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[2010] ZAGPPHC 186
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Berco Express (Pty) Ltd v Anderson and Another (29624/10) [2010] ZAGPPHC 186 (22 October 2010)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
NORTH
GAUTENG HIGH COURT)
Case
Number:
29624/10
DATE:
22/10/2010
In
the matter between:
BERCO
EXPRESS
(PTY)
LTD
.......................................................
APPLICANT
and
DAVID
IAN
ANDERSON
.................................................................
FIRST
RESPONDENT
UPS
SCS SOUTH AFRICA (PTY)
LTD
.........................................
SECOND
RESPONDENT
JUDGMENT
RAULINGA
J,
[1]
The Applicant brought an urgent application seeking an order that:
1.
The first respondent be interdicted and restrained from:
1.1
being associated with, engaged or interested in or employed by any
business which renders services which fall within the ambit
of the
services rendered by the Applicant.
1.2.
rendering any services falling within the ambit of the services
rendered by the Applicant, to or for the benefit of any person
or
entity
who
as
at
31 July 2010, or during the period of twelve (12) months preceding 31
July 2010, was a customer of the Applicant or a potential
customer of
the Applicant who was in negotiation with the Applicant for the
rendering of services;
1.3
Soliciting
the business, or enticing away from the Applicant (or attempting to
entice any person or entity referred to in prayer
2.2).
1.4
disclosing
or divulging to any person or entity information pertaining to:
1.4.1
the
names of the Applicant's customers, or prospective customers.
1.4.2
the
operating requirements of the applicant's customers, or prospective
customers;
1.4.3
the
financial details (including pricing, credit and discount terms) of
the Applicant's customers or prospective customers;
1.4.4
the
contractual arrangements between the Applicant and its customers.
1.4.5
the
remuneration paid by the Applicant to its employees;
1.4.6
the
business of the Applicant which is not readily available in the
ordinary course of business to a competitor;
2.
That the restraint referred to in prayers 2.1 - 2.3 shall
operate:
2.1
for
a period of twelve (12) months calculated from 31
st
July 2010.
2.2
within
a radius of seventy (70) kilometres of the Applicant's business
premises;
2.2.1
53
de Haviliand Crescent, Persequor Park, Pretoria, Gauteng.
2.2.2
1
Quark Crescent, Linbro Park, Sandton, Gauteng.
2.2.3
26
Platinum Street, Ladine, Polokwane.
[2]
The parties did nor pursue the alternative to prayers 2 - 3 nor did
the court refer to it when making an order on the 7
th
September 2010. In fact, this judgment is a response to the 1
st
respondent's request for reasons for that order.
[3]
The first Respondent was employed by the Applicant at three of its
branches, namely in Polokwane, Sandton, and Pretoria. The
second
Respondent conducts business in direct competition with the Applicant
by way of rendering counter services, inter alia,
in Gauteng and
Limpopo.
Subsequent
to the first Respondent having left the employ of the Applicant on
the 31
5t
July 2010, the Applicant received information that the first
Respondent had taken up employment with the second Respondent. The
Applicant therefore seeks the order on the basis of the agreement in
restraint of trade entered into between the Applicant and
the first
Respondent on 6
th
May 2008 (the memorandum of agreement is marked "BA5" on
page 51 of the papers).
[4]
Although the restraint agreement applies to its terms, in respect of
the Applicant's branches throughout South Africa, the Applicant
seeks
to enforce it in respect only of those branches in the areas in which
the first Respondent worked for the Applicant. The
Applicant conducts
a courier and logistics business throughout South Africa. The courier
business is a highly competitive business
involving many competitors
competing for customers.
The
first Respondent commenced employment with the Applicant on the 27
th
March 2006. (Annexure "BA2" is the letter of appointment.
The first Respondent worked at the Johannesburg, Polokwane
and
Pretoria branches, as an Account Manager or Business Development
Manager. The first Respondent's duties involved that he developed
close
commercial relationships
with
customers. The first Respondent signed
a
memorandum of
agreement
containing restraint of trade and confidentiality
provisions
on
5
th
April 2006 - Annexure "BA4". As already
stated
above., the
restraint
agreement was concluded on the
6
th
May
2008,
which
restrains
him for a period of twelve (12) months after
date
of termination of
his
employment
with
the
Applicant, from being,
associated
with,
engaged
or interested in or employed by any business
similar
to or
competing
with the business of the Applicant
within
70 (seventy) kilometre
radius
of any of the Applicant's business premises.
The
restraint
agreement
was concluded on the basis that the first
Respondent
would
during
the course of his employment; acquire confidential
information
of
the Applicant. In clause 5 of the restraint agreement,
the
first
Respondent
acknowledged and agreed "that the restrictions
arc
restraints
herein
contained are reasonable and fair and
that
each of the restrictions
and
restraints is severable from the rest of them".
The
restraint
agreement
was entered into by the first Respondent
freely
and
voluntarily,
with full knowledge of its provision.
[5]
The first
Respondent
left
the
employ of the Applicant with effect from the
31
st
July 2010. after
tendering
his resignation by way of a letter dated
25
th
June 2010
-
Annexure "BA6". After his resignation
A
LETTER
DATED
28
th
June
2010 (annexure "BA7") was handed to the first
Respondent
confirming
that
he was bound by the restraint. On the 2
nd
July
2010,
the
first
Respondent replied to the letter furnishing certain
undertaking;
(annexure
"BA8") but he did not undertake to abide
by
the terms of
the
restraint
agreement. On the 23
rd
July 2010, the
Applicant
received a
letter
from the first Respondent's attorney -
annexure
"BA9". However,
the
first Respondent still refused to comply with the
terms
of the
restraint
agreement.
[6]
The
Applicant
contends
that
it is settled law that the trade secrets of a party
constitute
a
legitimate
interest which is deserving of protection by means of a covenant in
restraint of trade. Such connection arises where
the party against
whom the restraint of trade is sought to be enforced had access to
clients, and was in a position to large customer
connections.
Further, that an Applicant seeking to enforce a restraint of trade is
not required to show that the party against
whom the restraint is
sought to be enforced has exploited its confidential information or
customer connections, or that he/she
would do so.
[7]
The Respondent avers, that the Applicant was aware, from the 28
tn
June
2010of the first Respondent's intended move to take up employment
with the second Respondent and that the first Respondent
provided
undertakings required by the Applicant and requested the Applicant to
negotiate the matter and requested a non litigious
resolution to the
dispute. The first respondent has been in the employ of the second
respondent for six weeks since and has intergrated
himself into the
business of the second Respondent.
[8]
The position in our Law regarding the validity and enforceability of
a restraint of trade agreement has been well discussed
in
Magna
Alloys and Research SA (PTY) LTD v Ellis
1984 (4) SA 847
(A).
It
was decided that a party wishing to be absolved from a restraint of
trade agreement has to allege and prove that the enforcement
of the
restrictive condition would be contrary to public policy. Each
agreement should be examined with regard to its own circumstances
to
ascertain whether the enforcement of the agreement would be contrary
to public policy, in which case it would be enforceable.
Although
public policy requires that agreements freely entered into should be
honoured, it also requires, generally, that everyone
should be free
to seek fulfilment in the business and professional world. An
unreasonable restriction of a person's freedom of
trade would
probably also be contrary to public policy, should it be enforced.
See also the unreported judgment of Makgoba
J
in
Subtropico
Marko Centre (EDMS) BPK vs Marius Karsten and Another- Case number
42671/08.
[9]
I am of the view that the first Respondent has not succeeded in
proving that the enforcement of the restrictive condition is
contrary
to public policy. The circumstances in this case are such that the
first Respondent in his letter dated the 2
nd
July 2008 admitted that the contents of the restraint agreement
clauses entered into and signed by the parties on the 6
th
May 2008 were fair and reasonable. The restraint agreement so signed
would therefore limit the freedom of the first Respondent
to fulfil
his business and professional desires.
Trade
connections of a party constitute a legitimate interest which is
deserving of protection by means of a covenant in restraint
of trade
-
Rawlins
and Another V Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A).
Protection
of trade secrets arises where a party against whom the restraint of
trade is sought to be enforced was privy to confidential
information
of the party seeking to enforce it.
[10]
As already indicated, the first Respondent in his letter of 2 July
2008 states that he understands the particulars of the restraint
of
trade agreement which he has signed. He also admits that during his
employment with the Applicant's company he was privy to
certain
confidential information of the company. Further, that the company is
at risk in that he would dissolve confidential information
to his
prospective employer who is a direct competitor of the Applicant.
The
first Respondent has been in the employ of the Applicant for more
that 4 years. It is common cause that during this period he
has
gathered
a
lot
of information and trade secrets. It therefore follows that in the
event that this information is disclosed to a competitor
it will harm
the business of the Applicant.
[11]
The
Applicant is not required to show that the first Respondent has
exploited its confidential information or customer connections
or
that he/she would do so -
Reddy
V Siemens Telecommunications (Pty)
Ltd
2007
(2) 486
(SCA).
The
first Respondent signed the restraint agreement freely and
voluntarily and also stated that the restraint is not unreasonable
-Reddy's case supra.
It
is not necessary to deal with each minute aspect in this matter.
Suffice to mention that although I find all the other terms
of the
restrictions reasonable, I am however not satisfied that a period of
12 (twelve) months is reasonable. In my order I intend
reducing this
period to
6
(six)
months.
[12]
In the premises I would make the following order:
1.
That
the
first respondent be interdicted and restrained from:
1.1
being
associated with, engaged or interested in or employed by any business
which renders services which fall within the ambit of
the services
rendered by the Applicant.
1
.2
rendering
any services falling within the ambit of the services rendered by the
Applicant, to or for the benefit of any person or
entity who as at
31
July
2010,
or
during the period
of
6
(six)
months preceding 31 July
2010,
was
a customer of
the
Applicant
or
a potential
customer of the Applicant who was in negotiation with the Applicant
for the rendering of services;
1.3
Soliciting
the business of, or enticing away from the Applicant (or attempting
to entice away), any person or entity referred to
in prayer 1.2.
1.4
disclosing
or divulging to any person or entity information pertaining to:
1.4.1
the
names of the Applicant's customers, or prospective customers.
1.4.2
the
operating requirements of the applicant's customers, or prospective
customers;
1.4.3
the
financial details (including pricing, credit and discount terms) of
the Applicant's customers or prospective customers;
1.4.4
the
contractual arrangements between the Applicant and its customers.
1.4.5
the
remuneration paid by the Applicant to its employees;
1.4.6
the
business of the Applicant which is not readily available in the
ordinary course of business to a competitor;
2.
That the restraint referred to in prayers 1.1-1.3 shall operate:
2.1
for
a period of 6 (six) months calculated from 31
st
July 2010.
2.2
within
a radius of seventy
(70)
kilometres
of the Applicant's business premises at:
2.2.1
53 de Havilland Crescent, Persequor Park, Pretoria,
Gauteng.
2.2.2
1
Quark Crescent, Linbro Park, Sandton, Gauteng.
2.2.3
26
Platinum Street, Ladine, Polokwane.
3.
That the first respondent pays costs of the application.
TJ
RAULINGA
JUDGE
OF THE HIGH COURT
NORTH
GAUTENG HIGH COURT
FOR
THE APPLICANT: Adv TWG Bester
INSTRUCTED
BY: Cliffe Decker Hofmeyer
FOR
THE RESPONDENT: Adv P Van den Oderl
INSTRUCTED
BY: Hlatshwayo Du Ptessis Van der Merwe Nakiseng
DATE
OF JUDGMENT: 22/10/10
HEARD
ON: 7/09/10