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[2020] ZAGPJHC 429
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NBC Holdings (Pty) Ltd v Chaane and Another (2020/2170) [2020] ZAGPJHC 429 (27 October 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2020/2170
REPORTABLE:
YES/NO
OF
INTEREST TO OTHER JUDGES: YES/NO
REVISED.
NO
DATE:
27 October 2020
In
the matter between:
NBC HOLDINGS (PTY)
LTD
Applicant
and
CHAANE,
VICTOR
First Respondent
GINYA,
SIPHO
Second Respondent
JUDGMENT
SIWENDU
J
Introduction
[1]
The applicant, NBC Holdings (Pty) Ltd (NBC), is a private company
with
limited liability registered in terms of the Companies Act. Its
registered address is at 22 Junction Road Parktown, Johannesburg.
[2]
NBC provides managed employee benefits, pension fund administration
services,
health and risk management services, investment consulting
services, and legal and actuarial services. It is considered a
black-owned
company and provides services to approximately 120
registered pension and provident funds representing retirement
savings of nearly
350 000 members as a client base.
[3]
The first and second respondents, Mr Victor Chaane and Mr Sipho
Ginya,
are the erstwhile employees of NBC. Mr Chaane took up
employment in April 1998 as New Business Development Officer. Later,
he became
the Executive Head of Stakeholder Relations and headed the
team that served one of NBC’s clients, the Chemical Industries
National Provident Fund (the CINPF). Mr Ginya, on the other hand, was
employed as an Administrator in February 2001. He later became
the
Divisional Head in charge of the CINPF benefits consulting team. I
refer to them as the respondents.
[4]
NBC seeks to enforce a restraint of trade agreement entered into with
the respondents. Both respondents signed an identical restraint
agreement entitled ‘Declaration and Pledge’ following
their employment with the applicant. The order sought is in the
following terms:
‘
The
first and second respondents are interdicted and restrained from
directly or indirectly soliciting the custom of any client
of the
applicant, at any time prior to 12 December 2020, whether as
principal, agent, partner, representative, shareholder, member,
consultant, adviser, financier, employee or in any other capacity,
and whether alone or jointly with or as agent for any other
person.’
The
first and second respondents are interdicted and restrained at any
time prior to 12 December 2020, from directly or indirectly
offering employment or causing employment to be offered to or causing
to be employed any person who was employed by or in connection
with
the business carried on by any member of the applicant as at 12
December 2019 or at any time thereafter prior to 12 December
2020.’
[5]
The genesis of the application is the notice of termination of the
contract
of services offered by NBC to a longstanding client, the
CINPF. On 18 February 2020, NBC launched an urgent application for an
interim interdict before Senyatsi J. The court struck the application
off the roll because of a lack of urgency. Accordingly, the
determination before this Court is in the ordinary course. The
restraint is limited to a period of 12 months, of which more than
ten
months have elapsed.
Background
[6]
The founding affidavit in support of the application was deposed to
by
the Chief Executive Officer of NBC. He says that NBC has the CINPF
amongst its clients, and that this relationship commenced in
1992.
Over and above the bouquet of services referred to above, the CINPF
contracted NBC to provide health risk management services
in August
2002. It renewed the contract in January 2005. On 21 November 2019,
the Board of Trustees of the CINPF resolved to terminate
all the
services rendered by NBC, divesting the company of a longstanding
agreement. The notice period for the termination operated
from
29 November 2019 to 29 February 2020. An application to
review and set aside the termination decision is pending
before the
High Court. Individual Fund members also launched a complaint to the
Pension Funds Adjudicator. There are pending criminal
charges which
were instituted in terms of
s 34
of the
Prevention and Combating
of Corrupt Activities Act No 12 of 2004
in respect of certain
payments made to the respondents
[7]
The respondents were responsible for coordinating all the activities
of
NBC’s departments providing services to the CINPF. They were
also responsible for planning and scheduling meetings, keeping
records of the CINPF and Trustee meetings, reporting back on
investments, and ensuring that the services NBC rendered were within
the prescripts of the Financial Advisory and Intermediary Services
Act 37 of 2002 (the FAIS), the Pension Fund Act 24 of 1956 (the
PFA)
and the Financial Sector Regulation Act 9 of 2017 (the FSRA) amongst
others.
[8]
The respondents are the registered FAIS representatives on behalf of
NBC
in terms of the Act. NBC alleges it trained them to meet the “fit
and proper” requirements in terms of s 8 of FAIS.
NBC
contends that the respondents, as the sole custodians of the business
and service relationship between it and the CINPF, orchestrated
a
well-crafted ploy and conspired with individual trustees of the CINPF
to drive a wedge between NBC and the CINPF, leading to
the
termination of the contract. It alleges the respondents motivated for
and were a party to proceedings that oversaw the shortlisting
of
Akani Retirement Fund Administration (Pty) Ltd (Akani), a competitor
of NBC, leading to the contract's termination.
[9]
In March 2019, preceding the termination decision, the CINPF wrote a
letter
expressing dissatisfaction with services provided by NBC’s
Investment Consulting Services. After a meeting within NBC, the
respondents undertook to deal directly with the CINPF about the
complaints. Despite this undertaking, on 22 and 23 August 2019,
at a
Regional Advisory Committee (RAC) meeting of the CINPF, the Trustees
proposed an appointment of forensic investigators into
the conduct of
NBC's services. The Board appointed Gobodo Forensic and Investigative
Accountants in September, after a special
meeting of the Board of
Trustees. The remit of the investigation, spanning from 2014 to 2019,
included disinvestments made by NBC’s
Fund Accounts and
Administration Department from the Fund’s cash portfolio to pay
member claims, the processes followed,
and fees NBC charged for
services.
[10]
NBC claims there had been no issue brought to its attention other
than the complaint in
March 2019. It claims that rumours about
irregularities, unexplained financial loss of funds, the lack of
transformation within
NBC and a preference for Indian employees,
allegations of the duplication of service charges, and the pending
termination of the
contract, circulated at a training session and
meeting of the North Eastern Region RAC in September 2019, before the
termination.
It was discovered in November 2019, after investigations
(and after the respondents resigned) that they did not act in NBC's
best
interests.
[11]
NBC also established, after the fact, that the respondents assisted
the CINPF’s Principal
Officer to draft a subcommittee
resolution appointing a consultant to advise on the process of
selecting a new service provider.
Also, Mr Ginya assisted in drafting
the resolutions terminating all the services adopted by the CINPF
Board on 21 November
2019. The CINPF, after that, sent the
resolution to Mr Ginya on 25 November 2019.
[12]
On 27 November 2019, the respondents were present at a meeting of the
tender subcommittee
convened to consider tender specifications, the
appointment of an independent consultant, and, at the same time,
consider a list
of a list of providers of fund administration and
consulting services presented. Three companies were shortlisted,
including NBC’s
competitor, Akani.
[13]
NBC learnt of the resolution terminating its services on 28 November
2019, when Mr Ginya
forwarded it to the management by email at 22h00.
On 29 November 2019, the respondents tendered their resignations with
immediate
effect in a letter addressed by their attorney.
[14]
NBC alleges Mr Chaane had a meeting with Mr Letjane, the Managing
Director of Akani, and
a Director of Neighbour Funeral Scheme (Pty)
Ltd (Neighbour Funeral Scheme) early in November 2019 at Mike’s
Kitchen, Parktown.
There were two representatives from Akani, and the
General Secretary of the Chemical, Energy, Paper, Printing, Wood and
Allied
Workers’ Union (CEPPWAWU/the Union) present. The meeting
was to discuss financial support and logistics for the Union’s
staff meeting to be held that month. As the main sponsor for the
event, Akani hosted the event and Gala Dinner at Destiny Hotel,
Kempton Park, a hotel in which it has an interest. The replying
affidavit also alleges that at least two other meetings between
the
respondents and Mr Letjane took place, one in August 2019 at Destiny
Hotel and another on 17 November 2019 at CEPPWAWU’s
year-end
function.
[15]
NBC subjected respondents to a disciplinary hearing on 5 and 6
December 2019, held in absentia.
It dismissed them on 12 December
2019.
Solicitation
Complaint
[16]
NBC predicates the solicitation complaint on information it obtained
about meetings the
respondents held with office bearers, the
Trustees, and officials of the CINPF, and affiliated Fund officials,
the BMW Contributory
Provident Fund, and the NUMSA Staff Provident
Fund. It also relies on information it obtained from the members who
lodged a complaint
with the Pension Fund Adjudicator. It claims its
prima facie
view is that the respondents were in breach of
their fiduciary duties, and the restraint, based on these meetings.
[17]
The first reported meeting with office bearers took place in Secunda
on 4 December
2019 between Mr Chaane and Ms Rambau, an
influential member of the RAC and Local Advisory Committee (LAC) of
the CINPF.
Mr Mukhuba, now an ex-employee of NBC, arranged the
meeting on Mr Chaane’s behalf.
[18]
The second meeting was with Mr Mogoeroe, a Trustee and Chairman
of the Board of the
BMW Contributory Provident Fund, and an employer
appointed Trustee of the NUMSA Staff Provident Fund. NBC claims that
Mr Mogoeroe
received a call from Mr Albert Makhusha, a
former NBC employee, on 8 December 2019. He advised Mr Mogoeroe
about an information
session to be held at Destiny Hotel on 9
December 2019. Mr Makhusha reported to Mr Mogoeroe that the
respondents were
going to address the meeting. Further, the
respondents wanted to use the occasion to address the rumours
circulating about their
‘suspension’ from NBC’s
employment.
[19]
NBC also alleges the respondents solicited the NUMSA Staff Provident
Fund. Mr Makhusha
called Ms Caroline Mangalane Maswanganye,
a collective Bargaining Administrator and Trustee of the NUMSA Staff
Provident Fund,
to attend a meeting at Destiny Hotel. Mr Makhusha
advised her that she was leaving NBC for Akani. A reference to Mr
Chaane
“having a bag full of money on the table” was
allegedly made.
[20]
The respondents attended the meeting on 9 December 2019 at Destiny
Hotel. Mr Chaane met
with Mr Mogoeroe and NBC’s
ex-employees. It is unnecessary to detail the discussion at each of
these meetings because
they mainly follow a common thread.
[21]
The discussions were about: (a) the ill-treatment of the respondents
by managers at NBC
and the suspension of some of the employees who
were a part of the respondents’ team; (b) the thwarting of
black excellence
and transformation aspirations; (c) a bias towards
and preference for Indian employees; (d) complaints about an Indian
investment
consultant allegedly in charge of NBC; (e) lack of support
for the respondents by the CEO; (f) concerns about NBC’s
dealings
with the CINPF; (g) fees charged and how NBC ignored Mr
Chaane’s advice against a fee increase; and (h) the forensic
investigation
into R80 million.
[22]
The claim is that the respondents aired the same complaints after
9 December 2019
at a meeting held on the side-lines with the
Chairman of the Board of Trustees, the Principal Officer of the Fund,
representatives
of Akani, and an unidentified trustee from
KwaZulu-Natal. The report is Mr Chaane encouraged office bearers to
ask for NBC’s
organogram and question its transformation
credentials, with Mr Chaane undertaking to provide support in
the background on
information to be asked
.
There were
allegations of ‘kickbacks’ and monetary support used to
secure the move to Akani.
[23]
The above activities are also detailed in a complaint by individual
members of the Union
to the Pension Funds Adjudicator. Reports are
that Mr Chaane travelled across canvassing support for Trustees’
termination
resolution.
[24]
At the time of the launch of the application for an interim
interdict, which appears to
have been in haste, the founding
affidavit was not verified by confirmatory affidavits. Other than in
respect of Ms Maswanganye,
Mr Mogoeroe, and Ms Rambau, subsequently
filed confirmatory affidavits to support their claims.
Respondents’
Version
[25]
The respondents resist the application in an affidavit deposed to by
Mr Chaane. The chronology
of the events is, by and large, common
cause. The opposition broadly rides on two legs. Firstly, they claim
a dispute of facts.
The respondents dispute claims of the strategy,
conspiracy, and breaching the restraint. The second leg is on the
enforceability
of the restraint and its application to the
respondents.
[26]
By this time, the respondents had taken up employment as consultants
to Neighbour Funeral
Scheme. They provide marketing and sales
services. They dispute the allegations against them as an attempt by
NBC to use them as
a scapegoat for the contract’s termination.
They claim NBC’s attempts to discipline and disbar them with
the Financial
Advisory Intermediary Services were part of a reprisal
tactic extended to employees in Mr Chaane’s team.
[27]
Even though the respondents concede the good relations they have with
the CINPF, they deny
that they were the sole custodians of the
business and service relationship. They point to ongoing complaints
against NBC about
its lack of transformation, and a disproportionate
representation of White and Indian people in management structures in
KwaZulu-Natal
and the Western Cape. They claim NBC developed
unacceptable business practices, had poor service delivery, and that
there was financial
mismanagement. They claim the CINPF Trustees
required black Africans in the management echelons across the
divisions of NBC.
[28]
They point to a downward spiral in the relationship, commencing at a
meeting of the Trustees
on 28 and 29 March 2019, when Mr Ramakongoana
from NBC’s Investments Consulting Division presented the
CINPF’s
cash flow for December 2018 to February 2019. The cash
flows reflected an outflow of approximately R83 million regarding
disinvestment,
which caused dissatisfaction, leading to a forensic
audit call. The Fund Accounting Division of NBC did not seem to
provide information
to the Trustees’ satisfaction. The
discontent and relationship issues led to the termination. Mr Chaane
states that he raised
the areas of discontent at the time with NBC’s
CEO, without resolution.
[29]
When the Trustees adopted the resolution to appoint forensic
auditors, as NBC employees,
they had to recuse themselves. From
September 2019 onwards, the CEO asked him to persuade the Trustees to
hold off the audit and
pressurised Mr Chaane to salvage the
situation, while at the same time apportioning blame towards him. The
forensic report
returned unfavourable results.
[30]
Mr Ginya drafted the resolution for the Trustees to vote on the
termination of NBC’s
services on 21 November 2019. The
respondents claim not to have been aware of the outcome until the
CINPF returned the resolution
on 25 November 2019. Mr Ginya
discussed it with Mr Chaane. When the termination of NBC’s
services by the CINPF occurred,
the respondents’ relationship
with the CEO of NBC had broken down to the extent that the
respondents elected to terminate
their employment. They anticipated
that the CEO would blame them for the termination of the contract.
[31]
Mr Chaane claims the respondents were ‘put in contact’
with Mr Letjane
after the termination of NBC’s services,
and after Akani was shortlisted to provide services to the CINPF.
They claim not
to have had a relationship with Akani or Mr Letjane
and were not in contact with him. Their work at Neighbour Funeral
Scheme is
in areas unrelated to the business of NBC or the CINPF.
[32]
The respondents dispute the solicitation claims, but concede having
meetings with various
Trustees and office bearers of the CINPF. They
claim NBC deliberately misconstrues the context of these meetings to
paint an unfavourable
picture of them. Mr Chaane claims it had
been an emotional time. He approached Ms Rambau as a person he
had known, and
requested her to use her influence to stop NBC from
harassing him and his former team members. The meeting with
Mr Mogoeroe
of BMW Contributory Provident Fund, similarly, as
with Ms Maswanganye of NUMSA Provident Fund, was about his
colleagues’
mistreatment and the real reasons for their
resignation.
[33]
They deny attempts to lift-off NBC employees to a new service
provider and disputed the
allegations of payment of ‘kick-backs’.
They claim several NBC employees elected to either leave the employ,
voluntarily
resigned, were dismissed, or entered into separation
agreements because of poor treatment by NBC and its’ CEO. They
dispute
employing ex-employees of NBC.
[34]
In reply, NBC denies reports about its business and practices, and
faults the respondents
for not communicating the CINPF’s
dissatisfaction. It claims the increase in fees complained of was
voted on by the Trustees.
The respondents represented NBC at these
meetings. NBC claims that employment with Neighbour Funeral Scheme, a
company related
to Akani, is a ruse to divert attention from the
issues. After the respondents left, it accessed information from its
server, which
showed that Neighbour Funeral Scheme and Akani paid the
respondents. It characterises the payments as either ‘bribes/
gratifications’
or rewards for assisting with the termination
of the contract. On this basis, it claims that in all probability,
the respondents
intended to divert business to Akani.
[35]
Bank statements of the respondents, obtained after they left NBC,
reflect that the Mr Chaane
received R50 000 and Mr Ginya
received R40 000 from Neighbour Funeral Scheme on 20 December
2019. On 15 January
2020, Mr Chaane received a further payment of
R23 450. Between 20 December and 15 January 2020, Mr Ginya
received additional
payments of R2 000 from Akani, followed by a
further payment of R3 000 and R4 900 from Neighbour Funeral
Scheme.
Mr Ndivhuho Ravhuhali, an ex-employee dismissed by NBC
on 15 January 2020, received R45 620.72 from Neighbour Funeral
Scheme on 31 January 2020.
[36]
The issue is whether the restraint of trade undertakings is
enforceable. If so, the question
is whether the respondents breached
it by soliciting NBC’s clients. The Court is further required
to determine whether the
facts triggered the restraint operation. The
last issue for determination is the appropriate final relief the
court may grant in
the circumstances.
Is
the Restraint Enforceable?
[37]
Framed as a Pledge, the relevant Clauses, being Clauses 3, 3.1, and
3.2 read as follows:
‘
3.
I will not,
for a period of 12 (twelve) months from the date of
termination of employment
with NBC Consultants and Actuaries
(Pty) Ltd either as principal, agent, partner, representative,
shareholder, member, consultant,
advisor, financier, employee or in
any other capacity, and whether alone or jointly with or as agent of
another person:
3.1
In connection with any business, company or close corporation,
partnership, enterprise or other association of persons who or
which
carries on any business which is carried on by NBC
Consultants
and Actuaries (Pty) Ltd,
directly or indirectly, solicit the
custom of any client, as part of my duties, at any time during the 12
(twelve) months immediately
after the date of termination of our
employment with NBC Consultants and Actuaries (Pty) Ltd
.
3.2
Directly or indirectly offer employment to or employ or cause
employment to be offered to or cause to be employed any person
who
was employed by or in connection with the business carried on by any
member of NBC Consultants and Actuaries (Pty) Ltd as at
the date of
termination of my employment or at any time within the 12 (twelve)
months immediately after the termination of my employment
with NBC
Consultants and Actuaries (Pty) Ltd.’ (Emphasis added)
[38]
The restraint is thus in two parts: (1) the first part prevents the
respondents from ‘
directly or indirectly soliciting
any
client’
of NBC; and (2) the second part prevents the
respondents from enticing and poaching NBC employees. It provides
for:
(a)
the subject of protection, being the clients;
(b)
the
capacities in which the respondents may act in the solicitation;
[1]
(c)
the mode of solicitation as either direct or indirect;
(d)
the beneficiary of the solicitation;
(e)
the period of the restraint;
(f)
the trigger of the operation.
[39]
Besides disputing the solicitation charge, an aspect I deal with
later in the judgment,
the respondents attack the restraint
agreement's validity on all fronts by dissection of its constituent
parts. They charge that
it is overbroad, protects no legally
protectable interest, and that its enforcement would be repugnant to
public policy. They also
challenge its reasonableness, claiming that
it is anti-competitive, and that the restraint period is excessive.
[40]
As held in
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
,
[2]
a restraint agreement is
prima
facie
enforceable unless the respondents on whom the onus rests show that
its enforcement would be unreasonable and contrary to the public
interest
.
A
further iteration of the principles in
Magna
Alloy
is in
Experian
South Africa (Pty) Ltd v Haynes
,
[3]
where Mbha J articulates the position and the onus as follows:
‘
The
position in our law is, therefore, that a party seeking to enforce a
contract in restraint of trade is required only to invoke
the
restraint agreement and prove a breach thereof. Thereupon, a party
who seeks to avoid the restraint bears the onus to demonstrate,
on a
balance of probabilities, that the restraint agreement is
unenforceable because it is unreasonable.’
[4]
[41]
In
Basson
v Chilwan
,
[5]
the court raised the following four questions it deemed relevant to
the determination of the reasonableness of a restraint:
‘
(a)
Does the one party have an interest that deserves protection after
termination of the agreement? (b) If so, is that interest
threatened
by the other party? (c) In that case, does such interest weigh
qualitatively and quantitatively against the interest
of the other
party not to be economically inactive and unproductive? (d) Is there
an aspect of public policy having nothing to
do with the relationship
between the parties that requires that the restraint be maintained or
rejected?’
[42]
In respect
of the first question, I note that customers and clients form the
legitimate subject of proprietary interest worthy of
protection.
Basson
confirms
that clientele constitute a proprietary interest subject to
protection.
[6]
The protection arises because the law accepts that an employee can
build a relationship with customers over time which form part
of the
employer’s goodwill. In
Rawlins
v Caravantruck (Pty) Ltd
,
[7]
the Appellate Division stated as follows:
‘
The
need of an employer to protect his trade connections arises where the
employee has access to customers and is in a position
to build up a
particular relationship with the customers so that when he leaves the
employer's service he could easily induce the
customers to follow him
to a new business…’
Interpretation
of the Restraint
[43]
It is essential that I first deal with the terms of the restraint,
juxtaposed with the
respondents’ complaint to establish
whether, as it stands, the restraint is reasonable and enforceable.
[44]
As I understand the argument, the complaint about the overbroad
nature of the restraint
relates to the subject matter, the scope, and
the period. Its ambit refers to ‘
any clients
’ of
NBC. It does not delineate geographical area of operation. The
respondents complain that it prevents them from applying
their only
marketable skill in the pension fund and administration industry.
[45]
In line with the established principle to interpret restraint clauses
restrictively, I
construe the words of
any client
narrowly to mean
existing clients
. There can be no
dispute on the papers that NBC does not offer its services to the
broader public. Its business is specialised
and specific to the
pension fund industry. I am of the view that NBC’s existing
clients are determinable and known. This
application pivots on three
of its clients: the CINPF, the BMW Contributory Fund, and the NUMSA
Provident Fund.
[46]
Despite the contention by Mr Franklin SC (appearing for the
respondents) that the restraint
is unreasonable and anti-competitive,
the subject of the restraint is confined to existing clients of NBC.
Further, I do not read
the terms to restrict the respondents from
working in the pension administration industry or for a competitor.
In my view, the
respondents are merely prevented from soliciting the
existing custom of NBC.
[47]
There is no evidence that NBC monopolised the pension industry market
and therefore prevented
the respondents from working. The complaint
is at odds with the respondents having taken up consulting work with
Neighbour Funeral
Scheme, an unrelated industry. They do not reveal
any reasons for this election. I find agreement with Mr Peter SC
(representing
NBC) that nothing in the restraint prevents the
respondents from applying their skills, knowledge, and trade in the
broader pension
fund market or from taking up employment with a
competitor, as long as they do not solicit existing clients. The
scope of application
is not wide on this score.
[48]
The
additional facet is the 12-month period of the restraint; the
complaint, though not fleshed out clearly, that it is excessive,
merits consideration. Our courts have held that the period of the
restraint should not be longer than is necessary to protect the
infringed or threatened interest. In
Den
Braven SA (Pty) Ltd v Pillay
,
[8]
the court stated:
‘…
the
period of the restraint should not be any longer than is necessary to
enable the applicant to place a new salesperson in the
field, enable
them to become acquainted with the products and the customers and to
make it plain to the latter that they are now
the person with whom to
deal on behalf of the applicant.’
[49]
Subject to the facts, the courts have enforced restraints longer than
the 12 months claimed
by NBC. J Saner, in
Agreements in Restraint
of Trade in South African Law
describes the approach of the
courts to the duration of a restraint as follows:
‘
In
Mozart
Ice Cream Franchises (Pty) Ltd v Davidoff
2009 3 SA 78
(C) at 83BC Davis J said: “An important guideline
in the evaluation process is that a restraint should, as far as the
activities,
area and duration are concerned, be necessary to protect
the infringed or threatened interest.” It has been held that
two
years is the upper limit of the time period for which a restraint
might be enforced:
Random
Logic t/a Nashua Cape v Dempster
unreported case no. A419/2007 CPD (Full Bench Appeal) para 32. But
there are exceptions: the particular facts of a case being
determinative: see
Dickinson
Holdings Group v Du Plessis
2008 4 SA 214
(N) where a three year restraint was upheld on appeal
to the Full Bench….’
[9]
[50]
Given that the relationship between the respondents and NBC spans a
period of nearly two
decades, and, as will be evident below, the
close relationship the respondents had with the CINPF in particular,
the 12 month period
is not unreasonable. The restraint is enforceable
on the face of its interpretation.
Solicitation
Complaint
[51]
NBC built the solicitation complaint on allegations of a broader
strategy, collusion, and
conspiracy which occurred while the
respondents were still employed, and had interactions, direct
contact, and approaches with
the CINPF, the BMW Contributory
Provident Fund, and the NUMSA Provident Fund. NBC obtained
information pointing to the solicitation
after the respondents
resigned. The dispute of facts primarily centres on the allegations
of solicitation.
[52]
The meaning
of a non-solicitation denotes a prohibition from ‘
canvassing’
or ‘approaching’
,
in the sense of an impermissible conduct, with the hope or intention
of obtaining the business of applicant’s clients.
[10]
In my view, solicitation also entails both
direct
and indirect
conduct, covered by the wording of the contract. I am of the view
that the wording it is broad enough to include a subtle and less
direct ‘
aiding
’
in this instance.
[53]
The answer to the allegation of solicitation complaint lies more in
what the respondents
do not say, rather than in what they do say. I
view their conduct in context of the intricate connection between the
CINPF, its
governing structures, affiliates, and the labour union
which had a direct interest in the business of the CINPF. First, the
relationship
is not one of ordinary customer and service provider
serving the broad public. On the papers, the role of the respondents
was indisputably
akin to that of trusted advisors with one of the
clients, the CINPF. This, together with their length of service,
reveals they
were intimately acquainted and trusted by the CINPF and
the Principal Officer. They had good relations with various Trustees
and
office bearers cultivated over approximately 20 years while they
were employed by NBC. On the facts, their reach included office
bearers of other trade union backed provident funds who served as
Trustees of the CINPF.
[54]
There is little information about what transpired between March and
August 2019, after
the letter of complaint was sent in March.
Although the letter was not in the application papers, there was no
dispute the complaint
was specific to the Investment Consulting arm
of NBC. The respondents do not dispute that they undertook to deal
with the issues
raised in the March letter. However, they are silent
on what steps they took, if any. Other than a general reference to
having
addressed issues of a lack of transformation with NBC’s
CEO, the answering affidavit is silent on their best efforts to
address
the problems within the CINPF. Curiously, the letters of
termination of the service before me do not refer to the
dissatisfaction
with NBC’s transformation credentials.
[55]
The conduct of the respondents after the appointment of the forensic
auditors raises questions.
They participated in meetings that
discussed the contract’s possible termination, but they failed
to disclose this to NBC.
As of 21 November 2019, they were aware of
the resolution involving the pending termination. Mr Ginya
drafted the resolution.
The impression from the papers is that they
withheld this information from NBC and timed the disclosure made by
email after working
hours at 22h00 on 28 November 2019 with
their resignations. NBC received the letters of resignation from
their attorneys on
29 November 2019, pointing to an execution of a
considered plan. Their conduct lends credence to the impression that
NBC was lulled
into a false sense of security.
[56]
The complaint to the Pension Funds Adjudicator reveals that, in
addition to the meetings
referred to in the Founding Affidavit, the
respondents attended and arranged meetings with trade union officials
and the CINPF
Trustees – while still employed. They continued
with these meetings after their resignation. The engagements with
fund officials
and office bearers were not a once-off event to seek
emotional support as Mr Chaane made it out to be. Curiously, they do
not take
the Court into their confidence about their attendance at
the meetings of the CINPF and the trade union after they resigned,
and
they do not reveal what their role and capacity at these meetings
was.
[57]
Lastly, the respondents claim to have been introduced to Mr Letjane
after they left
NBC. On the contrary, Mr Chaane had a meeting
with Mr Letjane before the appointment of the forensic
investigators. Mr Chaane
met with Mr Letjane on 10 August
2019 at Mike’s Kitchen and again early in November 2019,
followed by another meeting
late in November 2019.
[58]
I am satisfied that the respondents were aware of the unfolding
events and withheld
critical business information from NBC. They
timed their resignation with the termination of the CINPF contract.
After that, they
actively canvassed for the support of the
termination decision with office bearers and union members. While the
respondents were
not responsible for the making of the decision, in
the context of organised labour, its milieu, and their position as
trusted advisors,
I find their conduct reveals alignment with the
contract’s termination. They were not neutral about the issue.
The available
facts point to their active advocacy and aiding in
support for the termination, which continued after they left NBC.
[59]
A real
genuine dispute of facts can only exist where the Court is satisfied
that the party who purports to raise the dispute has
in the affidavit
seriously and unambiguously addressed the fact said to be
disputed.
[11]
The respondents failed to do so. Considering the denial against the
dispute of fact alleged, there is a dissonance and lack of
candour. I
do not accept their version. On the approach set out in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
,
[12]
and an analysis of the denial of the breach, the respondents’
version does not create a bona fide dispute of fact when taken
in the
context of the admitted facts.
[60]
The argument that solicitation must be causally related to
NBC’s clients deciding
to end NBC’s services and take
their business elsewhere is too narrow a construction, and requires
that the respondents be
the cause of the termination. It does not
take account of the context of the trade union backed nature of this
part of NBC’s
business and the circumstances of this case. It
does not afford protection in the event of a threat. It implies that
an applicant
must wait for the horse to bolt before acting to limit
the harm. I find the respondents’ conduct constituted the
indirect
solicitation of the CINPF’s decision-makers and
supporting structures, in seeking to advocate for support for the
contract's
termination.
[61]
I cannot reach the same conclusion in so far as allegations of
solicitation of the BMW
Contributory Provident Fund and the NUMSA
Provident Fund. The evidence is not sufficient to support the claim.
[62]
With regard to the solicitation of NBC’s employees, I cannot
find evidence to support
the solicitation, even though it is alleged
the respondents urged that the termination be contingent on a
transfer of 39 employees
servicing the CINPF. NBC acknowledged that
there were conflicting reports made to Ms Maswanganye about
their long term plans
and intention. It appears that some of NBC’s
employees resigned or were dismissed. Even though Mr Makhubu set
up meetings
at Mr Chaane’s behest, and one of the
ex-employees received payments from Neighbour Funeral Scheme, there
is insufficient
evidence to support the claim.
Was
the Restraint Triggered?
[63]
The respondents contested that the restraint would only be triggered
on two grounds. The
first is that a direct competitor of NBC must
have employed them. They claim Neighbour Funeral Scheme is not a
competitor of NBC.
If there is a solicitation, it must be ‘
As
part of their duties’
with the competitor. The opening
clause of the restraint reads that:
‘…
Either
as principal, agent, partner, representative, shareholder, member,
consultant, advisor, financier, employee or in any other
capacity,
and whether alone or jointly with or as agent of another person.’
[64]
‘
As part of their duties
’ must be read in
conjunction with the opening clause, which caters for a wide range of
capacities in which the solicitation
of NBC’s custom may occur.
The respondents were employed as consultants. They did not disclose
their employment contract.
Further, a consultant conjures a wide
range of capacities in which solicitation may occur, potentially even
when respondents are
employed by different employers. It need not
occur as ‘part of their duties’.
[65]
The second argument is the restraint operates only in the case of a
dismissal. The respondents
had resigned. The idea negates the
restraint as an incidence of the employment contract. The clause
refers to contractual termination,
whether through resignation or a
dismissal. The contention that the restraint operates solely based on
one form of termination
of the employment relationship and not the
other is unsustainable.
Reasonableness
and Policy Considerations
[66]
According to Saner—
‘
The
reasonableness, or otherwise, of a restraint, may hinge on its area,
or time period or operation or the overall nature of the
restraint,
or on all of these elements together, (and any other relevant
element) or on any two or more in combination. Or even
other
circumstances pertaining at the time enforcement is sought.’
[13]
[67]
The reasonableness of the restraint and the policy considerations
militating for or against
enforcement stand on a different footing,
and touch on important principles in this case.
[68]
On the
established facts, the scope of the restraint application involves a
single client, and is relatively limited in duration.
It does not
prevent the respondents from working for a competitor or in the
pension fund administration industry. The respondents
are gainfully
employed, at their election, as consultants in a parallel field. The
balance of power is tipped in favour of the
respondents and against
NBC, given their role, collective influence, and sway.
[14]
I find the restraint is reasonable and enforceable on its terms.
[69]
The matter does not end there, however, because a restraint which is
reasonable as between
the parties may for some other reason be
contrary to the public interest. On this score, I refer once more to
the fourth question
in
Basson
, where the court posed the
question as follows:
(d)
Is there an aspect of public policy having nothing to do with the
relationship between the parties that requires that the restraint
be
maintained or rejected?’
[70]
As the
court pointed out in
Reddy
,
the value judgment required by
Basson
necessarily
requires determining whether the restraint or limitation is
“reasonable and justifiable in an open and democratic
society
based on human dignity, equality and freedom.”
[15]
[71]
There is a conundrum posed by the pending litigation to set
aside the termination
of the CINPF contract, and the effects of that
application on the enforcement of the restraint. I understood it was
on this basis
that Mr Franklin SC contended that NBC lacked a
protectable interest. Although not strictly correct, NBC’s
gumption in the
litigation aside, the trade connection remained in
legal form. Barring the difficulty with the remaining duration of the
restraint,
any final determination of the protectable interest would
have been contingent on the outcome of the review application,
tenuous
as the relationship between NBC and the CINPF may seem. The
outcome of the review is not before me given the sequence of the
applications.
[72]
A second conundrum is that even if the outcome is favourable, the
restraint period is limited
in duration. Part of the rationale for
the application was to prevent the respondents from interfering with
NBC’s attempts
to retain the CINPF’s business, as NBC
hoped to persuade the CINPF to keep its service without interference.
There has been
a reasonable time to do so.
[73]
In my view, NBC met the requirements for an interdict, but I
nevertheless observe that
the restraint expires on 12 December 2020,
less than two months away. This case confirms why the courts have
consistently held
that restraints are, by their nature, urgent. It
was anticipated that by the time the court decides the matter in the
ordinary
course, much of the restraint will have expired. The lapse
of time renders a final interdict academic. A court order will be a
hollow, symbolic victory, and of minimal practical effect.
Costs
[74]
As to the costs of the litigation, even though I conclude as
aforesaid, the conclusion
has no bearing on the substance of NBC’s
compliant. Therefore, it does not translate to a costs order in
favour of the respondents.
Despite their opposition, the respondents
failed to convince the Court on material aspects of their case.
Accordingly, each party
must pay its own costs
In
the result, I make the following order:
1.
The application is dismissed.
2.
Each party is to pay its own costs.
_____________________________
T
SIWENDU
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
This
judgment was handed down electronically by circulation to the
parties’ and/or parties’ representatives by email
and by
being uploaded to CaseLines. The date and time for hand-down is
deemed to be 10h00 on 27 October 2020.
Date
of hearing:
22 June 2020
Date
of judgment:
27 October 2020
Appearances:
Counsel
for the applicant:
J Peter SC
Attorney
for the applicant:
Loxton Attorneys
Counsel
for the respondents:
A Franklin
SC; P McNally SC; B Manentsa
Attorney
for the respondents:
Webber
Wentzel
[1]
Whether as an agent, as principal, partner, representative,
shareholder, member, consultant, advisor, financier, employee or
in
any other capacity.
[2]
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
1984 (4) SA 874 (A).
[3]
Experian
South Africa (Pty) Ltd v Haynes and Another
2013
(1) SA 135 (GSJ).
[4]
Ibid
para 14.
[5]
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993
(3) SA 742
(AD) at 767F–H, as set out in
Reddy
v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) para 16.
[6]
Basson
(note
5 above).
[7]
Rawlins
and Another v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541C–D.
[8]
Den
Braven SA (Pty) Ltd v Pillay and Another
2008
(6) SA 229
(D) para 55.
[9]
J
Saner
Agreements
in Restraint of Trade in South African Law
(November
2019) SI-25 at 6.5.1 footnote 117.
[10]
Ibid
at 15.3.2. See also
GrainCo
(Pty) Ltd v Van der Merwe
2014 (5) SA 444
(WCC) and
GrainCo
(Pty) Ltd v Van der Merwe
2016 (4) SA 303
(SCA).
[11]
Wightman
t/a JW Construction v Headfour (Pty) Ltd
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA) para 13.
[12]
Plascon-Evans
Paints Ltd v van Riebeeck (Pty) Ltd
1984 (3) SA 623 (A).
[13]
Saner
(note 9 above) at 6.3.2 footnote 80.
[14]
In
Advtech
Resourcing (Pty) Ltd t/a Communicate Personnel Group v Kuhn
2008
(2) SA 375
(C), Davis J points the imperative to examine the power
relationships in the contractual context in a manner that engages
the
transformative nature of the Constitution.
[15]
Reddy
(note
5 above) para 17.