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2020
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[2020] ZAGPJHC 283
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Kalex Flavours and Fragrances (Pty) Limited and Others v Muller (27224/2020) [2020] ZAGPJHC 283 (9 November 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 27224/2020
In the matter
between:
KALEX
FLAVOURS & FRANGRANCES (PTY)
LIMITED
First Applicant
KALEX
MARKETING (PTY)
LIMITED
Second Applicant
PROMIGEN
(PTY)
LIMITED
Third Applicant
and
KENT ALISTAIR
MULLER
Respondent
JUDGMENT
YACOOB J:
1.
The applicants approach this court on an
urgent basis for an order enforcing a restraint of trade agreement.
The enforcement is
opposed by the respondent, who also made a with
prejudice tender to the applicants, which I will deal with in due
course.
2.
I am satisfied that the application is
urgent. The applicants allowed the respondent sufficient time to
respond to the application
and he has put up a more than competent
defence. Restraint applications are inherently urgent, taking into
account that they seek
to protect interests in a time sensitive
manner.
3.
The respondent was employed by the first
applicant for nine years as a salesman. His employment was terminated
because he was in
breach of a restraint of trade obligation that was
applicable during his employment. It is common cause that the
respondent was
selling products to customers of the first applicant,
through a third party company (Ryke Trading (Pty) Ltd (“
Ryke
”))
of which a friend of his was a director, as substitutes for products
that the customers would have bought from the first
applicant, also
through the respondent as salesman.
4.
The respondent used the first applicant’s
laptop and cellphone that were issued to him to facilitate these
sales. His actions
were discovered when the laptop and cellphone were
returned to the first applicant after similar conduct was separately
discovered.
In addition to the information about sales, there was
other information discovered which showed that the respondent had
taken note
of information about product formulations, and that he had
absolutely no qualms in undercutting and doing the applicants out of
their business.
5.
The respondent in his answering affidavit
alleges that he is not currently employed by Ryke and does not
currently have a financial
interest in Ryke. He does not offer any
explanation of his earlier conduct, and does not deny it. He does not
suggest that he has
no connection with Ryke and its members. He does
not allege that he has never been employed by Ryke or has never had a
financial
interest in Ryke, nor does he allege that he will not in
the future, the future being any time after the answering affidavit
was
signed. The respondent’s answering affidavit is such that,
while it technically rebuts the applicants’ case, it does
not
provide a version. The manner in which it deals with issues raises
more questions than it provides answers, and the respondent’s
bona fides
are less than evident. At best for the respondent, it amounts to a
bare denial.
6.
There is no need for me to reject the
respondent’s version, because he does not provide me with one.
7.
The argument on the respondent’s
behalf was that, although there is a valid restraint of trade
agreement, the applicants have
not proved a breach of the restraint
clause after the respondent’s employment was ended and in any
event the restraint is
unreasonable in its scope.
8.
The law on restraints is well settled. The
applicants must allege and prove the obligation and its breach, and
the respondent bears
the onus to prove, if he wishes, that the
restraint is unreasonable and unenforceable.
[1]
9.
The existence of the restraint is common
cause. It is also common cause that the respondent has, before his
employment was terminated,
breached the restraint that was imposed on
him during his employment.
10.
The respondent contends that the applicants
must prove an actual breach of the restraint after the employment was
terminated. This
is because the restraint clause which applied before
termination is a different one to that which is relied upon now, and
the fact
that the respondent breached one termination clause has no
bearing, so the argument goes, on whether he has breached the other.
11.
The applicants referred me in this regard
to
IIR South Africa BV (incorporated in the Netherlands)
t/a Institute for International Research v Hall (aka Baghas) and
Another
,
[2]
a decision of the full court, in which it was held that the former
employer only has to show that the former employee could use
confidential information, not that he has in fact done so.
[3]
This was confirmed by the Supreme Court of Appeal in
Reccy v
Siemens Telecommunications (Pty) Ltd
.
[4]
12.
Although these cases referred specifically
to confidential information, there is no reason why the principle
should not apply to
protect any proprietary interest worth of
protection. In
Experian Sa v Haynes
[5]
this court pointed out that
[17] It is well-established that the proprietary
interests that can be protected by a restraint agreement are
essentially of two
kinds, namely:
[17.1] The first kind consists of the relationships with
customers, potential customers, suppliers and others that go to make
up
the business, being an important aspect of its incorporeal
property known as goodwill.
[17.2]
The second kind consists of all confidential matter which is useful
for the carrying on of the business and which could therefore
be used
by a competitor, if disclosed to him, to gain a relative competitive
advantage. Such confidential material is sometimes
compendiously
referred to as ‘trade secrets’.
13.
It is common cause that the respondent has
established relationships with the applicants’ customers,
not only as the
applicants’ salesman, but also in his capacity
as agent or representative (in however informal a manner) for Ryke.
14.
The respondent sought to convince the court
that the confidential information to which he had access, and which
he had obtained
on the quiet, which fits into the second category,
was not of the sort which he could use as he is not a chemist. He
also contends
that since the first applicant is the sole agent of the
supplier, the information is of no use to him. However at the same
time
he contends that some of the product with which he supplied the
applicants’ customers was not in breach of his restraint as
it
was not or could not be supplied by the applicants.
15.
The respondent has a special knowledge of
customers’ requirements and what the applicants can provide to
customers, as well
as what alternatives may be acceptable and what
the gaps are, which a competitor can fill. He also has relationships
with the customers
which he has established over the years, and which
he has already exploited to his own advantage.
16.
I am satisfied, therefore, that the
respondent threatens both types of proprietary interest which the
applicants are entitled to
protect, and that the applicants have made
out a case for the enforcement of the restraint.
17.
The next question to be determined is
whether the restraint is reasonable and if not, what a reasonable
period and or ambit of the
restraint would be.
18.
The respondent tendered with prejudice that
he be restrained for six months from 11 August 2020 from taking up
employment with any
competitor in South Africa, and that after that
six months has expired, he would not be restrained except with regard
to two customers
of the applicant, Kingsley Beverages and Halewood
Breweries, with whom he would undertake not to do business for two
years from
11 August 2020.
19.
The applicants rejected this tender but
contended that at the very least that was the relief that should be
granted.
20.
The respondent contended that, taking into
account that the restraint applied in the whole of South Africa, and
that six months
is sufficient time to build relationships with
customers, the restraint should be six months.
21.
However, the respondent’s
relationships were developed over a period of ten years. The
communications he had with customers
which were disclosed showed a
relatively close relationship. I am not satisfied that six months
would be sufficient to guard against
the risk presented by the
respondent, his relationships with clients, and what he offers them.
22.
The respondent does not contend that his
skills cannot be applied in any field in which he does not compete
with the applicant.
He is a salesman with well developed personal
skills. There is no reason why he would not be able to find
employment as a salesman
in a different industry, nor does he suggest
he would not be able to. He alleges that he is currently unemployed,
but not that
he has been unable to find work elsewhere, or even that
he has sought work elsewhere.
23.
Taking into account everything that has
been placed before the court, it is my view that between twelve and
eighteen months would
be necessary and appropriate to protect the
interest of the applicants. Since the prejudice to the respondent
appears to be relatively
little, I am satisfied that eighteen months
is appropriate.
24.
There is no reason why costs should not
follow the result. The applicants have been substantially successful
and therefore the respondent
should bear the costs.
25.
For these reasons I make the following
order:
25.1.
The
respondent is interdicted and restrained for a period of 18 months
from 11 August 2020, whether as proprietor, partner, director,
shareholder, member, employee, consultant, contractor, financier,
agent, representative, assistant, trustee or beneficiary of a
trust
or otherwise and whether for reward or not from directly or
indirectly carrying on or being interested or engaged in or concerned
with or employed by any company, close corporation, firm, undertaking
or concern which carries on business in the Republic of South
Africa
which sells any products worked on or dealt in by the applicants or
renders the services provided by the applicants as at
11 August 2020.
25.2.
The
respondent it to pay the costs of this application.
____________________________
S.
YACOOB
JUDGE OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Appearances
Counsel for the
applicants: A
Bishop
Instructed
by:
Dewy Hertzberg Levy Inc
Counsel for the
respondent:
C de Witt
Instructed
by:
DMO Incorporated
Date of hearing:
08 October 2020
Date of judgment:
09 November 2020
[1]
See in this regard
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 776I-J;
Experian South
Africa (Pty) Ltd v Haynes and Another
2013
(1) SA 135
(GSJ) at [14].
[2]
2004 (4) SA 174 (W)
[3]
At [13.4.1]
[4]
i997(2) SA 486 (SCA)
[5]
2013 (1) SA 135
(GSJ)