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[2020] ZAECPEHC 2
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Giza Technologies (Pty) Ltd v Sharpe and Others (3603/2019) [2020] ZAECPEHC 2 (30 January 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
Case
No: 3603/2019
Date
heard: 23 January 2020
Date
delivered: 30 January 2020
NOT
REPORTABLE
In
the matter between:
GIZA
TECHNOLOGIES (PTY) LTD
Applicant
And
JEFFREY
PETER SHARPE
First Respondent
AMOGELONG
PETRONELLA MATJEKE
Second Respondent
DURR
AFRICA (PTY) LTD
Third
Respondent
LUHLAZA
INDUSTRIAL SERVICES (PTY) LTD
Fourth Respondent
JUDGMENT
Goosen
J:
[1]
In this application the applicant seeks orders restraining the first
and
second respondents from acting in breach of certain restraints of
trade pending proceedings to enforce same. The application was
brought as one of urgency. The urgency was confined to securing an
expedited date for the hearing of the application for interim
relief.
The third and fourth respondents initially filed notices of
opposition. These were later withdrawn and they now abide the
decision of this court.
[2]
The applicant (hereafter Giza Technologies) is a company specializing
in mechanical and electrical engineering and turnkey projects. It is
presently in business rescue. The applicant was placed under
business
rescue in September 2018. The application, which is prosecuted by the
sole director of Giza Technologies, is brought with
the consent of
the business rescue practitioner.
[3]
The first respondent (hereafter Sharpe) entered into a contract of
employment
with Giza Technologies on 2 January 2018. He took up
employment as Projects and New Business Development manager. Sharpe
resigned
with effect 1 July 2019. He thereafter took up employment
with the fourth respondent.
[4]
The second respondent (hereafter Matjeke) entered into a contract of
employment
with Giza Technologies on 23 May 2017. She was employed as
a Project Administrator and Quality Controller. She resigned with
effect
4 November 2019. She has since taken up employment with the
third respondent.
[5]
In the case of Sharpe Giza Technologies relies upon a restraint of
trade
agreement which is incorporated in Sharpe’s contract of
employment. It also relies upon a Non-Circumvention, Confidentiality
Agreement and Restraint of Trade (hereafter the Non Circumvention
Agreement). In the case of Matjeke reliance is placed only on
her
contract of employment. Although she also concluded a Non
Circumvention and Confidentiality Agreement said agreement does not
include terms which constitute a restraint of trade. The latter
agreement is relied on only insofar as it imposes certain
confidentiality
obligations.
[6]
Clause 30 of Sharpe’s Contract of Employment provides as
follows:
“
30.
Confidentiality and Restraint of Trade
30.1. In accepting
employment with the employer, it is acknowledged that during the
course of his/her employment or other association
with the employer,
the employee with develop a close and personal relationship with the
clients of the employer, and that the employee
may, in the course of
his/her duties, have access to all confidential information of the
employer.
30.2 Such access
may include, but is not limited to, information in relation to
financial and marketing operations, customer
data base, technical
information and the employer’s terms conditions and methods of
conducting its business, and/or any other
information, confidential
and otherwise.
30.3 The employee
is prohibited, both during the tenure of the existing employment
contract, and for a period of 24 months
after termination of the
existing employment contract, in any capacity whatsoever, from
disclosing or discussing any information
of whatsoever nature,
including but not limited to, trade secrets, names of clients or
other client information, methods of operation,
information regarding
systems, technical know-how, financial information, or any other
information of whatsoever nature to, by
or with any person other than
the employer.
30.4 This
restriction is applicable during the tenure of the employment
contract with the employer and continues to be of
full force and
effect after the termination of the employment contract with the
employer, for a period of 24 months.
30.5 The employee
shall undertake to bind himself/herself to the non-circumvention,
confidentiality and restraint of trade
agreement hereto attached
marked annexure “A”.
30.6 The employee
further undertakes not to be directly or indirectly interested in, or
carry on, or to be engaged in or concerned
with, any business or to
be interested in or concerned with any company, form, partnership, a
close corporation, trust, undertaking
or concern, either as an
employee or in any other capacity of whatsoever nature, which carries
on any business which competes in
any way, either directly or
indirectly, with the business carried on by the employer for a period
of 24 months after termination
of this agreement.
30.7 The employee
undertakes further not to persuade or attempt to persuade in any way,
or to solicit, encourage or procure
or attempt to solicit, encourage
or procure the services of any employee of the employer, or approach
in any manner whatsoever
any employee of the employee to terminate
that employee’s employment contract with the employer.
30.8 The area of
the confidentially shall be throughout the Republic of South Africa.
The area of restraint and conditions
shall be applicable within 150
kilometres of any area where the company conducts business as well as
area where the employer has
established projects in, inclusive of a
subsidiary of the employer and/or a client who a project has been
seconded to.
30.9 The employee
acknowledges that the restraints and restrictions placed upon him/her
are reasonable as to subject matter,
geographical area, and duration.
30.10 The employee
acknowledges further that his/her experience, qualifications,
knowledge and capabilities are such that he/she
will be able to
obtain employment after termination of his/her employment contract
with the employer, and that such employment
will not impinge upon or
contravene any of the conditions of Clause 30 to this agreement, and
that enforcement of the restraint
with not prevent him/her from
earning a livelihood.”
[7] Clause
4 of the Non-Circumvention Agreement incorporates a restraint of
trade in the following
terms:
“
4.
Job Description , Duties and Responsibilities
4.1 The
employee shall be expected to satisfactorily carry out all the tasks
and duties normally associated with
the position.
4.2 The
employee agrees and undertakes to obey all treasonable and lawful
instructions, which may be given by
the employer.
4.3 The
employee confirms that the employee is capable and competent to
perform the duties for which the employee
has been employed, and that
he has the necessary skills and knowledge to perform competently and
to the satisfaction of the employer.
4.4. The
employee agrees that the employer may, whenever it is deemed
necessary or desirable transfer the employee from
one department to
another. In this regards, the employee confirms that he/she is fully
aware of the inherent requirement that the
job requires travelling
and/or may require him or her to be seconded.
[8]
Clause 29 of Matjeke’s contract of employment is in identical
terms
to Clause 30 of Sharpe’s contract quoted above. It is
these restraints that Giza Technologies seeks to enforce. Although
nothing turns upon the nature of the enforcement proceedings
envisaged it should be noted that in the case of Sharpe provision is
made for arbitration proceedings whereas no such provision is made in
the case of Matjeke. Enforcement of the latter’s agreement
will
accordingly be by way of action or application proceedings in the
absence of agreement to the contrary.
[9]
Giza Technologies alleges that both Sharpe and Matjeke have breached
their
respective restraints of trade. The breaches are constituted by
the fact that Sharpe and Matjeke have taken up employment with what
are alleged to be competitors. In the case of both Sharpe and Matjeke
it is alleged in broad and encompassing terms, that they
have
misappropriated confidential information which they may have made
available to their respective employers. Based on this the
applicant
alleges that it has established the requisite right which it is
entitled to enforce by way of an interdict
pendente lite
[10]
I shall return hereunder to the facts upon which this application
must be decided and the
requirements for interim relief. Before doing
so reference should be made to the basis upon which the applicant has
formulated
its case.
[11]
The deponent to the founding affidavit is Daniel Tenner who is the
sole director of the
applicant. He states in the affidavit that he
acts with the consent of the Business Rescue Practitioner. The
consent is qualified
to the extent that such legal costs as may be
incurred by or be awarded against the applicant “
are to be
divided amongst Chemchamp, Nautilus Projects & Design and Giza
Technologies”
. Tenner has also agreed that the costs
against Giza Technologies “
shall be treated as my personal
liability
”. Tenner goes on to identify these other
corporate entities. He is a co-director of Nautilus Projects (Pty)
Ltd (hereafter
Nautilus Projects) which is a broad based black
economic empowerment firm “
that operates in tandem with Giza
Technologies”
. He is the sole director of Akula Trading 277
(Pty) Ltd t/a Chemchamp Africa which is a company specialising in
solvent recovery,
solvent recycling systems and safe environmental
practices. Finally, he is the sole director of Clean Planet Chemical
Africa (Pty)
Ltd “
a company similar to Chemchamp
”.
Tenner designates these companies as “
the Corporate Group
”.
[12]
The founding affidavit does not, however, set out the structure, if
any, of this “
corporate group
”. These separate
entities are not parties to the application. The founding affidavit
does not set out in what respects, if
at all, Giza Technologies is
authorized to act on behalf of these other entities within the
“
corporate group
”.
[13]
The contracts of employment incorporating a confidentiality agreement
upon which the applicant
places reliance were entered into between
Nautilus Projects & Design and Sharpe and Matjeke respectively.
Nautilus Projects
is described as a division of Giza Technologies
(Pty) Ltd. It is not apparent from the contracts whether Nautilus
Projects &
Design is in fact Nautilus Projects (Pty) Ltd.
[14]
The Non-Circumvention agreement (which incorporates a restraint of
trade) entered into
by Sharpe was concluded with four separate
entities, namely Akula Trading 277 (Chemchamp); Giza Technologies;
Nautilus Projects
and Clean Planet Chemical Africa. They are referred
to therein as “
the Companies
”. Tenner refers to
them as the “
corporate group
” in his affidavit.
[15]
In the case of Matjeke the Non-Circumvention agreement (which does
not incorporate a restraint
of trade) was concluded with six
corporate entities, namely the four referred to above and two
additional companies. The additional
companies are 1Oner Projects and
Design (Pty) Ltd and 1oner Mining Solutions (Pty) Ltd. Apart from
this reference the founding
affidavit contains no averments which
explain the relationship, if any, that these entities have to the
applicant or the “
corporate group
”.
[16]
What the applicant seeks to protect by way of an interim interdict is
its right to enforce
agreements which restrain Sharpe and Matjeke
from disclosing information gained by them in consequence of their
employment to competitors.
It seeks also to protect its intellectual
property, disclosure of which is likely to harm its business
interests. It must accordingly
satisfy the requirements for the
granting of an interim interdict. Those requirements are that the
applicant has a
prima facie
right; that it has a well-grounded
apprehension of irreparable harm if the interim relief is not granted
and the ultimate relief
is granted; that the balance of convenience
favours the granting of the interim interdict; and that no other
satisfactory remedy
is available to protect the applicant’s
rights or interests.
[17]
It is
appropriate for the purpose of this matter to reiterate the proper
approach to deciding matters such as this as articulated
in
Spur
Steak Ranches Ltd and Others v Saddles Steak Ranch, Claremont and
Another
[1]
where
it was said:
“
Save that the
requirement of a
prima facie
right established though open to
some doubt, is the threshold test, the factors are not considered
separately or in isolation,
but in conjunction with one another in
the determination of whether the Court should exercise its overriding
discretion in favour
of the grant of interim relief. I refer here to
Olympic Passenger Services (Pty) Ltd v Ramlagan
1957 (2) SA 382
(D);
Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton and Another
1973 (3) SA 685
(A) and Beecham Group Ltd v B-M Group (Pty) Ltd
1977
(1) SA 50
(T).
In determining whether or
not the applicants crossed the threshold, the right relied upon for a
temporary interdict need not be
shown by a balance of probabilities,
it is enough if it is
prima facie
established though open to
some doubt.
The proper approach is to
take the facts set out by the applicants together with any facts set
out by the respondents, which the
applicants cannot dispute, and to
consider whether having regard to the inherent probabilities the
applicants should, not could,
on those facts obtain final relief at
the trial.
It is also necessary to
repeat that although normally stated as a single requirement, the
requirement for a right
prima facie
established, though open
to some doubt, involves two stages. Once the
prima facie
right
has been assessed, that part of the requirement which refers to the
doubt involves a further enquiry in terms whereof the
Court looks at
the facts set up by the respondent in contradiction of the
applicant's case in order to see whether serious doubt
is thrown on
the applicant's case and if there is a mere contradiction or
unconvincing explanation, then the right will be protected.
Where,
however, there is serious doubt then the applicant cannot succeed.”
[18]
“A
contract in restraint of trade must protect some proprietary interest
of the person who seeks to enforce it before it will
be enforced.
Such interest may take the form of trade secrets or confidential
information or goodwill or trade connections.”
[2]
[19]
In the
context of this application what is required of the applicant is to
establish,
prima
facie
,
that it has a valid agreement in restraint capable of enforcement;
that it has a protectable or proprietary interest and that
said
agreement has been breached. The question as to the reasonableness or
scope of the protection of the agreement in restraint
is a matter to
be dealt with in the enforcement proceedings in due course. Stated
differently, in order to meet the threshold requirement
for an
interim interdict the applicant must show that it holds a proprietary
interest of the sort described in
Townsend
Productions
[3]
.
[20]
There is no dispute regarding the fact that Sharpe and Matjeke
entered into contracts of
employment which contain restraints in
respect of the disclosure of confidential information relating to the
business practices
of their erstwhile employer. There is some dispute
as to the existence of some variation thereof in the case of Sharpe.
For present
purposes that is of no moment. The central question
regarding the threshold requirement is whether the applicant has
established
some propriety or protectable interest which it can
enforce.
[21]
To answer this question it is necessary to consider the allegations
to found such protectable
interest in the founding affidavit and to
do so against the background of the several parties outlined above.
[22]
It is not in dispute that Sharpe is employed by the fourth
respondent. The third respondent
has 26% shareholding in the fourth
respondent. It is alleged that during his employment with Giza
Technologies Sharpe gained access
to:
-
“
confidential designs and patented technology of the
corporate group”;
-
The “corporate group’s business plans and pricing
methodology in the market”;
-
The “corporate group’s marketing strategies in the
area with reference to the designs, the IP/patents and the pricing
structures”; and
-
The “corporate group’s client base and potential
client base as well as marketing strategies to infiltrate that client
base”.”
[23]
In describing the access to confidential information Tenner employs
in his affidavit the
terms forming part of the definition of such
information in the Non-Circumvention agreement without specifying the
information
and the particular proprietary interest it has or holds
in such information. The information to which Sharpe (and for that
matter
Matjeke) is alleged to have has access is that of the
“
corporate group
”. I have already indicated that
this group structure is not set out. It is accordingly not possible
to determine what proprietary
interest or protectable right any one
of the entities might hold in, for example, the intellectual property
or patented designs
held by another entity in the group.
[24]
This difficulty is apparent when dealing with the allegations
concerning the business of
solvent recovery systems. This part of the
group’s business is conducted by Chemchamp (and possibly Clean
Planet Chemical
Africa). It is not asserted that Nautilus Projects
(Sharpe and Matjeke’s employer) was involved in this aspect of
the business.
What is stated is the following:
“
Solvent Recovery
and Systems are public knowledge and is known to the Fourth
Respondent. The Applicants (sic) and Third Respondent
have competed
in this field with original manufacturers. The Applicant has
developed and optimised their systems. This intellectual
property has
become known and was accessible to both the First and Second
respondents whilst in the Applicant’s employ.”
[25] This
allegation does not suggest that the intellectual property and
know-how is confidential.
To the contrary it appears to be public
knowledge in the industry.
[26]
In regard to Matjeke the case is asserted in the broadest of terms.
It is alleged that
she had access to very sensitive and confidential
information which is categorised in terms of the definition referred
to above.
It is then stated that by working for a direct competitor
and if she were to disclose such information Giza Technologies will
suffer
irreparable harm. No more is asserted than this.
[27]
The existence of a protectable interest,
prima facie
established, is to be determined on the basis of the factual
averments made by the applicant and those made by the respondent
which cannot be gainsaid by the applicant.
[28]
The first respondent states that when he was employed by Giza
Technologies he was required
to work in the stainless steel division.
At that time it had no active contracts or clients. This it seems
accords with the averment
by Tenner that Sharpe was required to focus
on dormant clients. Sharpe also states that he was not involved in
other aspects and/or
discussions of Giza Technologies’
business. In particular he states that the stainless steel workshop
did not do any work
for or obtain contracts from Parmalat, Distell,
MSSL Global and Mercedes Benz, businesses named by Tenner as clients.
He also states
that he was not involved in the solvent recovery
business and that this was conducted by Chemchamp.
[29]
In regard to the applicant’s relationship with SAB and Aspen
Sharpe alleges that
he had a prior relationship through his business
before joining Giza. He further states that such work as was done for
SAB and
Aspen was done by Nautilus and was completed in 2018.
[30]
In relation to confidential information Sharpe concedes that he had
access to pricing and
marketing information. He denies, however, that
there are unique designs utilized by the stainless steel workshop.
These he states
are generally utilized in the industry and there is
no confidential or protectable interest in such designs. In any event
he was
responsible for these designs.
[31]
Sharpe denies that he has retained any confidential information or
that he has disclosed
such information to the fourth respondent. He
is not employed by the third respondent. He states that he is
presently engaged by
the fourth respondent in a project at Nissan SA,
and that his employment by the fourth respondent has no bearing on
the business
of Giza Technologies.
[32]
Matjeke denies that she has acted in breach of the confidentiality
agreement. She denies
that Sharpe enticed her to leave the employ of
Giza Technologies. She is employed by the third respondent which she
states is not
a competitor of Giza Technologies and does not perform
any work in the field of solvent recovery, nor does it intend to do
such
work. Its field of work comprises painting systems, robotics and
automation. This is not a field in which Giza Technologies conducts
business. The nature of the third respondent’s business is
confirmed by the managing director of the third respondent.
[33]
The averments made by Tenner on behalf of Giza Technologies, do not,
in my view, set out
with sufficient particularity the existence of a
protectable interest in the hands of Giza Technologies. Even if a
generous construction
were to be placed upon the collective
proprietary interests which vest in entities which make up the
“
corporate group
” and I were to accept that Giza
Technologies may properly enforce same, the allegations made by the
respondents (Sharpe and
Matjeke) that Giza enjoys protectable
interest cast serious doubt upon those averments. Their answer is
not, in my view, a mere
contradiction of the applicant’s case.
[34]
It follows from this that the applicant has not met the threshold
test. However, even if
I were to accept that the threshold hurdle was
overcome, I do not consider that the applicant has demonstrated an
apprehension
of irreparable harm should the relief not be granted or
that the balance of convenience favours the granting of the interim
relief.
[35]
I shall deal briefly with my reasons for coming to that conclusion
below.
[36]
The contention that the applicant will suffer irreparable harm is
dealt with fairly tersely
in the founding affidavit. In relation to
the first respondent it is alleged that irreparable harm will be
suffered if the confidential
information is disclosed and if he is
allowed to make contact with clients he “
has a realistic
prospect of taking (them) away from the Applicant”.
A
similarly general statement is made in respect of the second
respondent.
[37]
No information is provided in respect of the status of contracts the
applicant has with
clients, whether these are open for renewal,
whether the complained of conduct by the first and second respondents
would impact
these contracts and/or client relations other than the
broad sweeping averments. Mr Dyke SC, for the applicant sought to
meet the
argument regarding a paucity of evidence as to harm by
arguing that an applicant is not required to await harm or suffer it.
It
is enough to point to the prospect of such harm eventuating. It is
so that a party may act in anticipation but it is nevertheless
required to show that harm is likely to be suffered and that it will
be irreparable. The assertion that a loss of clients is likely
to
impact business reputation and that this will be irreparable is, in
my view, insufficient in the circumstances.
[38]
That brings me to the balance of convenience. In considering
the balance of convenience
a broad range of factors are considered.
Principally, however, the balancing is between the entitlement of an
applicant to enforce
its rights by due process in the to-be
instituted proceedings without suffering the consequences of the
breach and the prejudice
suffered by the respondents. The clearer the
applicant’s right and therefore the more likely it will obtain
final redress
the less significant the balance of convenience plays
in the determination of the entitlement to relief.
[39]
In this instance, for the reasons already indicated, I consider the
applicant’s asserted
right to obtain final redress is weak.
Against this must be weighed the fact that the order sought will in
effect preclude the
first and second respondents from being employed.
The applicant persisted in said relief. As for the balance of the
relief it was
framed in very broad terms without, for instance, any
attempt to limit it with reference to specified customers or
clientele. In
my view, the balance of convenience does not weigh in
favour of granting such interdictory relief.
[40]
Finally, there is the question of an alternative remedy. Although Mr
Moorhouse, for the
respondents, argued that on this ground also the
applicant should fail, it is not necessary to decide the point.
[41]
In the circumstances I find that the applicant has not made out a
case for the relief it
seeks. When the matter came before me on 14
January 2020 a
rule nisi
was issued and the costs were
reserved. There was at the time considerable debate about whether the
applicant was entitled then
to seek an order against the first and
second respondents by default. That was so because the first and
second respondents had
not filed their notice of opposition timeously
in accordance with the time period stipulated in the notice of
motion. The notice
of motion provided that in the event that no
notice of opposition was filed an order would be sought on 14 January
2020. Mr Moorhouse
argued that since no order was to be sought the
matter ought to be removed and enrolled for hearing in due course.
[42]
In an effort to facilitate the hearing of the matter on an expedited
date (as was sought
by the applicant) I agreed that I would hear the
matter on 23 January 2020. For this reason a
rule nisi
was
formulated to protect the applicant’s interests until the
hearing date. The first and second respondents were placed
on terms
to file their papers. In my view, that was the proper way to address
the fact that the respondents intended to oppose
the application.
[43]
In the light of this the postponement of the matter on 14 January
2020 flowed from the
filling of the notice of opposition. Had the
notice of opposition been filed timeously some costs may have been
saved. They
could equally have been saved if the applicant did
not seek a default order notwithstanding the filing of the notice of
opposition.
In the light of this it will be fair, in my view, to make
no order as to costs in respect of 14 January 2020. The effect is
that
each party will bear its own costs for that day. This will, in
my view, ameliorate the effect of the ordinary rule which otherwise
applies in respect of the costs following the result.
[44]
I make the following order:
1. That
the
Rule Nisi
is discharged.
2. That
the applicant is ordered to pay the costs of the application.
3.
There will be no order in respect of the costs incurred on 14 January
2020.
____________________________
G.
G. GOOSEN
JUDGE
OF THE HIGH COURT
Appearances:
Obo
the Plaintiff: Adv
B.C Dyke SC
Instructed
by Brown
Braude & Vlok, 317 Cape Road, Newton Park, Port Elizabeth
Ref:
C Jessop
Tel:
(041) 365 3668
Obo
the Defendant:
Adv Moorhouse
Instructed
by
TN & Associates, 137 Water Road, Port
Elizabeth
Ref:
Thireka
Tel:
(041 363 8460
[1]
1996 (3) SA 706
(C) at 714C-G
[2]
Townsend Productions (Pty) Ltd v Leech and Others
2001 (4) SA 33
(C)
at 48B-E; (Sibex Engineering Services (Pty) Ltd v Van Wyk and
Another
1991 (2) SA 482
(T) at 486I - 488D; Basson v Chilwan and
Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 769C - I; Aranda Textile Mills (Pty)
Ltd v Hurn and C Another [2000] 4 B All SA 183 (E) at 192f).
[3]
Supra