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[2019] ZAECPEHC 87
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Sizonke Trading Nelspruit (Pty) Ltd and Another v Stander and Others (675/2019) [2019] ZAECPEHC 87 (16 July 2019)
SAFLII
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Certain
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
Case No.: 675/2019
Date Heard: 27 June
2019
Date
Delivered: 16 July 2019
In
the matter between:
SIZONKE
TRADING NELSPRUIT (PTY) LIMITED
First
Applicant
SIZONKE
TRADING PORT ELIZABETH (PTY) LIMITED
Second
Applicant
and
JOHAN
ANDRé
STANDER
First Respondent
ANDRé
STANDER
Second Respondent
SURFACE PREPARATIONS
EQUIPMENT AND
COATINGS
(PTY)
LIMITED
Third Respondent
SPEC
HARDWARE (PTY) LIMITED
Fourth Respondent
SPEC
CORROSION PROTECTION (PTY) LIMITED
Fifth Respondent
JUDGMENT
EKSTEEN
J:
[1]
The applicants seek to enforce a covenant
in restraint of trade entered into with the first and second
respondents respectively.
In the founding papers it is alleged
that the first and second respondents have, in breach of the
covenant, taken up employment
with the third respondent. It
accordingly sought an interdict against the third respondent alleging
that it competed unlawfully
with the second respondent. In the
answering papers, however, the third respondent alleged that the
first respondent was
in fact employed by the fourth respondent and
the second respondent by the fifth respondent. An application
was accordingly
brought to join the fourth and fifth respondent in
these proceedings and to seek an interdict against the fourth and
fifth respondents
based upon their alleged unlawful competition.
The joinder was not opposed. I can conceive of no reason not to
grant
same.
[2]
The background leading to the conclusion of
the contracts of employment and the covenants in restraint of trade
are prolix and complicated.
It is, however, necessary for
purposes of the adjudication of the disputes between the parties to
set out the circumstances in
greater detail than I would have liked
to do. The history, as set out below, dates back some
considerable time prior to the
conclusion of the contracts of
employment in issue.
[3]
Chesterton International Inc. (Chesterton)
is a foreign company situation in the United States of America, which
manufactures lubricants
and sealing products utilised by large
industrial clients and marketed across the world. Chesterton
established and registered
a subsidiary company, Chesterton
Industries (Pty) Ltd (Industries) in South Africa in order to
distribute its products. Industries
established branches in
Richards Bay, Durban, Port Elizabeth and Cape Town from which their
products were distributed to end-users.
In other areas, in the
interior of South Africa, Chesterton entered into distribution
agreements with independent companies which
entitled them to
distribute specified categories of Chesterton products. During
2002 Chesterton entered into such a distribution
agreement with
Unitrading (Pty) Ltd (Unitrading) conferring on it the exclusive
rights to distribute certain specified Chesterton
products within a
circumscribed part of Mpumalanga.
[4]
During 2010 Industries, with the
concurrence of Chesterton, resolved to sell its business and assets
within South Africa and entered
into negotiation with the first
applicant. An agreement (the sale agreement) was duly concluded and
the first applicant purchased
the business and assets (save for some
excluded assets which are not material for purposes of this
application), subject to certain
conditions precedent.
[5]
One of the conditions precedent to the sale
agreement was that a distribution agreement be entered into and that
all the conditions
precedent in such an agreement be fulfilled in
accordance with its terms. The first applicant, being the
purchaser in terms
of the sale agreement, was a related company to
Unitrading, as more fully set out below. In these circumstances
the distribution
agreement, which was envisaged in the condition
precedent in the sale agreement, was concluded between Unitrading and
Chesterton.
In terms of the distribution agreement Unitrading
was granted the distribution rights of certain specified Chesterton
products
within the demarcated territorial areas of Richards Bay,
Durban, Port Elizabeth, Mossel Bay and Cape Town. Two clauses
of
the distribution agreement have featured large in the disputes
between the parties. Clause 14 of the Distribution Agreement
provides:
“
Competitive
Products
Distributor
shall not, during the term of this Agreement, stock or sell any
products that are competitive with products marketed
by Supplier.
Marketing or sale of such competitive products by Distributor shall
be deemed a material breach of this Agreement.”
[6]
The second provision which was much debated
during argument is clause 26, which provided:
“
Distributor
Partner / Joint Venturer
Distributor
has informed Supplier that it wishes to accomplish and fulfill its
obligations under the Agreement in the Territory
with the assistance
of certain companies that are affiliated with and/or subsidiaries of
Distributor that are located in the Territory
assigned hereunder to
Distributor and with whom Distributor will enter into contractual
relationships. Distributor agrees
and acknowledges that it may
only do so if, and to the extent that: (a) Distributor provides
prior
full disclosure to Supplier of the full legal name, ownership
details, type of legal entity, principal and trading addresses and
principal business contacts of such potential sub- distributors;
(b) Distributor confirms in writing to Supplier that such
contractor
sub- distributors have been shown a copy of this Agreement and have
agreed in writing to act in accordance with these
terms and
conditions; and (c) upon review of such information, Supplier
consents to Distributor’s relationship(s) with
such sub-
distributors for purposes of assisting in the fulfillment of the
Distributor’s obligation in the Territory hereunder.
…”
[7]
The sale agreement and the distribution
agreement were concluded in December 2010. At the same time the
first applicant established
and registered Sizonke Trading Richards
Bay (Pty) Limited, Sizonke Trading Durban (Pty) Limited, Sizonke
Trading Port Elizabeth
(Pty) Limited and Sizonke Trading Cape Town
(Pty) Limited (to which I refer jointly as the Coastal Companies)
which, upon implementation
of the sale agreement, took over the
distribution of the relevant Chesterton Products to the end-user
customers from the various
branches of Industries. Whilst the formal
requisites set out in clause 26(b) of the distribution agreement were
not complied with,
Chesterton was at all times aware of the existence
and activity of the Coastal Companies, which, in turn, were all fully
aware
of the terms of the distribution agreement through their common
directors. The inescapable conclusion is that the Coastal
Companies were the entities contemplated in clause 28. I shall
set out the reasons for this conclusion more fully later.
[8]
The effect of their structure was that the
first applicant, Unitrading and the Coastal Companies were all
related or interrelated
companies as defined in section 2 of the
Companies Act 71 of 2008 (the Act) and, with the exception of first
applicant, were distributing
Chesterton products in terms of the
distribution agreement. During 2015 the first applicant caused
Sealmech (Pty) Limited
to be established and registered.
Sealmech procured other products utilised in the same fields of
industry as, and which
are competitive with, the products of
Chesterton. Both the Chesterton products and those procured by
Sealmech were distributed
and marketed through the Sizonke Group.
[9]
Sealmech joined the Sizonke Group as a
related company as envisaged in section 2 of the Act. Save in
the case of the first
applicant, which is a black empowerment
company, the Ashcra Trust and the LB Trust together hold the majority
of shares in all
the remaining companies. The Ashcra Trust is
described as the family trust of Simon Bennett, the deponent to the
founding
affidavit, and the LB Trust as the family trust of his son,
Craig Bennett. Either or both of the Bennetts are directors in
all of the companies in the Sizonke Group. The applicants
allege that the business of the Group is
de
facto
one conglomerate business that
operates over the whole of Sub-Saharan Africa and that the Bennetts
are the controlling minds of
all of the related companies.
There is much dispute between the parties, flowing from these facts,
in respect of the interpretation
and impact of the sales agreement
and the distribution agreement on the adjudication of the dispute
between the parties.
I shall revert to these agreements, to the
extent that it is necessary to adjudicate the dispute between the
parties, later.
[10]
Although the third respondent is at times
equivocal about its distribution rights, it is apparent that from
approximately 2016 Chesterton
awarded distribution rights of certain
of its products to the third respondent and later also to the fourth
respondent. During
February 2019 Chesterton cancelled the
distribution agreement with Unitrading. Its entitlement to
cancel the agreement is
not in dispute in the present proceedings.
Chesterton awarded the distribution rights which Unitrading and its
Distributor
Partners had previously held to the third and/or fourth
respondents. Whilst neither Chesterton nor Unitrading are
parties
to the present dispute the respondents contend that many of
the rights asserted by the applicants in fact accrue to Chesterton
and that the third, fourth and fifth respondents are entitled, by
virtue of the distribution agreement with Chesterton, to the exercise
of such rights. I shall revert to these issues too, to the
extent necessary later.
[11]
Against this background and during 2015 and
2016 respectively, the first and second respondents, father and son,
were employed.
In each case the employment contract and the
covenant in restraint of trade were signed simultaneously, although
they are embodied
in separate documents. Sadly, these documents
are not a model of clarity and there has been much dispute as to the
proper
interpretation of these documents. The disputes relate
primarily to the identity of the employer and to the party entitled
to enforce the restraints.
[12]
There was initially some ambiguity in the
responses from the third respondent in respect of the employment of
the first and second
respondents leading to the initial joinder of
the third respondent. It is now, however, common cause that the
first respondent
is employed by the fourth respondent and the second
respondent by the fifth. It is not seriously in dispute that
the third,
fourth and fifth respondents compete with the first and
second applicants in the distribution of industrial lubricants,
corrosion
protection products, mechanical sealing and seals, gaskets
and related products and that all or some of them are involved in the
installation, service, repair and maintenance of pumps, pneumatic and
hydraulic cylinders and coatings on metal and concrete applications.
Notwithstanding the exclusivity clause to which I have referred
earlier in the distribution agreement the applicants allege that
the
business of the “Sizonke Group” has never been restricted
only to Chesterton products and that they have branched
out from
purely procuring and selling products to providing the additional
services referred to above.
[13]
As alluded to earlier the employment
contracts of the first and second respondents are not models of
clarity. Although there
are many similarities in the documents
I shall deal with them separately.
[14]
The employment contract with the first
respondent was concluded on 20 February 2015. It appears on a
letterhead of “Sizonke
Trading” bearing the address of
the first respondent in Nelspruit. The dispute between the
parties relates to the meaning
to be attributed to the introductory
portion and the first clause of the employment contract. It
provides as follows:
“
Dear
Johan
We
have pleasure in confirming your permanent appointment with the
Sizonke Trading ((Pty)) Ltd Group. The following terms
and
conditions apply to your appointment;
1.
Employment Details
1.1
Your first day of employment is 23 February
2015 (or sooner)
1.2
Your place of work is at the premises of
SIZONKE TRADING PORT ELIZABETH ((PTY)) LTD, 119 Villiers Road,
Walmer, Port Elizabeth.
You may at times be required to work at
the premises of any associated Company of the group or any client of
the Company.
This may be in South Africa or abroad.
1.3
You are employed as a Full Line Specialist
and your duties include;
-
Selling the Chesterton Range of Products
A
specific job description will be issued and explained to you.
You
may also be required, from time to time, to perform duties outside
of your job description that are reasonably expected
of you.
1.4
You will report directly to Mr M.R Moore –
Director”
[15]
Mr Moore, it is common cause, was the
branch manager of Industries in Port Elizabeth prior to the sale of
the business of Industries
to the first respondent. The sale of
the business was affected as a going concern and Mr Moore became
employed by the second
applicant as the manager of the business in
Port Elizabeth. He also became a director and shareholder in
the second applicant.
Shortly after the first respondent had
commenced employment Moore resigned from the Sizonke Group and took
up employment with Chesterton
in July 2015. Moore is not
currently bound by any restraint of trade.
[16]
The covenant in restraint of trade in
respect of the first respondent was concluded on the same day as the
contract of employment
and in each case the agreement was signed on
behalf of Sizonke by Craig Bennett. The agreement in restraint
of trade compounds
the ambiguity. The heading and first
paragraph of the agreement records as follows:
“
SIZONKE
TRADING (PTY) LTD
Registration Number
2006/014858/07
(herein referred to as
“
THE COMPANY
”)
And
JOHAN STANDER
ID No. 6[…]
(hereinafter
referred to as “
THE EMPLOYEE
”)
1.
PARTIES
1.1
Sizonke Trading (Pty) Limited and its
subsidiaries (“
THE
COMPANY
”)
1.2
Mr JOHAN STANDER (“
THE
EMPLOYEE
”)”
[15]
Paragraph 2.5 of the agreement, under the
heading “Interpretation” the agreement records:
“
The
following expression (
sic
)
bear the meanings assigned to them hereunder and cognate expressions
bear corresponding meanings, namely:
2.5.1
“THE COMPANY” means Sizonke (Pty) Limited and its
subsidiaries through which THE COMPANY performs
the
prescribed
services
and contracts with the
prescribed customers
and
prescribed suppliers
;
2.5.2
…”
[16]
The covenant in restraint of trade is set
out in paragraph 3 of the agreement which commences as follows:
“
3.1
THE EMPLOYEE acknowledges that:
3.1.1
he is an employee of THE COMPANY and that he could be employed by any
one or more of THE COMPANY’S
subsidiaries;
3.1.2
in the course of his being employed with
THE
COMPANY
, he will gain access to the
names of customers and suppliers with whom
THE
COMPANY
does business whether embodied
in written form or otherwise;
3.1.3
in the course of his duties, he will acquire considerable know-how in
the techniques of
THE COMPANY
relating to inter alia, the marketing and sale of the
prescribed
services
.
3.1.4
in the course of his employment with
THE
COMPANY
, he will have opportunity of
forging personal likes (
sic
)
with customers and suppliers of
THE
COMPANY
;
3.1.5
in the course of his employment with
THE
COMPANY
, he will generally have the
opportunity of learning and acquiring trade secrets, business
connections and other confidential information
pertaining to the
business of
THE COMPANY
.”
[17]
The respondents’ main argument, based
upon these agreements is that the first respondent was employed by
the first applicant
and that the restraint concluded is in favour of
the first applicant. The first applicant on its own version,
serves merely
as the “head office” of the Group and is
not itself engaged in any distribution of Chesterton products or any
other
products. It accordingly has no protectable interest, so
it is argued, in enforcing the restraint of trade. All the
exposure which the first respondent has had to the business of the
Sizonke Group has been in the employ of the second applicant.
The restraint of trade, however, so argument proceeds, is not
concluded in favour of the second applicant. It accordingly
has
not acquired any rights under the agreement.
[18]
This brings me to the proper interpretation
of the contract of employment and the restraint of trade. It is
now well recognized
that over the last century there have been
numerous developments in the law relating to the interpretation of
documents.
In
Natal Joint
Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) at 603F-604B Wallis JA set out the current
state of the law thus:
“
The
present state of the law can be expressed as follows: Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given
to the language used in the light of the
ordinary rules of grammar
and syntax; the context in which the provision appears; the apparent
purpose to which it is directed
and the material known to those
responsible for its production. Where more than one meaning is
possible each possibility must be
weighed in the light of all these
factors. The process is objective, not subjective. A sensible meaning
is to be preferred
to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose of the document. Judges
must be alert
to, and guard against, the temptation to substitute
what they regard as reasonable, sensible or businesslike for the
words actually
used.”
[19]
Subsequently in the unreported decision of
Comwezi Security Services (Pty) Ltd and
Another v Cape Empowerment Trust Limited
(795/11)((Pty))
[2012] ZASCA 126
(21 September 2012) at para 15
Wallis JA again had occasion to consider the interpretation of
contract. He stated:
“
In
the past, where there was perceived ambiguity in a contract, the
courts held that the subsequent conduct of the parties in
implementing
their agreement was a factor that could be taken into
account in preferring one interpretation to another. Now that
regard
is had to all relevant context, irrespective of whether there
is a perceived ambiguity, there is no reason not to look at the
conduct
of the parties in implementing the agreement. Where it is
clear that they have both taken the same approach to its
implementation,
and hence the meaning of the provision in dispute,
their conduct provides clear evidence of how reasonable business
people situated
as they were and knowing what they knew, would
construe the disputed provision. It is therefore relevant to an
objective determination
of the meaning of the words they have used
and the selection of the appropriate meaning from among those
postulated by the parties.
This does not mean that, if the parties
have implemented their agreement in a manner that is inconsistent
with any possible meaning
of the language used, the court can use
their conduct to give that language an otherwise impermissible
meaning. In that situation
their conduct may be relevant to a claim
for rectification of the agreement or may found an estoppel, but it
does not affect the
proper construction of the provision under
consideration.”
[20]
In the context of the history and
developments which I have set out earlier it was clearly known to the
parties that a number of
related companies existed and traded under
the name Sizonke Trading and that they operated in conjunction with
one another.
Sizonke Trading Port Elizabeth (Pty) Limited was
established simultaneously with the sale agreement and the
distribution agreement
with the purpose of conducting the
distribution of Chesterton products in the Port Elizabeth and Mossel
Bay areas to end-users.
The employment agreements stipulates
that the first respondent was to take up employment at Sizonke
Trading Port Elizabeth (Pty)
Limited and that he was required to sell
the Chesterton range of products. Mr Moore, to whom he
reported, was stationed at
Port Elizabeth and was a director of
Sizonke Trading Port Elizabeth (Pty) Limited. Upon taking up
employment, it is common
cause, he worked under the direction of
Moore and was remunerated by Sizonke Trading Port Elizabeth (Pty)
Limited. He was,
as a fact, employed throughout the period of
his employment by Sizonke Trading Port Elizabeth (Pty) Limited.
After the resignation
of Moore his son, Mark Moore succeeded him as
the manager of the second applicant. This arrangement was
unsatisfactory which
led to the termination of Mark Moore’s
employment in November 2017. At this stage the first respondent
was promoted
to manage the business of the second applicant in Port
Elizabeth. In these circumstances I consider that reading the
provisions
of the employment contract in the context of the agreement
as a whole, with due regard to the circumstances attendant on its
coming
into existence, and the purpose for which it was entered into
a sensible businesslike interpretation leads ineluctably to the
conclusion
that the first respondent was to be employed by the second
applicant and that he could be required to render services, in
future,
to other related companies. The conclusion, I think,
accords with the definition of an employee contained in the
Basic
Conditions of Employment Act, 75 of 1997
where an employee is defined
to mean:
“
Any
person … who works for another person … and who
receives … any remuneration.”
[21]
The first respondent as a matter of fact
worked for the second applicant and received his remuneration from
the second applicant
in the course of carrying on the business of the
second applicant.
[22]
Reverting to the restraint of trade
agreement, it is argued, that the first applicant elected to bind the
first respondent to the
restraint in favour of the first applicant
and “its subsidiaries”. Subsidiaries, it is argued,
is a specific
term with a defined meaning. The defined meaning
relied upon is in section 3(1)(a) of the Act and could therefore not
sustainably
be defined as meaning “associated companies”.
I have given careful consideration to this argument, however, it
think that it places too narrower meaning on the term subsidiaries.
It is correct that a subsidiary company is defined in
section 3 of
the Act. The term subsidiary, however, also carries a general
English meaning. The New Shorter Oxford
Dictionary (4
th
ed) defines the term subsidiary as:
“
Serving
to help, assist, or supplement, auxiliary, supplementary. Also
subordinate, secondary”
[23]
Ascribing to the term its ordinary
linguistic English meaning I consider that it is perfectly
susceptible in the context of the
circumstances leading to the
restraint of trade agreement and the content of the agreement itself
to ascribe to the term of the
meaning of “associated companies”
or related companies as envisaged in section 2 of the Act.
After all, it was
at all times known that the first applicant has no
subsidiaries as envisaged in the Act. In the circumstances the
first respondent
bound himself to a restraint in favour of the first
respondent and its related companies within the Group.
[24]
The contract of employment entered into
with the second respondent is identical to that entered into by the
first respondent save
that his job description was more broadly
circumscribed as including “sales” and that he was to
report to “Mark
Moore” who, as set out earlier, had
succeeded his father as the manager of the second applicant.
For the reasons set
out earlier I conclude in his case too that he
was employed by the second applicant. The restraint of trade
agreement entered
into with the second respondent is again identical
to that concluded by the first respondent save that it was concluded
between
Sizonke Trading Port Elizabeth (Pty) Limited and the second
respondent. The parties in this case were defined as “Sizonke
Trading (Pty) Limited and its subsidiaries (
sic)
Sizonke Trading Port Elizabeth” and “André
Stander”. In his case therefore, the second respondent
bound himself in a restraint of trade in favour of the first and
second respondents only and not in favour of the remaining members
of
the Group. The distinction is, for purposes of this judgment
immaterial for the applicants seek the enforcement of the
restraint
only in respect of the Eastern Cape and Mossel Bay, which is the area
in which the second applicant trades and in which
the respondents
worked.
[25]
The applicants seek to enforce the
restraint of trade in the said area for a period of twelve months,
being the period set out in
the covenant of restraint. The
restraint itself provided:
“
THE
EMPLOYEE
further undertakes that
neither he nor any company undertaking or concern in or by which he
is, directly or indirectly interested,
engaged, concerned or employed
will during
the restraint period
,
directly or indirectly, whether as proprietor, partner, director,
shareholder, employee, consultant, contractor, financier, agent,
representative, assistant or otherwise in territory and whether for
reward or not:
3.6.1
solicit orders from
prescribed customers
or
prescribed suppliers
for
prescribed services
;
3.6.2
canvas business in respect of the
prescribed
services
from
prescribed
customers
or
prescribed
suppliers
;
3.6.3
sell or otherwise supply any
prescribed
services
to any
prescribed
customers
;
3.6.4
purchase or attempt to purchase services from
prescribed
suppliers
;
3.6.5
solicit appointment as a distributor, licensee, agent or
representative of any
prescribed
supplier
in respect of
prescribed
services
;
3.6.6
attempt to do any of the above.
3.7
Each of the undertakings set out in this clause (including those
appearing in a single clause)
is severable, inter alia, as to:
3.7.1
nature of interest, or activity;
3.7.2
the categories of persons falling within the definition of
prescribed
customers
;
3.7.3
the categories of services failing within the definition of
prescribed services
;
3.7.4
the categories of persons falling within the definition of
prescribed
suppliers
;
3.7.5
the individual cities, towns and/or states which are defined in
the
territory
;
3.7.6
each year or month forming the
restraint period
;
and
are acknowledged to be reasonably required for the protection of
THE
COMPANY
and are generally fair and
reasonable.”
[26]
Neither the area nor the term of the
restraint has been challenged in the papers. The first
respondent resigned from the service
of the second applicant on 31
January 2019. The second respondent resigned, at the insistence
of the second respondent following
disciplinary procedures, on 29
August 2018, and was thereafter re-employed on a different basis.
The applicants acknowledge,
accordingly, that the period of the
restraint in respect of the second respondent would commence on 30
September 2018.
Legal framework
[27]
Covenants in restraint of trade have been
held to be valid and enforceable unless they are unreasonable and
contrary to public policy
(
Magna Alloys
& Research (SA)(Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A);
Basson v
Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A)
at 767B-E; and
Automotive Tooling
Systems (Pty) Ltd v Wilkens and Others
2007 (2) SA 271
(SCA) at 277G). It has also repeatedly been
held that a restraint is, to the extent that it is found to be
reasonably required
for the protection of the party who seeks to
enforce it, constitutionally valid (
CTP
Limited and Others v Independent Newspaper Holdings Ltd
1999
(1) SA 452
(W) at 468G-H;
Fidelity
Guards Holdings (Pty) Limited t/a Fidelity Guards v Pearmain
2001 (2) SA 853
(SE) at 861F-862G;
Reddy
v Siemens Telecommunications (Pty) Limited
2007
(2) SA 486
(SCA) at 495D
; Den
Braven SA (Pty) Limited v Pillay and Another
2008
(6) SA 229
(D)).
[28]
A party wishing to be absolved from a
restraint of trade agreement bears the onus to allege and prove that
the enforcement of the
restrictive condition would be contrary to
public policy. (
Magna Alloys
supra
and
Den Braven
supra
.)
The factual basis for this allegation must be set out in the papers.
Two conflicting considerations come into play
in assessing
whether the enforcement of a restraint of trade is contrary to public
policy. On the one hand agreements ought
to be honoured and, on
the other hand, everyone ought to be free to seek fulfillment in
his/her business or profession and has
a right to freedom of trade.
(
Basson v Chilwin
supra
;
Townsend Productions (Pty) Limited v
Leech
2001 (4) SA 33
(C); and
Reddy v Siemens Telecommunications
supra
.)
[29]
A restraint which is directed solely at the
restriction of fair competition with the covenantee, which is not at
the time of the
enforcement reasonably necessary for the legitimate
protection of the covenantee’s protectable proprietary
interests, is
against public policy (
Super
Safes (Pty) Limited and Others v Voulegarides and Others
1975 (2) SA 783
(W);
Digicore
Fleet Management v Steyn
[2009] 1 All
SA 442
(SCA); and
Value Logistics
Limited v Smit and Another
[2013] 4 All
SA 213
(GSJ)). The protectable proprietary interest may take
the form of trade secrets, confidential information, goodwill or
trade
connections. Liability involves a fourfold test (herein
referred to as the “liability test”);
(a) is there an
interest of the plaintiff which, pursuant to the agreement, warrants
protection;
(b) is that
interest threatened by the defendant;
(c) if it is
threatened, does that interest weigh qualitatively and quantitatively
against the interests of the other so that
he or she will be
economically inactive and unproductive?
(d)
is there another aspect of public interest that does not affect the
parties but requires that the restraint not be invoked?
(
Basson
v Chilwin
supra
and
Digicore Fleet Management
supra.
)
[30]
When the application was launched the
applicant initially sought interim relief. By virtue by the
manner in which the application
has proceeded interim relief was
never granted and the application was postponed from time to time.
When the matter was called
before me the respondents had filed
answering papers and the applicants their replying papers.
Final relief is now sought.
There are numerous factual disputes
between the parties and the approach to such disputes in proceedings
such as this was considered
in
Plascon-Evans
Paints Limited v Van Riebeeck Paints (Pty) Limited
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634H-635C where Corbett J stated:
“
It
is correct that, where in proceedings on notice of motion disputes of
fact have arisen on the affidavits, a final order, whether
it be an
interdict or some other form of relief, may be granted if those facts
averred in the applicant's affidavits which have
been admitted by the
respondent, together with the facts alleged by the respondent,
justify such an order. The power of the
Court to give such final
relief on the papers before it is, however, not confined to such a
situation. In certain instances the
denial by respondent of a fact
alleged by the applicant may not be such as to raise a real, genuine
or
bona
fide
dispute
of fact (see in this regard
Room
Hire Co ((Pty)) Ltd v Jeppe Street Mansions ((Pty)) Ltd
1949
(3) SA 1155 (T)
at
1163 - 5;
Da
Mata v Otto NO
1972
(3) SA 858
(A) at 882D - H). If in such a case the respondent has
not availed himself of his right to apply for the
deponents concerned
to be called for cross-examination under Rule 6
(5)
(g)
of
the Uniform Rules of Court (
cf
Petersen v Cuthbert & Co Ltd
1945
AD 420
at 428;
Room
Hire
case
supra
at
1164) and the Court is satisfied as to the inherent credibility of
the applicant's factual averment, it may proceed on the basis
of the
correctness thereof and include this fact among those upon which
it determines whether the applicant is entitled
to the final relief
which he seeks (see eg
Rikhoto
v East Rand Administration Board and Another
1983
(4) SA 278
(W)
at
283E - H). Moreover, there may be exceptions to this general rule,
as, for example, where the allegations or denials of
the
respondent are so far-fetched or clearly untenable that
the Court is justified in rejecting them merely on the papers …”
[31]
I shall proceed to consider the enforcement
of the restraint of trade mindful of these principles.
The application of the
facts in respect of first respondent
[32]
First respondent was employed on 23
February 2015 at the age of 53. He is qualified as a fitter and
turner and had been employed
with Sappi for some years. In 2004
he moved to Jeffreys Bay and purchased a bottle store business which
he conducted until
he took up employment with the second applicant.
Throughout the duration of his employment with the second applicant
he rendered
services in the Port Elizabeth and Mossel Bay areas.
The applicants contend that upon taking up employment the first
respondent
was allocated a list of existing customers of the second
applicant who he was to serve. The primary functions of the
first
respondent as a sales representative were to serve existing
customers, introduce new product lines and services to existing
customers
and to expand the customer base of the Group. The
first respondent, however, did not canvas any new customers for the
Group
during the period of his employment.
[33]
The applicants allege that the first
respondent received comprehensive and continuous in-house training on
the products and services
of the Group. Craig Bennett, it is
alleged, visited the second respondent to give training to the staff
on products and services
as well as the marketing of the Group’s
products and services to its customers and prospective customers.
He often
accompanied sales representatives to customers and showed
them how to conduct themselves. The first respondent, it is
alleged,
was sent on a number of training courses including one in
Singapore for a week in April 2018 on products of AIGI Environmental
Incorporated and in Johannesburg for one day in September 2018 on
Valvoline Products. The products of AIGI Environmental
Incorporated and Valvoline are products that are competitive with the
products manufactured by Chesterton.
[34]
In the course of the discharge of his
obligations the first respondent dealt with one or more of the key
persons of each of the
customers, had opportunity to and did in fact
build up very good relationships and rapport with his customers.
The applicants
contend, accordingly, that the first respondent knows
the names and addresses of the applicants’ customers, how much
the
customers have spent, who the big customers are, what products
and services the customers use, what products and services the
customers
want, the substitutes for or alternatives to each such
product, which customers are difficult, what terms and conditions of
the
individual contracts are and what the renewal dates of the
contracts with customers are. It is argued accordingly that the
first respondent acquired and built up a good customer connection
with the customers of the applicant which would place him in
a
position where he could take these customers with him should he join
a competitor of the applicants. In addition it is
alleged that
the first respondent became privy to the applicants’
confidential information including who the suppliers of
the applicant
are, what price and on what terms the products are supplied to the
applicant, the applicants’ methods of doing
business, who the
employees of the applicants are, what salaries and commissions these
employees earned, and which employees had
expressed dissatisfaction
and were vulnerable of being enticed.
[35]
In summary, the applicants rely on their
confidential information, being customer lists and confidential
customer information, customer
connections (or goodwill) and their
interest in the training provided to first respondent during his
employment.
[36]
The respondents on the other hand, deny
that the applicants have any proprietary interests in the customer
identity or the customer
information. In this regard it is
contended that the customer base was the customer base of Chesterton
and not that of the
applicant. I have referred earlier to the
sales agreement. Industries sold their businesses and all their
assets to
the first applicant. Only the excluded assets were
retained by Industries. Customer goodwill is an asset of an
employer
and becomes a trade connection of the employer which is
capable of protection by way of restraint of trade (
Recycling
Industries (Pty) Limited v Mohamed and Another
1981 (3) SA 250
(SE) at 258;
Rawlins
and Another v Caravantruck (Pty) Limited
[1992] ZASCA 204
;
1993 (1) SA 537
(A);
Paragon
Business Forms (Pty) Limited v Du Preez
1994 (1) SA 434
(SE) at 444; and
Bridgestone
Firestone Maxiprest Limited v Taylor
[2003] 1 All SA 299
(N) 303i-304a). Customer goodwill was not
an excluded asset under the sale agreement and accordingly the
customer goodwill
of Industries became the property of the first
applicant. There is accordingly no merit in the argument
presented on behalf
of the respondents that the customer base did not
belong to the applicants.
[37]
The respondents, however, argue, further
that the applicant has no proprietary interest worthy of protection.
The foundation
of the argument is to be found largely in the content
of the distribution agreement. As set out earlier, prior to the
sale
agreement Industries, acting through its various coastal
branches, distributed Chesterton products directly to the customer
base
which I have found was sold as a part of the sale agreement.
The assets of the business of Industries were sold to the first
respondent. The distribution rights were awarded in terms of a
distribution agreement to Unitrading. I have recorded
earlier
that simultaneously with the conclusion of the sales agreement and
the distribution agreement the second applicant was
established.
The material provisions of clause 28 of the distribution agreement
are also set out earlier. It records
that Unitrading had
advised Chesterton that it had wished to accomplish and fulfill its
obligations under the agreement in the
territory with the assistance
of certain companies that are affiliated and/or are subsidiaries of
Unitrading. The applicants
deny that the second respondent was
duly appointed as such an affiliated company and deny that the
conditions set out in clause
28, as recorded earlier, were complied
with.
[38]
In this regard it is common cause that
Chesterton has at all times been aware that the Coastal Companies
have marketed and sold
Chesterton products to the end-user customers,
as the branches of Industries had done prior thereto. The
applicants do not
disclose who these “affiliated”
companies were which it had intended to utilise in assisting
Unitrading. The
applicants’ case, however, is that the
Sizonke Group was operated as one conglomerate venture and that Simon
and Craig Bennett
are directors of all the affiliated companies.
The sale agreement and the distribution agreement were negotiated by
the Bennetts
and the distribution agreement is signed on behalf of
Unitrading by Craig Bennett. They are, on their own case, the
controlling
minds of all the companies. The Bennetts,
accordingly, had personal knowledge of the pre-conditions required
for the utilisation
of the related companies in the execution of the
distribution agreement. The distribution agreement, as recorded
earlier,
requires of Unitrading not to stock or sell any products
that are competitive with products marketed by Chesterton. The
related
companies assisting as distributor partners in terms of
clause 28 would be equally bound by the provisions of the
distribution
agreement. On a consideration of all the
circumstances which prevailed at the time I think it must be accepted
that the Coastal
Companies were the companies referred to in clause
28 and that they derive their right to distribute Chesterton products
from this
source. For these reasons I arrive at the conclusion
set out in para [7] above.
[39]
Moreover the distribution agreement
provided for Chesterton to provide specialist training in respect of
all the products and to
be actively involved with Unitrading in
preparing an annual distributor business plan which would include any
special marketing
strategies to be employed, the targeting of
particular accounts or market agreements and customer support and
documentation objectives.
Chesterton was obliged to review with
Unitrading the distributor’s performance year to date against
the current year business
plan and objectives.
[40]
On behalf of the respondents it is
contended that Chesterton did indeed provide ongoing specialist
training to Unitrading and to
representatives of the various related
companies.
[41]
In respect of the admitted training
provided by the first applicant to the first respondent in respect of
AIGI Environmental Incorporated
and Valvoline, the respondents argue
that such training was in breach of first applicant’s
obligations under the distribution
agreement which cannot now be
invoked against the respondents in the employ of the newly authorised
distribution agent for Chesterton.
I shall revert to this
aspect later.
[42]
In respect of the customer identity and
confidential customer information the respondents allege that one
Williams, previously employed
by Industries, and Moore, regularly
assisted Chesterton distributors, including Unitrading, with account
planning and often visited
end-user customers of Chesterton products
with Unitrading specialists. They prepared core reports
recording the end-user
customer visited during each week. A
list of such visits is set out in the respondents’ answering
affidavit.
Moore, having previously been the manager of the
Port Elizabeth branch of Industries and a director in the second
applicant is
acutely aware of all the customers of the second
applicant. There is therefore, nothing confidential about the
identity of
the second applicant’s customers nor the customer
information. It is undoubtedly true that the first respondent
knew
who the customers were, what they had spent, what services they
required and what products they purchased. He knows the
particular
idiosyncrasies of each client and what contracts they had
concluded. So did Moore and Williams, however, through their
contact
with the end-users and they understood the needs of the
various customers by virtue of the point of sale information which
Unitrading
was required to provide in terms of the distribution
agreement. In respect of the customer identity and customer
information
I do not consider that there was any confidentiality
about it and Chesterton, when appointing a new distributor, would be
entitled
to utilise the information which it had in that regard.
All this is therefore at the disposal of the respondents through
Chesterton.
[43]
I have no doubt that the first respondent
did receive comprehensive and continuous in-house training on
products and services.
It is unquestionably so that in respect
of the Chesterton products the training provided by Bennett was
originally obtained from
Chesterton. That notwithstanding the
training was provided to the first respondent by virtue of his
contract of employment
with the second applicant. He was,
however, employed to market Chesterton products and it seems to me
that the only basis
upon which the second applicant gained any
entitlement to sell Chesterton products is by virtue of clause 28 of
the distribution
agreement. It was accordingly bound to sell
only Chesterton products. The knowledge of Chesterton products
which the
first respondent gained is readily at the disposal of the
respondents by virtue of the appointment of third and fourth
respondents
as distributors of Chesterton. There is accordingly
nothing confidential about such expertise. In respect of the
general
training as to, for example, how sales representatives should
conduct themselves and the development of marketing skills the
comments
of Kroon J in
Aranda Textile
Mills (Pty) Limited v Hurn and Another
[2000] 4 All SA 183
(E) in para [33] are apposite. Kroon J
stated:
“
A man’s
skills and abilities are a part of himself and he cannot ordinarily
be precluded from making use of them by a contract
in restraint of
trade. An employer who has been to the trouble and expense of
training a workman in an established field of work,
and who has
thereby provided the workman with knowledge and skills in the public
domain, which the workman might not otherwise
have gained, has an
obvious interest in retaining the services of the workman. In the eye
of the law, however, such an interest
is not in the nature of
property in the hands of the employer. It affords the employer no
proprietary interest in the workman,
his know-how or skills. Such
know-how and skills in the public domain become attributes of the
workman himself, do not belong in
any way to the employer and the use
thereof cannot be subjected to restriction by way of a restraint of
trade provision. Such a
restriction, impinging as it would on the
workman’s ability to compete freely and fairly in the market
place, is unreasonable
and contrary to public policy.”
[44]
That brings me to the question of customer
connections. The ratio for this protection was set out by
Nestadt JA in
Rawlins and Another v
Caravantruck
supra
at 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 (Joubert
General
Principles of the Law of Contract
at 149). Heydon
The
Restraint of Trade Doctrine
(1971) at 108, quoting an
American case, says that the 'customer contact' doctrine depends on
the notion that
'the
employee, by contact with the customer, gets the customer so strongly
attached to him that when the employee quits and joins
a rival he
automatically carries the customer with him in his pocket'
.
In
Morris
(Herbert) Ltd v Saxelby
[1916] 1 AC 688
(HL) at 709 it was
said that the relationship must be such that the employee acquires
‘
such
personal knowledge of and influence over the customers of his
employer . . . as would enable him (the servant or apprentice),
if
competition were allowed, to take advantage of his employer's trade
connection . . .'.”
[45]
Nestadt JA proceeded at 541G-I to state:
“
Much
will depend on the duties of the employee; his personality; the
frequency and duration of contact between him and the customers;
where such contact takes place; what knowledge he gains of their
requirements and business; the general nature of their relationship
(including whether an attachment is formed between them, the extent
to which customers rely on the employee and how personal
their
association is); how competitive the rival businesses are; in the
case of a salesman, the type of product being sold; and
whether there
is evidence that customers were lost after the employee left.”
[46]
I have found earlier that the customers
serviced by the first respondent were customers of the second
applicant. The allegation
that he had gained a close attachment
to key persons in these industries is not in dispute. I shall
accordingly accept that
the second applicant has made a case in
respect of customer connections. The question which now arises
is whether such interest
is threatened by the first respondent.
The first respondent is currently employed by the fourth respondent.
He markets
only Chesterton products and only to those customers known
to Chesterton which are, of course, the same customers whom he
serviced
whilst in the employ of the second applicant. The
second applicant has been deprived of the opportunity to sell
Chesterton
products, and, to the extent that customers may wish to
utilise Chesterton products the first respondent is well placed to
take
such customers with him in his new employment. It does not
seem to me that the first respondent can hold any threat to the
applicant’s customers who wish to purchase other products,
which he does not sell.
[47]
Finally, there arises the question whether
there is any other aspect of public policy that does not affect the
parties but requires
that the restraint not be invoked. The
real threat which the applicants perceive is that the first
respondent is in a position
by virtue of the training which he
received in respect of alternative products to take clients who may
wish to purchase such products
with him to his new employer.
Although he is not employed in the sale of other products he does
have the information and
knowledge of clients who do purchase such
alternatives. Such knowledge and training which he acquired was
acquired in conflict
with the distribution agreement and I
accordingly conclude that it would be contrary to the public policy
for a court to sanction
and protect the applicants unlawfully
acquired “rights” by depriving the first respondent from
being employed by the
fourth respondent to sell Chesterton products.
Application of facts
to second respondent
[48]
The second respondent, like his father, is
a fitter and turner by trade and had been employed largely in that
field prior to taking
up employment with the second applicant.
He too was employed as a sales representative until his resignation
on 29 August
2018.
[49]
He has now taken up employment with the
fifth respondent as a mechanical fitter and maintenance foreman
performing repairs and maintenance
on mechanical waterworks and
dams. It is alleged on behalf of the respondents, which
averment must be accepted (cf
Plascon-Evans
supra
)
that he has “hardly any” contact with clients and spends
99% of his time in the workshop utilising his acquired skill
and
craft built up over his entire career.
[50]
The applicants’ case based on the
covenant in restraint of trade against the second respondent is
founded on more limited
grounds than that against the first
respondent. He serviced just fifteen customers of the second
applicant, but had much
the same exposure to key persons in these
companies as the first respondent had to the customers he serviced.
The applicants’
case against the second respondent, as I
understand the papers, is based upon his customer connections and his
knowledge of confidential
customer information. In respect of
customer information I have already held that Chesterton at all times
had access to the
customer information by virtue of the provisions of
the distribution agreement and the contact by Moore and Williams with
end-user
customers.
[51]
As in the case of the first respondent I do
not think that it can be gainsaid that he did have access and regular
contact with key
persons of the customers of the second applicant.
I do not understand this to be seriously contested.
[52]
I shall accept for purposes of the first
issue of the liability test (without making any finding in that
regard) that at least the
second applicant, does have an interest
which warrants protection as against the second respondent. By
virtue, however, of
the nature of his new employment it is difficult
to conceive of any threat which this could pose to the customer
connections of
the first and second applicant. In any event,
even if I err in this regard, I consider that the applicants must
fail in respect
of the third and fourth requirements of the liability
test. When the threat to the applicants’ interest in its
customer
connections, such as it is, is weighed qualitatively and
quantitatively against the interests of the second respondent to be
economically
active and productive, the interests of the second
respondent must outweigh that of the applicants for the reasons set
out hereafter.
[53]
Firstly, the second respondent has already
been in active employment of the fifth respondent for some time and
the term of his restraint
has virtually expired. To ask of the
second respondent to resign from his current employment by virtue of
approximately six
weeks of the restraint period which remains binding
would, in my view, not be in the public interest.
[54]
Secondly, the threat, if any, which his
employment could pose to the customer connections of the applicants
is minimal by virtue
of the nature of his employment. Moreover,
the customer information which he holds, I have already found, is not
confidential
to the applicants.
[55]
To the extent that he may have serviced
other customers of the second applicant which do not utilise
Chesterton products, that,
for the reasons already set out, offended
the terms of the distribution agreement concluded between Unitrading
and Chesterton.
In the circumstances, where the fourth issue of
the liability test arises, I consider that public policy requires
that the restraint
should not be invoked as against a duly appointed
distributor of Chesterton’s products.
Unlawful competition
[56]
That brings me to the second leg of the
applicants’ attack upon the first and second respondents’
employment with the
fourth and fifth respondents respectively, namely
unlawful competition. Unlawful competition involves the
wrongful interference
with the rights of another trader. It may
justify the grant of an interdict or found a claim for damages under
the
lex aquilia
.
(See
Schultz v Butt
1986 (3) SA 667
(A) at 678.) In either case, where relief is
sought based on unlawful competition, it does not suffice to
establish that
an ex- employee has taken up employment with a
competitor who has knowledge of a covenant in restraint of trade.
An actual
infringement must be established.
[57]
The events which occurred after the
resignation of the first respondent from the employ of the second
applicant are not seriously
in dispute. The third respondent
has been an authorised distributor of limited Chesterton products
since 2016. In February
2019 the fourth respondent was
appointed as the distributor of the Chesterton products which the
Sizonke Group had previously marketed.
Unitrading’s
rights to such distribution were simultaneously cancelled.
Chesterton and Moore, who was employed at the
time by Chesterton or
its subsidiary, in Southern Africa, and who was not bound by any
restraint with the applicants, informed
it of all the end-users of
Chesterton products in the area. For the reasons set out
earlier Chesterton had at its disposal
all the material customer
information relating to end-users of Chesterton products. The
fourth respondent employed the first
respondent at the time and he
interacted with such Chesterton product users, who were also
customers of the second applicant, advising
them that the first
respondent had left the employ of the second applicant and was now
employed by the fourth respondent.
He also conveyed to such
users of Chesterton products that the second respondent could no
longer provide Chesterton products as
its distribution rights had
been cancelled and awarded to the fourth respondent. This was
all true.
[58]
The applicants contend that first
respondent and/or Moore had in fact informed various customers of the
second applicant:
(i)
that the second applicant was no longer
able to supply Chesterton products to them;
(ii)
that the second applicant was no longer
able to supply products to meet the needs of the customers; and
(iii)
that Sizonke had “closed its doors”
and that all the staff had been transferred to the third respondent.
[59]
The applicants contend further that the
allegation that they were unable to service the needs of their
customers was false in that
they have sufficient alternative products
to service the needs of those customers. I pause to record that
the allegation
that the first respondent had advised customers that
Sizonke had “closed its doors” and that its staff had
been transferred
to the third respondent, is founded solely on a
hearsay allegation attributed to one “Yolande” whose
surname is not
known and who has not deposed to a confirmatory
affidavit.
[60]
The first respondent, for his part, denies
that he advised anyone that the second applicant was unable to
provide products, other
than Chesterton products, or that he had
advised the said “Yolande” that the second applicant had
closed its doors
or that its staff had been transferred to the third
respondent. Whereas the applicant has not sought that the
matter be referred
to oral evidence the respondents’ averment
in this regard must be accepted.
[61]
Reverting to the alleged unlawful
competition, there is no closed list of conduct which would
constitute unlawful competition in
Pexmart
CC and Others v H Mocke Construction (Pty) Limited and Another
2019 (3) SA 117
(SCA) Navsa ADP at para [63] remarked that the
following were well-known acts of unlawful competition:
“
(a)
trading
in contravention of a statutory prohibition;
(b)
fraudulent
misrepresentations made by a rival trader as to that trader's own
business or goods;
(c)
the
publication by a rival of injurious falsehoods concerning the
competitor's business;
(d)
the
passing-off by a rival trader of that trader's goods or business as
being that of a competitor;
(e)
the
employment of physical assaults and intimidation designed to prevent
a competitor from pursuing her or his trade;
(f)
the
unfair use of a competitor's fruits and labour;
(g)
the
misuse of confidential information in order to advance one's own
business interests and activities at the expense of a competitor's;
(h)
the
inducement or procurement of a breach of contract: an action for
damages (and, in appropriate cases, for an interdict)
will lie
against any person who intentionally and without justification
induced or procured another to breach a contract made with
any other
person; and
(i)
interference
with character merchandising rights.”
[62]
I have already held that customer identity
and the alleged customer information was not confidential to the
applicants. Chesterton
was therefore in my view entitled to provide
that information which it held to the third and fourth respondents to
utilise that
in the marketing and sales of its products.
[63]
Absent a restraint of trade agreement (with
which I have dealt earlier) there does not seem to me to be any
impediment to the first
respondent advising customers of his change
of employment. The fact of the cancellation of Unitrading’s
distribution
rights and the award thereof to the third respondent was
true and necessary for the advancement of the marketing of
Chesterton.
The necessary corollary of that is that the
applicants could no longer supply Chesterton products. Whereas
the legitimacy
of the cancellation of the distribution agreement is
not attacked, I do not think that the disclosure of the fact and the
necessary
consequence thereof can be said to be wrongful.
[64]
The test for wrongfulness is one of
fairness and honesty, having regard to the
bona
mores
and general sense of justice in
the community. Questions of public policy such as the
significance of a free market and of
competition, are important.
(See
Amlers Precedents and
Pleadings
(9
th
ed) page 367;
Schultz v Butt
supra
at 679 and the cases there cited;
Phumelela
Gaming and Leisure Limited v Gründlingh
[2006] ZACC 6
;
2007 (6) SA 350
(CC);
Masstores
(Pty) Limited v Pick ‘n Pay Retailers (Pty) Limited
2017 (1) SA 613
(CC); and
Mullane
and Another v Smith and Others
[2015] 3
All SA 230
(GJ).)
[65]
No active conduct on the part of the second
or fifth respondent which may interfere with the business of the
applicant has been
alleged. In the circumstances I conclude
that the applicants have not established an unlawful infringement
with their business
which can be categorised as unlawful
competition.
Costs
[66]
The general rule is that costs should
follow the result. No reason has been advanced to deviate from
the rule and I can conceive
of none.
[67]
There remains two reserved costs orders for
consideration. First, on 26 March 2019 Beyleveld AJ granted a
postponement of
the application to allow the respondents to file
answering affidavits. He reserved the wasted costs occasioned
by the postponement.
[68]
The main application was launched as one of
urgency and set down for hearing on 26 March 2019. The
applicants allege that
the respondents, in seeking a postponement,
sought an indulgence and accordingly the applicants ought to be
entitled to the costs
of the day. Ordinarily that would be
correct.
[69]
The history shows that the first respondent
resigned from the second applicant’s employ on 31 January
2019. On the same
day the applicants learnt that Moore had
advised the Nelson Mandela Metropolitan University of the
cancellation of the distribution
agreement between Unitrading and
Chesterton. On 12 February the applicants learnt from PG Bison
that the first respondent
had advised them of his employment with the
“new distributor” of Chesterton products.
[70]
The application was, however, only launched
on 15 March 2019 and then on an urgent basis. The
applicants unilaterally
imposed the restrictive time periods bringing
the respondent to court on 26 March 2019. To compound the
respondents’
difficulty the Easter weekend intervened with 19
and 22 March being public holidays. In these circumstances the
respondents
sought a postponement in order to file answering
affidavits. Their application was resisted, unsuccessfully,
hence the order
by Beyleveld AJ.
[71]
I consider in these circumstances that it
would be fair to the parties that these costs be costs in the cause.
[72]
The second issue of reserved costs arises
from the judgment delivered by Goosen J on 30 April 2019. The
history leading to
this order is set out hereafter. On 20 March
2019 the respondents filed a Rule 35(12) notice seeking the
production of certain
documents. The applicants responded on 29
March 2019. They produced some of the documents sought and
declined others
on the ground that they were irrelevant. An
opposed application followed in which Goosen J ordered the production
of some,
but not all of the documents sought. This required a
further postponement of the application. Goosen J reserved the
costs of the application to compel the production of the documents
and the wasted costs occasioned by the postponement.
[73]
On behalf of the applicants it is argued
that the production of the documentation has now proved that it was
in fact irrelevant
and therefore requests that the first to third
respondents (they were the only respondents before court at the time)
pay these
costs. The respondents, on the other hand, argue that
the documents were material and point out that a significant number
of distribution contracts were in fact concluded with Unitrading
which are annexed to the answering affidavit.
[74]
It is true that a number of different
distribution agreements concluded from time to time are annexed to
the papers. That
does not make them relevant to the dispute.
The only agreement upon which reliance is being placed and which is
annexed to
the answering papers is the distribution agreement relied
upon by the applicants, which already formed part of the papers.
In these circumstances I am of the view that the submission made on
behalf of the applicants has merit. There was clearly
no
relevance in the documentation sought and accordingly I consider that
the first and third respondents should be ordered, jointly
and
severally, to pay the costs reserved by Goosen J.
[75]
In the result, the following order is made:
1.
The fourth and fifth respondents are joined
as parties to the application
2.
The application is dismissed with costs,
including the costs occasioned by the postponement on 26 March 2019.
3.
The first, second and third respondents are
ordered, jointly and severally, to pay the costs reserved by Goosen J
in his judgment
delivered on 30 April 2019.
J W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Applicant: Adv
G Richards instructed by Schoeman Oosthuizen Inc, Port
Elizabeth
For
Respondent: Adv W N Shapiro instructed
by Joubert Galpin & Searle, Port
Elizabeth