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[2010] ZAWCHC 200
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Pepkor Rentail Ltd v Caleni and Another (14585/2010) [2010] ZAWCHC 200 (6 September 2010)
IN THE
HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE HIGH COURT. CAPE TOWN
CASE.: 14585/2010
In the matter between
PEPKOR
RETAIL LIMITED
….....................................................
Applicant
and
NWABISA
CALENI
…..................................................................
First
Respondent
WOOLWORTHS
(PTY) LTD
…...................................................
Second
Respondent
JUDGMENT
DELIVERED ON 6 SEPTEMBER 2010
SAMELA.
AJ
[1]
On the 9
th
July
2010 the Applicant brought an urgent application against the First
and Second Respondents, inter alia, seeking to enforce
restraint of
trade agreement and an order interdicting the First Respondent for a
period of six months, commencing from 30 June
2010, from directly or
indirectly soliciting custom or business or trade from any person or
entity which was a supplier of Ackermans
for a period of twelve
months prior to 30 June 2010.
[2]
On the 12"
1
July
2010. by agreement between the parties, the matter was postponed to
4 August 2010 on the semi urgent roll for hearing.
[3]
The First Respondent opposed the relief sought on the basis that it
is far too wide, unreasonable and unenforceable.
[4]
The facts in this matter are largely common cause. The First
Respondent was employed by the Applicant during March 2004. and
in
January 2006 was appointed as the Ladies' Activewear Buyer after
receiving some training. During October 2006, the First Respondent
signed the restraint agreement. The provisions of the restraint
agreement provided, amongst other things, that for a period of
six
months from the date of termination of First Respondent's
employment, she would not be employed by either a competitor of
the
Applicant or any other entity involved in the business of clothing
retail. Secondly, for the same period (i.e. six months).
First
Respondent would not provide the very same services or services of
the same nature or kind which she rendered to the Applicant
Thirdly,
the First Respondent agreed that the restraints were both reasonable
and necessary to protect the proprietary interests
of the Applicant.
Fourthly, the First Respondent entered into the restraint agreement
voluntarily and with full appreciation
of its consequences. The
First Respondent was paid R102 000,00, being equivalent of a year's
salary, in four equal instalments,
in consideration of the
agreement. The First Respondent is now employed by the Second
Respondent (namely Woolworths) as from
1 July 2010, after leaving
Applicant's employment on the 30
,h
June
2010
[5]
The basis for the relief sought by the Applicant is that in terms of
the restraint agreement the First Respondent undertook,
amongst
other things, not to work for Applicant's competitor within six
months period stipulated in the agreement after the termination
of
her service with the Applicant. Furthermore, she received a sum of
R102 000.00. in consideration of the agreement.
[6]
The First Respondent opposed the application on various grounds.
[7]
Firstly, the First Respondent alleges that she did not acquire any
confidential and protectable information whilst in the
employ of the
Applicant.
[8]
Secondly, the restraint of trade agreement is far too wide and
unreasonable, in so far as it extends well beyond what is required
to safeguard any legitimate protectable interests that the Applicant
might have.
[9]
Thirdly, the Applicant's suppliers' identity is hardly a secret.
[10]
Fourthly, the First Respondent was under the impression that if she
did not agree to sign the restraint agreement, she would
not be
offered employment by the Applicant.
[11]
The only dispute is whether the restraint of trade entered into
between the Applicant and the First Respondent is reasonable
and
enforceable. The First Respondent tendered to pay to the Applicant
the R102 000.00 which she received in consideration of
the restraint
agreement which the Applicant has rejected.
[12]
The court is required to determine whether:
(i)
the
restraint agreement is reasonable and enforceable: and
(ii)
to
grant or not an interdict against the First Respondent.
[13]
Section 22 of the Constitution provides:
"Every
citizen has the right to choose their trade, occupation or
profession freely. The practice of a trade, occupation
or profession
may be regulated by law."
[14]
It is trite law that four questions have to be addressed to
determine whether the restraint of trade is reasonable or not
between the parties, see Basson v Chilwan & Others
[1993] ZASCA 61
;
1993 (3) SA
742
(A) at 767G, where the court addressed the following questions:
Is
there an interest of the one party which is deserving of protection
at the termination of the agreements
(b)
Is such interest being prejudiced by the other party?
(c)
If so, does such interest so weigh up qualitatively and
quantitatively against the interest of the other party that the
latter should not be economically inactive and unproductive?
(d)
Is there another fact of public policy having nothing to do with the
relationship between the parties but which requires that
the
restraint should either be maintained or rejected?
[15]
At 762 C-H the court clarified the public policy issue and by doing
so made reference to considerations of reasonableness,
when it said:
"The
public interest must be the touchstone for deciding whether the
Courts will enforce the restraint clause or not The
party seeking to
avoid the contractual obligation to which he had solemnly agreed
should therefore be required to prove that
the public interest would
be detrimentally affected by the enforcement of the clause (at
892I-893D). The mere fact that the clause
may be unreasonable
inter
partes
is
not normally a ground for attacking its validity, since the public
interest demands that parties to a contract beheld to the
terms of
their agreement (at 893H-I). A second consideration however, is
this: that it is also generally accepted that a person
should be
free to engage in useful economic activity and to contribute to the
welfare of society by the exercise of the skills
to which he has
been trained. Any unreasonable restriction on such freedom would
generally be regarded as contrary to public
policy. In deciding on
the enforceability of a restraint clause the Court would be required
to consider both these aspects in
the light of the circumstances of
each particular case (at 894B-B). Where public interest is the
touchstone, and where public
interest may change from time to time,
there can be no
numerus
clausus
of
the circumstances in which a Court would consider a restraint on the
freedom to trade as being unreasonable. There can be no
justification, therefore in the ordinary course, for limiting the
concept of reasonableness to cases where a party has knowledge
of
trade secrets or trade connections or the established customers of a
firm. With the public interest as the touchstone the
Court will be
called upon to decide whether in all the circumstances of the case
it has been shown that the restraint clause
should properly be
regarded as unreasonable"
[16]
In
Reddy v
Siemens Telecommunications (Pty) Ltd
2007
(2) SA 486
(SCA)
at 496 (para 15) and 497 (para 16) the court had this to say:
"[15]
A court must make a value judgment with two principal policy
considerations in mind in detenrtining the reasonableness
of a
restraint. The first is that the public interest requires that
parties should comply with their contractual obligations,
a notion
expressed by the maxim
pacta
servanda sunt.
The
second is that all persons should in the interests of society be
productive and be permitted to engage in trade and commerce
or the
professions. Both considerations reflect not only common-law but
also constitutional values." [16] In applying these
two
principal considerations, the particular interests must be examined.
A restraint would be unenforceable if it prevents a
party after
termination of his or her employment from partaking in trade or
commerce without a corresponding interest of the
other party
deserving of protection. Such a restraint is not in the public
interest"
[17]
In
Automotive
Tooling Systems (Pty) Ltd v Wilkens & Others
(2007)
(2) SALR 271
(SCA) the court outlines what qualifies as a
"proprietary interest" and had this to say at 277-278:
"An
agreement in restraint of trade is enforceable unless it is
unreasonable. It is generally accepted that a restraint will
be
considered unreasonable, and this contrary to public policy, and
therefore unenforceable, if it does not protect some legally
recognizable interest of the employer but merely seeks to exclude or
eliminate competition."
[18]
In
Walter
McNaughton (Pty) Ltd v Schwartz & Others
2003
(1) ALLSA 770
(C) at 777 the court outlined the requirements to be
met in order for the information to be classified as confidential,
when
it said:
"For
infonnation
to be "confidential it must (a) be capable of application in
trade or industry, that is it must be useful, not
be public
knowledge and property, (b) be known to only a restricted number of
people or a closed circle, and (c) be of economic
value to the
person seeking to protect it."
[19]
The requirements for the granting of final interdict are well known,
namely: a clear right, injury actually committed or
reasonably
apprehended, and the absence of similar protection by any other
ordinary remedy, see
Setlogelo
v Setlogelo
1914
AD 221
at 227.
[20]
Mr Schippers SC who appeared on behalf of the Applicant submitted
that the First Respondent, by virtue of her employment
position as
senior employee whilst in the Applicant's employment, gained access
to strategic information, trade secrets, financial
information and
commercial practice regarding the Applicant's business activities.
This information is referred to as the confidential
information,
which can be utilised by the First Respondent in clothing and
homeware against the Applicant's competitor, in this
matter,
Woolworths.
[21]
Mr Manca SC on behalf of the First Respondent submitted that the
First Respondent was not a senior employee whilst employed
by the
Applicant and that "there is no genuinely confidential or
protectable information or trade secrets" which she
acquired
during her employment with the Applicant.
[22]
Having regard to the evidence of the Applicant I am satisfied that
the First Respondent was employed in a senior position
for the
following reasons:
(a)
as a Ladies Activewear Buyer, the First Respondent was required to
select and determine merchandise for all Applicant's stores
countrywide;
(b)
she travelled overseas to determine trends on active wear:
(c)
the merchandise selected, determined and bought by her was sold in
all Applicant's stores countrywide;
(d)
she was required to source and deliver merchandise for sales in the
order of R54 million per year;
(e)
she was also a part of the Applicant's buying team; and
(f)
had access to confidential information as she signed on 3 March 2004
the annexed document marked "ML10" (Ackermans
Ltd Code of
Good Conduct Confidentiality).
[23]
The next issue is to determine whether the information, strategies
and identities of the Applicant suppliers are in the public
domain.
[24]
It is clear from the document "ML 15(1)" and "ML
15(2)" that the Applicants supplier was not in public
domain
because the Applicants answering affidavit say in 2006. the
Applicant established its own International Sourcing Office
(ISO) in
Shanghai, China. The First Respondent had access to it and utilized
it to find unique suppliers or factories for the
Applicant only and
obtained prices therefrom.
[25]
Mr Manca countered Mr Schippers' argument by submitting that the
identity of the Applicant's suppliers was not a secret,
and since
taking up employment with Woolworths, First Respondent never had
contact with suppliers in relation to any homeware
products supplied
by the Applicant.
[26]
I agree with Mr Schippers' submissions because it is clear from the
documentary evidence presented by the Applicant by way
of annexures
(ML2. ML10, ML15(1) and ML15(2)) that the information is
confidential for the following reasons - (a) it is useful
and
capable of application in trade; (b) it is not public knowledge and
property; (c) known only to restricted people namely,
the SBU (Small
Business Unit) including the First Respondent; and (d) is of
economic value to the Applicant.
[27]
The next question is whether the restraint in question is in the
public interest.
[28]
Mr Schippers submitted that the restraint is reasonable and
enforceable, in that it seeks to protect the Applicant's proprietary
interests, and is not against public interest, which requires the
parties to comply with their contractual obligations even if
it is
unproductive.
[29]
In reply, Mr Manca submitted that a restraint which seeks to prevent
competition is contrary to public policy and therefore
unenforceable. He submitted that the Applicant has not shown that
protected interest justifies such enforcement.
[30]
I disagree with Mr Manca s contention. In my view the restraint of
trade is reasonable because it is for a very short period
of time,
namely six months. Although it operated throughout the Republic of
South Africa, it is reasonable in that she bought
the goods not for
a specific store but for all the Applicant's stores throughout the
Republic of South Arica. She also received
compensation, namely a
year's salary in consideration of the restraint. In these
circumstances I am of the view that the restraint
agreement is
reasonable and enforceable and not against the public policy. See
Basson's case (supra) at 762; Reddy's (supra)
at 496 para 15 and 497
para 16 and Automotive Tooling Systems (supra) at 277-278.
[31]
There is no doubt that the First Respondent voluntarily signed the
restraint agreement on 25 October 2006 (ten months later
as she was
appointed on 1 January 2006) without any undue influence and was
fully aware of the legal consequences flowing from
the agreement.
The suggestion by the First Respondent that she was under the
impression that if she did not sign the restraint
agreement she
would not be employed as a buyer, is rejected. She was given the
opportunity to read the restraint agreement before
signing it, and
there is no basis for her to say that she misunderstood the
restraint agreement.
[32]
By accepting employment with the Second Respondent, she breached the
restraint agreement. The undertaking given by the First
Respondent
is not enough to protect the Applicant's interests because it will
be difficult to enforce it. I therefore find that
the First
Respondent has not discharged the onus of showing that the restraint
of trade agreement is unreasonable.
[33]
In the circumstances I find that the Applicant has established a
clear right, that is, Applicant's proprietary and business
interest.
The Applicant has furthermore established that there is a real
likelihood that the First Respondent could use the confidential
information which will cause the Applicant to suffer serious
proprietary and business interests. There is no alternative or
appropriate remedy available to the Applicant, because a claim for
damages against the First Respondent will be difficult to quantify.
[34]
In the result, the following order is made:
(i)
The First Respondent shall terminate her employment as a buyer with
Woolworths on 20 September 2010; and is interdicted from
being
engaged, retained, employed, interested or involved, financially or
otherwise, in or with a competitor of Ackermans or
any other entity
involved in the business of clothing retail, wholesale and/or
clothing purchasing and/or any company or entity
formally or
commercially associated with these companies or entities, throughout
the Republic of South Africa, for a period of
six months with effect
from 21 September 2010, in accordance with the provisions of the
restraint of trade agreement entered
into on 25 October 2006,
between Ackermans, a division of the Applicant, and the First
Respondent.
(ii)
The First Respondent is interdicted for a period of six months,
commencing from 21 September 2010. from providing any type
of
services identical or similar to the nature of the services which
she had performed on behalf of Ackermans whilst in its employ,
to or
on behalf of any competitor of Ackermans, which had been such a
competitor or other entity at any time during a period
of 12 months
prior to 30 June 2010.
(iii)
The First Respondent is interdicted for a period of six months,
commencing from 21 September 2010, from directly or indirectly
soliciting custom or business or trade from any person or entity
which was a supplier of Ackermans for a period of 12 months
prior to
30 June 2010.
(iv)
First Respondent to pay the costs.
SAMELA. AJ