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[2017] ZAECPEHC 36
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Izikhathi Security (Pty) Ltd v Zaayman and Another (1919/2017) [2017] ZAECPEHC 36 (18 July 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
CASE
NO.: 1919/2017
In
the matter between:
IZIKHATHI
SECURITY (PTY)
LTD
Applicant
And
JOHANNES STEPHANUS
ZAAYMAN
First
Respondent
ORAZONE (PTY) LTD t/a
PROPSEC
Second
Respondent
JUDGMENT
BESHE
J:
[1]
Applicant approached this court for an order in the following terms:
That
first and second respondents are hereby interdicted and restrained
from date of this order from:
1.1 Approaching directly and indirectly, or assisting any other
person in approaching directly or indirectly any existing client
and
or customer of the applicant or engaging with any of them in order to
solicit their business for the benefit of the second
respondent for a
period of 6 months.
1.2 Approaching directly or indirectly, or assisting any other person
in approaching directly or indirectly current employees of
the
applicant with a view to inducing and or enticing them to work for
the second respondent and or first respondent.
[2] Applicant is a company that is duly registered in
accordance with the company laws of this country. It is in the
business of
providing security solutions to corporate clients
throughout South Africa.
[3]
First respondent is an adult male person who was previously employed
by the applicant. He is currently the director of second
respondent.
It appears to be common cause that second respondent also provides
similar services to those provided by the applicant.
[4]
The following facts emerge from the founding affidavit deposed to by
the Group Managing Director of the applicant,
Mr Gary Michael
Barnett
.
During
the course of his employment in applicant, first respondent was
tasked with,
inter alia
,
attracting new clients and
Barnett
would then secure the business. During the period first respondent
had access to applicant’s clients’ files, lists,
contract
information, requirements and budget as well as information relating
to individual client security solution and cost thereof.
He also had
access to employee records which contained their salaries and
benefits.
[5]
First respondent resigned from the employ of the applicant on the 1
April 2017 giving one month’s notice of his intention
to leave
on the 30 April 2017.
[6]
It is common cause that second respondent was registered on the 9
February 2017. On the 15 March 2017 first respondent applied
for
registration with the Private Security Industry Regulatory Authority
(PRISA). He got his certification from PRISA on the 7
April 2017.
[7]
It is also common cause that first respondent resigned from applicant
to start his own security company.
[8]
According to
Barnett
,
on 26 April 2017 he received correspondence from one of applicant’s
clients, Brooks on the Bay, notifying applicant of the
termination of
its contract with applicant.
[9]
Two days thereafter on the 28 April, a further notice of termination
was received from another client Kinghurst. Applicant alleges
that
the respondents have made use of confidential information pertaining
to the business of the applicant, which first respondent
acquired
during the course of his employment with the applicant, to
springboard second respondent’s business. Applicant alleges
further that first respondent asked its operations manager,
Ms
Lorraine Loggenberg
to assist him with the
rostering of his guards using the rostering system of the applicant.
This is confirmed by
Ms Loggenberg
.
[10]
It is applicant’s further allegation that first respondent
tried to entice
Mr John Loggenberg
to resign from applicant and work for second respondent. He also told
Mr Loggenberg
he will
be taking clients Bluekap, Brooks on Bay, Kingshurst, Summerstrand
and Walmer. Also that he has approached guards at Brooks
on Bay and
Kingshurst to come and work for second respondent. That indeed, from
the 1
st
of May
2017 a number of guards from Summerstrand complex who had been under
applicant’s management, started working for the
second
respondent.
[11]
Mr Loggenberg
confirms
having been approached by second respondent as stated above.
[12]
Applicant contends that the actions of the respondents amount to
unlawful competition.
[13]
Mr Barnett
states that
he met with second respondent on the 25 April 2017 whereupon he
requested that the latter return the company cell phone,
laptop,
petrol and credit cards and that he should not return to applicant’s
office. The said items were returned the following
morning.
[14]
Further notices of resignation / termination have since been received
by the applicant, being from Kinghurst security guards
(8 May 2017)
and from Bluekap (22 May 2017).
[15]
Applicant contends that first and or second respondent are unlawfully
interfering with applicant’s right to fair and
honest trade by
soliciting business from applicant’s existing clients and by
enticing its employees to resign. Further that
respondents utilize
confidential information first respondent amassed whilst working for
the applicant, to spring board the second
respondent, and that this
is to the detriment of the applicant.
[16]
From as early as April when applicant received notification from two
of its clients that they will be terminating their contracts
with
applicant, applicant queried the said decision from such clients. In
addition thereto it was indicated to the two clients
that applicant
will be approaching the court for the necessary relief. The same
threat was conveyed in a letter from applicant
to the first
respondent in April. Later during May applicant called on the
respondents to give an undertaking to desist with the
wrongful acts
of unlawful competition. Respondents furnished such undertaking –
not to compete unlawfully. They however denied
that their actions
constituted unlawful competition. Respondents also pointed out that
they were not under any restraint of trade.
[17]
It is common cause that this application was launched on the 1 June
2017.
[18]
In opposing the granting of the relief sought, respondents raise,
in
limine
, lack of urgency. This on the basis that applicant was
aware months before the application was launched that:
When
first respondent resigned early in April the intention was to go into
business as his opponent or competition. This, according
to first
respondent came through during his discussion with
Barnett
in January 2017. The latter was also aware that some of applicant’s
clients would follow second respondent. Applicant’s
knowledge
in regard also stems from the notices of termination and resignation
from applicant’s clients and staff (guards)
respectively that
were received during April.
[19]
Respondents contend that all the facts upon which this application is
based were known to the applicant since January alternatively
April
2017. Applicant denies he was aware of second respondent’s
intentions when he resigned from applicant. It is also denied
on
behalf of applicant that there was delay in launching these
proceedings. That attempts were made to avoid having to go to court.
And that based on respondents’ undertaking that there will be
no unlawful competition coupled with the fact that no other
notices
of termination were received until May 22, applicant relaxed or put
his guard down.
[20]
In my view, this is a reasonable explanation on the part of the
applicant for the delay in launching these proceedings.
[21]
As far as the merits are concerned, first respondent states that he
has been employed in the security business for thirteen
(13) years.
During that period he has developed skills in the management of the
security business, developing skills in risk assessment
and
management to applicant’s clients’ satisfaction. First
respondent further alleges that he did not receive any training
from
applicant. Through his interaction with representatives of their
customers, or based on such interactions he improved their
security
requirements. His reputation in this regard gave him the ability to
compete and acquire new business without soliciting
applicant’s
clients.
[22]
First respondent denies using any confidential information of
applicant’s business stating that he does not have any
such
confidential information. Further that applicant does not have any
client files and he did not have access to any client files.
He has
dealt with applicant’s clients in Port Elizabeth for over a
decade, he knows their managers or supervisors by name
and has been
dealing with them for a long time. First respondent retorts that
there were no files to speak of. The folders he had
in his work
laptop were compiled by him and contained clients’ folders of
procedures and protocols. The information is of
no use to him and in
any event the company laptop and cellular phone which had clients’
cell phone numbers were returned
to the applicant. According to him
telephone numbers and contact details of applicant’s clients
are public knowledge or in
the public domain. They appear from the
signage in most of the businesses concerned. He denies that he
approached contact persons
in applicant’s clients’
companies, but alleges that as soon as they heard he was leaving
applicant’s business,
the customers approached him proposing to
migrate their business to the second respondent. That this is due the
fact that he is
known to be highly skilled in the security industry.
First respondent denies being privy to applicant’s clients’
budgets.
That PRISA has a pricing structure that is recommended to
its members. These costs are therefore public knowledge. The same
applies
to salaries and benefits – guards being paid according
to the sectorial determination.
[23]
In an bid to show that he did not solicit applicant’s clients,
first respondent states that he prepared a quote for
Lindi
Domoney
, the centre manageress of Brooks on
the Bay at her request. So was the case with Kingshurst. A quote was
requested by
Sister Debora Ferrant
who is in charge of the property and security on the premises. This
was upon her learning that first respondent was leaving applicant
to
open his security company. Further, that Kinghurst terminated their
contract with applicant because they were dissatisfied with
Mr
Loggenberg’s
service which complaints
include his attitude towards security guards. That is also for this
reason that he would not consider
employing him. He denies
communicating with him about his future plans or telling him that he
will take applicant’s clients
with him.
Loggenberg’s
attitude towards guards is confirmed by one of the guards
Mr
Mandla Takane
.
[24]
The awarding by Bluekap of their security work to the second
respondent resulted from a request from their representative,
Melanie
Bird
for a quote on the 12 May 2017. Further
that upon being asked by applicant why Bluekap was terminating the
contract with applicant,
Ms Bird
,
gave the reason as
inter alia
,
that the service they received from applicant has always been very
professional, that she valued the personal attention they received.
But that is currently lacking at the time of the response to the
applicants. He has always met and dealt with first respondent
from
applicant’s management. However there was no communication from
applicant about what the arrangements would be after
first
respondent’s resignation.
[25]
First respondent accuses
Mr Barnett
of failing to disclose that a representative of Bluekap informed
applicant why they decided to terminate their contact with applicant,
showing that Bluekap and other customers left in their own volition
and for reasons as cited by
Ms Bird
.
First respondent denies that he is competing unlawfully with the
applicant. He points out that he is not under a restraint of
trade.
He states he will however attempt to solicit business from any
potential customer. Denies his conduct is unlawful.
[26]
In his reply
Barnett
seems
to confirm that certain functions and, I would imagine and documents,
pertaining to quoting and costing of new business were
retained at
applicant’s head office in Durban and that all costings and
quotes took place from Durban. This,
Barnett
attributes to incompetence on the part of first respondent in this
regard. He denies that first respondent did not receive any
training
from applicant. He retorts that first respondent attended many
meetings with him where he told him how the company is
run and what
make applicant different from the rest. He contends that first
respondent is using inside knowledge gained from his
employment with
the applicant to his advantage to the detriment of the applicant.
Hence applicant submits it is entitled to the
protection of this
court.
[27]
The issue to be determined in this matter is whether the actions of
the first respondent, acting on behalf of or as a representative
of
second respondent amount to unlawful competition or not.
[28]
What amounts to unlawful competition? Invariably, a determination of
what constitutes unlawful competition, will involve the
balancing of
the interests of former employer (the complainant who cries unlawful
competition) and the interest of the competitor
and ex-employee of
the complainant. This is so precisely in the environment of a free
market economy in which free competition
amongst those participating
in the market is expected or is supposed to prevail. This is also in
keeping with
Section 22 of the Constitution
which provides:
“22. Freedom of trade, occupation and profession. ̶
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.”
In
the publication
Van Heerden – Neethling
:
Unlawful Competition, Second Edition,
the
author states that
“At first glance the concept of
unlawful competition is self-explanatory: it encompasses any act
which is directed at gaining
an advantage over and / or prejudicing a
competitor(s) in the competitive struggle and which is censured by
law”
.
[1]
It is trite that what the law censures or what is restrainable is
unlawful competition. It is also trite that the unlawfulness
concerns
the use of the former employer’s confidential information or
documents to compete with the former employer. The
author of the
publication
Van Heerden – Neethling
“Unlawful Competition”
[2]
seems to suggest that confidential information is worthy of
protection by courts if such information amounts to trade secrets.
In
addition to qualify as such (trade secret) the information must be
secret or confidential, or in other words, only be available
and
known to a restricted number of people, and not be public knowledge.
It must also be of economic value to the former employer.
I have
already indicated that first respondent denies having applicant’s
confidential information. He denies receiving any
training from
applicant. He alleges he honed his skills over the years (period of
some thirteen (13) years) during which he interacted
with
representatives of applicant’s clients. As a result of which
interactions he incrementally made improvements on their
security
requirements. He denies having any client files or having had access
thereto. That information / contact details pertaining
to applicant’s
clients is in the public domain, so is industry pricing structure as
well as salaries and benefits for guards.
[29]
If the matter is decided on respondents’ version as it should
be, this being an application for a final interdict, it
occurs to me
that first respondent does not have any confidential information or
trade secrets that belong to the applicant.
[30]
In
Motion Transfer & precision Roll
Grinding CC v Carsten
[3]
the following was stated:
“
The types of
information which are capable of qualifying as confidential in terms
of these requirements are unlimited but undoubtedly
include
technical, business or marketing information. The categories of such
information which the courts have held to be trade
secrets are once
again conveniently listed by Van Heerden and Neethling
op
cit
at
227 as follows:
“
A
technical process, computer software, the know-how of an undertaking,
an unpublished trademark, customer lists, customer connections,
business conversations, credit records, price lists and tender
prices.””
There
are similarities between the facts in
Motion Transfer
supra
and the present matter. At page 177, the following was stated:
“In the present case there is no proof whatsoever that the
respondents stole the applicant's customer list or even memorised
it
without purloining the actual document. The most that can be said is
that the first respondent in particular, on his own admissions,
learned in the course of his employment the identity of a number of
the applicant's clients and that respondents have, since they
commenced trading in competition with the applicant, solicited work
from some of those clients. In my view, it has not been shown
in the
first place that their approach to those clients was because those
clients featured on the applicant's customer list; and,
secondly,
even if the first respondent originally learned of their identity
because they were on the list, there is nothing to
show that his
subsequent dealings with them were not of such a nature as to render
it inevitable that he would remember them and
carry away their
identity in his head as potential customers when he left the
applicant's employ. I accordingly do not think that
the applicant has
proved, even
prima facie
, that his conduct in approaching them
was unlawful; and it was, in my view, no more than a legitimate
exercise of his right freely
to compete with the applicant after he
left its employ. To hold that under those circumstances he should be
precluded from approaching
any potential customer who happened to
have features on the applicant's customer list would be unduly to
stultify that right and
against public interest.”
Later
in the judgment
Page J
had this to say:
[4]
“As regards the alleged unlawful misappropriation of the
applicant's goodwill, flowing from the first respondent's
relationship
with the applicant's clients built up during the course
of his employment, it is obvious that every employee occupied in the
field
of customer relations must become acquainted with and build up
a relationship with his employer's customers. It would be totally
unrealistic to expect him after termination of his employment to shun
all such customers.”
In
my view these remarks apply with equal force
in
casu
. This appears to be the case with first
respondent, there is no evidence that he has applicant’s trade
secrets. The information
he has is either in the public domain or of
general application in the industry. He does not have client lists or
files. He knows
their representatives’ personally through his
longstanding interaction with them, through which he honed his skills
in the
security industry and managed to improve on their
requirements. There is no reason not to accept that it is the
representatives
of applicant’ clients who approached the first
respondent with a view to migrating to his newly formed company –
the
second respondent. Respondents attached correspondence to prove
this. In my view, first respondent can hardly be said to be riding
on
the crest of applicant’s good will. If anything his reputation,
albeit
gained during
his employment with the applicant, preceded him or placed him in good
stead.
[31]
Applicant complains about all the steps first respondent took whilst
still in the employ of the applicant to set up his company.
I do not
think he can be faulted for doing that if his intention was to resign
and set up a rival company, he did what any wise
person would do –
prepare for such move.
[32]
It must also be noted that the first respondent is not under any
restraint of trade by the applicant. There is no agreement
of
restraint of trade between them.
[33]
I am not persuaded that applicant has made out a case for relief that
it seeks.
[34]
Accordingly the application is dismissed with costs.
_______________
NG
BESHE
JUDGE
OF THE HIGH COURT
APPEARANCES
For
the Applicant : Adv: BC Dyke
Instructed
by: MACGREGOR ERASMUS ATTORNEYS
C/o
KAPLAN PLUMBERG ATTORNEYS
1
st
Floor, Block A
South
Life Gardens
70
– 2
nd
Avenue
Newton
Park
Docex
14
PORT
ELIZABETH
Tel.:
041 – 363 6044
Ref.:
MAT17885/K Morris/mve
For
the Respondents : Mr Friedman
Instructed
by: FRIEDMAN SCHECKTER
75
Second Avenue
Newton
Park
PORT
ELIZABETH
Tel.:
041 – 395 8413
Ref.:
Mr Friedman / Jacky
Date
Heard : 20 June 2017
Date
Reserved : 20 June 2017
Date
Delivered : 18 July 2017
[1]
Page 4.
[2]
Page 227.
[3]
[1998] 4 All SA 168
N at 175.
[4]
Page 177.