattered not that Option
Springs, accepted CVA’s quote instead of Integrated Air
Solutions, the fact was
that Ms. Thackeray offered a competing
quotation in breach of the restraint of trade agreement. If the quote
were accepted it would
have taken custom away from CVA and had the
potential to cause harm by diminishing their profit and reducing
their client base.
[15]
He argued that CVA had a right to protect their proprietary interests
and the restraint of trade
provided for such protection. There was a
clear breach by Ms. Thackeray. She held confidential information of
CVA which included
their client numbers, pricing and pin codes. She
had approached Option Springs and other clients and there was every
reason to
believe she would approach more clients and would utilize
CVA’s confidential information. He argued that CVA could not
show
what losses had been incurred as it entailed involving clients
in its disputes and was counter- productive. Ms. Thackeray could
well
secure financial information pertaining to its business and profit
margins and it is well able to meet any damages claim Ms.
Thackeray
may be able to demonstrate. He argued further that she is able to
mitigate her losses by finding another position or
starting her own
business. Mr. Dobie argued that CVA had made out a case for
final relief however to the extent the Court
was not inclined to
grant a final order it should grant an interim order and refer issues
in dispute to trial.
[16]
Ms de Witt, appearing for the respondent argued that
Ms.
Thackeray did not deny being employed by Integrated Air Solutions.
She denied however that CVA had a proprietary interest to
protect and
challenged the
enforceability of the restraint of trade agreement. She argued
that Ms Thackeray as one of the most junior
sales persons in the
company, who did not receive a commission on many occasions could not
have held important proprietary information
as asserted by CVA
as they admit that she was a minor role-player as a junior sales
person.
[17]
She argued further that when Ms. Thackeray commenced employment and
signed a letter of appointment having
discussed the terms and
conditions, the restraint of trade agreement was never a part of the
discussion. She was presented
with the document by Mr Van
Vuuren after she signed her letter of appointment. She was not given
the option of negotiating it during
the discussion concerning terms
and conditions of her contract. She was informed she had to sign or
leave. This situation was intimidating
and she felt compelled to sign
the agreement or lose her employment. She felt she had no option. Ms
de Witt argued that there was
no such practice as commercial
bargaining or hard bargaining as suggested by Mr. Dobie and it was
unconscionable to compel Ms Thackeray
to sign such an agreement after
she signed her letter of appointment. She was not afforded the
opportunity to read the document
before signing the agreement.
The restraint was
imposed
on her after she signed the letter of appointment as a non-negotiable
condition of her employment. It was
signed
under duress and is thus unenforceable.
[18]
Ms de Witt argued further that Ms Thackeray denied that CVA had a
proprietary interest in the
form of any confidential information such
as technical information, pricing, special codes or client
information which required
protection by way of an interdict. Ms
de Witt argued that Ms Thackeray admitted to having some technical
knowledge as she
was taught to read the compressor meters. She
however denied having the extent of the technical knowledge
attributed to her by
CVA. She would take photos of the screens on
compressors, send them to the technical department. The technical
team would then
communicate with the client directly regarding the
service requirements and the costs without her input or involvement.
She argued
further that this limited knowledge did not encompass
CVA’s strategies or its strengths or weaknesses. Ms de Witt
argued
that CVA’s clients were aware of their products and when
they enquired about a product Ms Thackeray would go back and forth
between the client and the technical team to relay information as the
information was not known to her. Ms Thackeray thus did not
have
access to codes, to pricing or trade secrets and no opportunity to
form relationships or attachments with clients
[19]
Ms. de
Witt
argued further
that CVA’s proprietary interest could not be affected because
Ms Thackeray had contact with its clients. Referring
to the case of
Walter
McNaughten (Pty)
Ltd v Schwartz and Others
2004(3)
SA 381(C) she argued that Ms Thackeray’s contact with CVA’s
clients was not of such a nature that she could
easily induce them to
follow her. CVA’s clients had contacted her on her
private cellphone when she referred them to
her new employer. This
was a single incident which would not be repeated, especially since
her employer furnished her with an official
phone for use. She argued
further that CVA failed to provide proof of any other breach as they
assert in their founding affidavit.
They also fail to show a loss or
decrease in profits and clients over the period of six months since
Ms Thackeray’s termination
of employment which indicates they
have not suffered any harm or immanent harm. During this period half
of the period of restraint
had passed. Consequently she argued that
the balance of convenience favoured Ms Thackeray in the circumstances
where there was
duress, and on the one hand CVA proved no loss of
profit or trade connections, they suffered no harm and on the other
hand Ms Thackeray
had the right to be economically active.
[20]
CVA sought final relief and in the alternative interim relief. The
relief if granted would amount
to final relief in view of the
remaining period of restraint being of such short duration. There
were only six months left of the
period that CVA required Ms
Thackeray to be interdicted. In accordance with the principles laid
down in
Plascon Evans Paints Limited v Van Riebeeck Paints Limited
(Pty) (Ltd)
1984 (3) 623 (A), a final interdict may only be
granted if “the facts as stated in the respondent’s
affidavit together
with the admitted facts in the applicant’s
affidavit justify an order for final relief as sought”. This
test applies
even where the
onus
is on the respondent to prove
that a restraint is unreasonable and accordingly
contra bonis
mores
.(see
Associated South African Bakers Pty Ltd v Oryx &
Verenigte Backereien (Ply) Ltd & Andere
1982 (3) SA 893
AD at
923 G-924 B.)
[21]
In
Basson v Chilwan and Others
1993(3) SA 742 (A), Botha JA in
a separate judgment stated at p 776:
“
The
incidence of the
onus
in a case concerning the enforceability of a contractual provision in
restraint of trade does not appear to me in principle to
entail any
greater or more significant consequences than in any other
civil case in general. The effect of it in practical
terms is this:
the covenantee seeking to enforce the restraint need do no more than
to invoke the provisions of the contract and
prove the breach; the
covenantor seeking to avert enforcement is required to prove on a
preponderance of probability that in all
the circumstances of the
particular case it will be unreasonable to enforce the restraint; if
the Court is unable to make
up its mind on the point, the
restraint will be enforced. The covenantor is burdened with the
onus
because public policy requires that people should be bound by their
contractual undertakings. The covenantor is not so bound, however,
if
the restraint is unreasonable, because public policy discountenances
unreasonable restrictions on people's freedom of trade…”
[22]
In
Basson
supra
the
Court
per
Nienaber
JA at 767 C-F
[2]
held
that a convenant in a restraint of trade may be unenforceable
inter
partes
if:
‘
This
concerns, as repeatedly emphasized in the Magna Alloys matter
supra,
the
enforceability of a provision in an agreement that is otherwise
valid.
An
agreement is in whole or in part unenforceable if it harms the public
interest or is conflict with the public interest. A provision
of this
nature which attempts to bind or restraint an employee or partner at
the end of a contract- and that is all that needs
to be had regard to
here- violates the public interest if the effect of the restraint
would be unreasonable. The reasonableness
or lack of
reasonableness of the restraint is determined having regard to
the broader interests of the community on
the one hand and those of
the contracting parties on the other hand. Regarding the
broader community there are two conflicting
considerations:
agreements should be maintained (even though it results in
unproductivity or economic inactivity ); unproductivity
or economic
inactivity is most discouraged (even where it collapses the
agreement)(see
Sunshine
Records (Pty) Ltd v Frohling and Others
1990
(4) SA 782
(A) te 794D-E). It hinders the one party from allowing
the other to apply themselves in the trade and vocational world after
the
end of their contractual relationship, without efficiently
protecting a proprietary interest of the other party. This is in
itself
contrary to public policy.” (loosely translated)
[23]
CVA has proved an agreement was signed on 24 February 2015 and the
onus falls on the respondent
to show that it is unreasonable at the
time of enforcement. I am required to examine the agreement and the
circumstances to ascertain
whether the enforcement of the agreement
would be contrary to public policy, bearing in mind that agreements
freely entered into
must be honoured. I am also cognisant that
everyone should be free to seek their opportunities in business and
economic activity.
(See
Magna Alloys and Research SA (Pty) Ltd v
Ellis
[1984] ZASCA 116
;
1984 (4) SA 874(A))
Thackeray’s first defence
was the unreasonableness of the restraint of trade agreement due to
duress. The first principle
in our law is that a contract willingly
entered into must be upheld. This also supposes that the parties have
contracted on an
equal footing. Having regard to the circumstances
and manner in which the agreement was presented to Ms Thackeray it is
evident
that the parties did not contract on an equal footing. when
the employment contract was concluded. Ms. Thackeray was clearly the
weaker party. It is not disputed that she was not afforded an
opportunity to read the document she was expected to sign. This
cannot be described as driving a hard bargain or commercial
bargaining. When the document was presented after her
employment
had commenced as a further non- negotiable condition of
employment on a take it or leave basis it was clearly not signed
freely
and voluntarily. On this basis it is not in the interests of
public policy to uphold the agreement. This puts an end to the
restraint
agreement on the basis of duress. I express my views
on the remainder of the arguments for the sake of completeness.
[24]
Ms Thackeray bore the onus of proving that CVA had no proprietary
interests worthy of protection.
There was no reply to Ms Thackeray’s
denial that whilst she had some technical knowledge it was limited
and she was not in
possession of pin codes to enable her to service
CVA’s client’s compressors. She denied having access to
pricing structures
which were supplied by the technical department to
CVA’s clients directly. This is not disputed by CVA. As a
junior sales
person and given the nature of her work it is
incomprehensible Ms Thackeray would have built up relationships with
clients to be
able to entice them to follow her. Her trips were in
any event monitored by Mr Swart preventing her from going out to
lunch or
buying gifts to cement a relationship with a client. It is
apparent that she poses no threat to CVA’s proprietary
interests
in that she has no knowledge of pricing or codes. She had
contacts of thirty clients. CVA has not shown that they have lost
clients.
An interdict would pose an unreasonable restriction on her
freedom to be economically active and would also be contrary to
public
policy, should it be enforced.
[25]
I am satisfied that Ms Thackeray has succeeded in discharging the
onus in showing that, the agreement
was concluded under duress and as
such is unenforceable. Further she has discharged the onus in showing
that she does not have
knowledge of CVA’s proprietary interests
such as pricing and codes and enforcing the restraint of trade
agreement would pose
an unreasonable restriction on her freedom to be
economically active and would also be contrary to public policy,
should it be
enforced. The applicant, in my view, has failed to make
out a case for the relief that it sought.
ORDER
[26]
I therefore grant the following order:
“
The application is
dismissed with costs.”
_________________________________________________
S
C MIA
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Appearances:
On behalf of the
applicant
:
Adv.
JG Dobie
Instructed
by
:
Dreyer & Niewoudt Attorneys
(
jldreyer@tiscali.co.za
)
On
behalf of the respondent
: Adv.
C de Witt
Instructed
by
: Malherbe Rigg and
Ranwell
jason@mrr.co.za
matt@jwlaw.co.za
Date of hearing
:
16 March 2020
Date
of judgment
: 30 March 2020
[1]
Magna
Alloys Research v Ellis 1984(4) SA 874 (A)
[2]
Basson
v Chilwan and Others
1993(3)
SA 742 (A)
per
Nienaber 767C-F
'
Dit gaan hier, soos in die
Magna
Alloys-
saak
passim
herhaaldelik beklemtoon word, om die afdwingbaarheid van 'n bepaling
in 'n ooreenkoms wat andersins geldig is. 'n Ooreenkoms
is in
sy geheel of ten dele aanvegbaar as dit die openbare belang skaad en
aldus teen die openbare beleid indruis. 'n Bepaling
van hierdie aard
wat 'n werknemer of vennoot na beëindiging van die kontrak aan
bande probeer lê - en dis al geval
wat hier in oënskou
geneem moet word - druis teen die openbare beleid in as die
uitwerking van die belemmering onredelik
sou wees. Die redelikheid
al dan nie van die belemmering word beoordeel aan die hand van die
breëre belange van die gemeenskap,
enersyds, en van die
kontrakterende partye self, andersyds. Wat die breëre
gemeenskap betref is daar twee botsende oorwegings:
ooreenkomste
moet gehandhaaf word (al bevorder dit ook onproduktiwiteit);
onproduktiwiteit moet ontmoedig word (al verongeluk
dit ook 'n
ooreenkoms) (vgl
Sunshine
Records (Pty) Ltd v Frohling and Others
1990
(4) SA 782
(A) te 794D-E). (D) it die een party verhinder om
hom, na beëindiging van hul kontraktuele verhouding, vrylik in
die handels-
en beroepswêreld te laat geld, sonder dat 'n
beskermingswaardige belang van die ander party na behore daardeur
gedien word.
So iets is op sigself strydig met die openbare beleid.'
(Per Nienaber JA in Basson v Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A)
at 767E - F.)