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[2021] ZAECPEHC 1
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Value Logistics Limited v Kuhn and Another (2854/2020) [2021] ZAECPEHC 1; [2021] 2 All SA 298 (ECP) (12 January 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN CAPE LOCAL
DIVISION, PORT ELIZABETH
Case
No: 2854/2020
Date
Heard: 8 December 2020
Date
Delivered: 12 January 2021
In
the matter between:
VALUE
LOGISTICS
LIMITED
APPLICANT
and
QUINTON
KUHN
FIRST RESPONDENT
JUNGHEINRICH
SOUTH AFRICA (PTY) LIMITED
SECOND RESPONDENT
JUDGMENT
MULLINS
AJ
INTRODUCTION
[1]
The Applicant is a public company that describes its principal
business as warehousing
and distribution (referred to in the industry
as “logistics”), as well as the sale, rental and
servicing of vehicles
such as forklifts, commercial vehicles and
trucks.
[2]
The First Respondent was previously employed by the Applicant and is
currently employed
by the Second Respondent. The nature of the First
Respondent’s past and current employment is dealt with below.
[3]
The Second Respondent is a private company whose business is the
sale, rental and
maintenance of vehicles such as forklifts. To
this extent only the business of the Applicant and the Second
Respondent overlap,
and they are competitors.
[4]
The purpose of this application is twofold, namely:
(a)
To enforce a covenant
in restraint of trade and a confidentiality undertaken given by the
First Respondent to the Applicant in the
employment agreement which
he concluded with the Applicant; and
(b)
To enforce a
“non-solicitation” undertaking given by the Second
Respondent to the Applicant in a contract titled Full
Maintenance and
Rental Agreement, which was concluded between the Applicant and the
Second Respondent (“the FML Agreement”).
[5]
The Applicant was represented by Mr
Kaplan
and both
Respondents by Mr
Ossin.
I am indebted to both counsel for the assistance in the matter,
which was heard remotely.
BACKGROUND
[6]
The background facts to this application, which are either common
cause or not in
dispute, may be summarised as follows:
(a)
The First Respondent
was employed by the Applicant in Port Elizabeth in 2012 in terms of a
written contract. That contract
was not attached to the papers
as it was superseded by subsequent events;
(b)
The First Respondent
was briefly employed as a salesperson and thereafter on the technical
side dealing with the maintenance, servicing
and repair of forklifts;
(c)
In June 2019 the First
Respondent resigned his employment with the Applicant as he and his
family were emigrating to New Zealand.
However, he remained
employed by the Applicant on a temporary basis until 30 August 2019
in the same capacity, that is, Area
Manager;
(d)
The First Respondent’s
New Zealand plans did not work out and he returned to South Africa
and was re-employed by the Applicant
in December 2019;
(e)
On 10 December 2019 the
Applicant and the First Respondent concluded a written contract of
employment in terms of which he was again
appointed an Area Manager
in the Applicant’s Port Elizabeth material handling division,
as this position had not been filled
in his absence;
(f)
The contract of
employment contained a covenant in restraint of trade and a
comprehensive confidentiality policy;
(g)
During September 2020
the Applicant’s branch manager, one van der Wath, heard rumours
that the First Respondent intended taking
up employment with the
Second Respondent. She approached the First Respondent who
confirmed to her that he had been offered
employment with the Second
Respondent. It should be mentioned that the First Respondent
denies having advised van der Wath
at that stage he had been offered
a job, merely that he was in discussions with the Second Respondent.
In any event, van der Wath
reminded him of the restraint and
confidentiality policy in his contract of employment;
(h)
Van der Wath made a
number of enquiries thereafter of the First Respondent, without
receiving any definitive response as to his
intentions;
(i)
On 16 October 2020 the
First Respondent handed in his resignation, his last day of work
being 13 November 2020. He advised
van der Wath that he would
be taking up employment with the Second Respondent in Port Elizabeth;
(j)
On the same day the
First Respondent was handed a letter in which the restraint and
confidentiality policy were pertinently brought
to his attention. The
letter concludes:
“
5.
Should you take up employment with Jungheinrich, alternatively
divulge any confidentiality
information contrary to the
confidentiality policy, we will not hesitate to take such steps
against you which may include launching
proceedings against you for
the necessary interdictory relief. This of course, will be without
prejudice to any damages suffered
by Value Logistics arising out of
your breach of the covenant in restraint of trade”.
(k)
There being no response
to this letter, after two weeks the Applicant conducted an archive
retrieval search of its email server
and discovered that,
inter
alia
, the First
Respondent had emailed from his work email address to his personal
email address the service manual for what is described
as “
a
1.0t – 5.0t Lead Acid Battery Counterbalanced Forklift Truck
manufactured by Hangcha Group Co Ltd”
(the
“Service Manual”)
;
(l)
The other emails which
the First Respondent had sent to himself were his employment contract
with the First Respondent and his employment
contract with the Second
Respondent;
(m)
This elicited a letter
from the Applicant to both the First and Second Respondents, dated 2
November 2020, to the effect that:
(i)
By taking up employment
with the Second Respondent the First Respondent was in breach of the
covenant in restraint of trade;
(ii)
By employing the First
Respondent the Second Respondent was in breach of the
non-solicitation clause in FML Agreement, in that the
Second
Respondent had employed the First Respondent in breach of the two
year moratorium on employing the Applicant’s employees
after
termination of that contract;
(n)
Both Respondents were
called upon by no later than 4 November 2020 to give a written
undertaking that the First Respondent’s
employment with the
Second Respondent would be terminated, failing which an urgent
application would be launched for the necessary
interdictory relief;
(o)
On 4 November 2020 the
First Respondent sent an email requesting more time to respond to the
above. He was granted until 6
November 2020;
(p)
On 6 November 2020
attorneys representing the Second Respondent replied, stating that:
(i)
The restraint was
unreasonable and unnecessary in various respects, in particular the
geographical area as it in effect covered
the whole of South Africa
and Namibia;
(ii)
The First Respondent
was employed in the Second Respondent’s sales department, which
is “
different
and distinguishable”
from the after-sales position he held with the Applicant;
(iii)
In order to respond to
the allegation in respect of the FML Agreement a copy thereof was
requested;
(iv)
The First Respondent’s
employment with the Second Respondent would not be terminated and any
application, urgent or otherwise,
would be opposed;
(q)
As a result of the
above response, on 9 November 2020 the Applicant’s internal
legal adviser requested instructions from its
directors and on 10
November 2020 was given the go-ahead to obtain legal advice, which
she did on 11 and 12 November 2020. Based
on the legal advice
instructions were given to draft papers for an application;
(r)
During this process,
and on 17 November 2020, a further letter was sent to the Second
Respondent attaching the FML Agreement, with
specific reference to
clause 23, giving the Second Respondent a further opportunity to
furnish the undertaking previously requested,
which undertaking was
demanded by 18 November 2020;
(s)
In response the Second
Respondent’s attorneys refused to give any undertaking, denied
that clause 23 was applicable, and disputed
urgency;
(t)
In the circumstances
the application was launched in this Court on 19 November 2020 on an
urgent basis, which application both the
Respondents, represented by
the same firm of attorneys, oppose.
[7]
In accordance with the Eastern Cape Practice Rule 12 the matter was
set down for argument
on 8 December 2020.
[8]
The FML Agreement requires some explanation:
(a)
Unrelated to the
employment relationship between the Applicant and the First
Respondent, on 5 April 2019 the Applicant and the Second
Respondent
concluded a written contract in terms of which the Applicant leased
certain equipment to the Second Respondent;
(b)
The contract was for a
period of six months, commencing on 1 April 2019, and thereafter
indefinitely, subject to either party giving
the other party one
months’ written notice of its intention to terminate the
contract;
(c)
The FML Agreement is a
comprehensive document dealing with the lease by, and maintenance of,
what is referred to as tow motors (which
I understand are forklifts)
by the Applicant to the Second Respondent. Of relevance to this
application is clause 23, which provides
as follows:
“
23
Non-Solicitation
Neither
the Lessee nor its subsidiaries, or affiliates, shall directly or
indirectly solicit for employment, and/or actively entice
away or
endeavour to, and/or employ any of the employees of the Lessor during
the term of this agreement and for a period of 2
(two) years after
the termination of this agreement.”
(d)
On 2 March 2020 the
Second Respondent terminated the FML Agreement effective as at 31
March 2020. The termination, letter, which
is signed by the Second
Respondent’s short-term rental manager, reads:
“
RE:
CANCELLATION
Dear
Business Partner
This
letter serves as termination notice of the current material handling
equipment cross hire contract in place with yourselves
and
Jungheinrich SA for DHL Volkswagen. The last effective date
will be 31 March 2020 and the machines may be collected from
site
from 1 April 2020.”
The APPLICANT’S
CASE AGAINST THE FIRST RESPONDENT
[9]
The Applicant alleges that prior to his resignation the First
Respondent was employed
in the renting, selling and servicing of
forklifts, managing sites at which forklifts were rented out and
dealing with service
and repair related queries from clients,
including after-market services. This, it alleges, is exactly
the same business
conducted by the Second Respondent, which is a
direct competitor, as they both “…
supply,
service and rent trucks, forklifts and spare parts”
to the logistics industry.
[10]
It alleges that as an Area Manager the First Respondent occupied
senior position and his duties
included:
(a)
Being responsible for
the day-to-day managing of forklifts on site;
(b)
Daily communication
with customers re the breakdown of equipment;
(c)
Conducting regular site
inspections;
(d)
Making sure customers
were satisfied;
(e)
Building relationships
with customers.
[11]
The First Respondent also participated in monthly meetings with
customers and had access to the
Applicant’s billings and rates,
which information is highly confidential. In the nature of his
duties the First Respondent
met regularly with the Applicant’s
customers and built up a relationship with them to the extent that he
would be able to
solicit their business in the future. He also
entertained customers and on occasions had drinks with and lunched
with representatives
of important customers (the details of which
were dealt with in a so-called confidentiality affidavit).
[12]
Furthermore, the Second Respondent is not only a competitor of the
Applicant, but was also a
customer until the FML Agreement was
terminated and the First Respondent regularly corresponded with and
met with representatives
of the Second Respondent to resolve
problems. In the process he built up a close relationship with the
Second Respondent.
[13]
In emailing the Service Manual to himself the First Respondent had
appropriated proprietary information
of the Applicant’s and the
question arises as to why he did it in a clandestine manner two days
before tendering his resignation.
The suggestion is made that it
could be used to the benefit of the Second Respondent in various
ways, which would be to the detriment
of the Applicant.
[14]
It was further alleged that the First Respondent’s actions were
not only a breach of the
restraint, but also the prohibited conduct
contained in the confidentially policy, of which I quote the
following:
“
2.
Prohibited
Conduct
:
The employees of the
Company unconditionally undertake, during the continuance of the
employment and thereafter:
2.1.
to keep confidential and not publish, disclose or to otherwise reveal
in any way whatsoever nor
make commercial use of the confidential
information;
2.2
not to copy, use or reproduce the confidential information, whether
in documentary or electronic
form;
…
2.4
not to use the confidential information for any purpose other than in
the course and scope
of employment by the company;
…
2.9
not to remove the confidential information from the premises of the
Company, whether physically,
electronically or otherwise, except
where such removal is necessary for the employee to perform his or
her functions as an employee;
…”
[15]
According to the Applicant the pool of customers in Port Elizabeth is
limited and due to the
close customer connection the First Respondent
established and extensive confidential information which he was privy
to during
the eight years he was employed by the Applicant he is in a
position to solicit business away from the Applicant in favour of the
Second Respondent. As the First Respondent’s remuneration
with the Second Respondent is partly commission based there
an
incentive to use those connections and confidential information to
the ultimate detriment of the Applicant.
[16]
In the result, according to the Applicant, it stands to suffer severe
financial losses and it
would therefore be just and equitable to
restrain the First Respondent from being employed by the Second
Respondent and/or any
other competitor falling within the terms of
the terms of the covenant in restraint of trade.
[17]
I interpose to mention that in the notice of motion the Applicant
seeks to prevent the First
Respondent from being employed by a
competitor which “…
conducts
the business of rendering logistics material handling services being
the sale of, supply of or rental of forklifts and
spare parts and the
rendering of services in regard thereto to customers requiring
same…”
.
Thus, the Applicant seeks to restrain the First Respondent only in so
far as it relates to forklifts.
THE
FIRST RESPONDENT’S OPPOSITION
[18]
In his answering affidavit the First Respondent deals at length with
his personal circumstances.
He is currently 41 years old,
married with two young children; he has lived his entire life in Port
Elizabeth and has strong family
ties in the city; the aborted
emigration to New Zealand was financially disastrous and the family
currently lives with his in-laws;
his wife is employed earning
R20,0000.00 per month, he has managed to save up R550,000.00 which is
to be put towards the purchase
of a house.
[19]
The First Respondent’s work history is as follows: In
2000 he was employed by MCJ
Electronics doing electronic repairs to
all types of forklifts and battery chargers; in 2002 he joined Toyota
Forklift (one of
the top three forklift companies in the world, along
with Linde and Jungheinrich – the Second Respondent); in 2012
he joined
the Applicant.
[20]
As is evident from the above the First Respondent’s entire
working life has revolved around
forklifts.
[21]
The First Respondent states that the enforcement of the restraint
will have a devastating effect
on him, both financially and
emotionally. Suffice it to state that every employee whose
contract of employment contains a
restraint will potentially suffer
some hardship in the event of the restraint being enforced. The
law requires the Courts
to do a balancing act.
[22]
The First Respondent’s employment with the Applicant came about
as follows:
(a)
While still employed at
Toyota Forklifts an erstwhile fellow employee, one Hendricks, who had
left Toyota Forklifts to work for
the Applicant, contacted him with a
view to employing him, but unfortunately there was no appropriate
position at the time. He,
the First Respondent, was in any event not
interested in moving;
(b)
In July 2012 Hendricks
contacted him again and said that although there was no position
available in his field there was one in
sales and she offered him the
job with a view to him moving to a technical position as and when
such became available;
(c)
He took up the offer
and was employed by the Applicant as Area Sales Manager in Port
Elizabeth. He had no experience in sales but
did his best, with very
limited success. He was dealing with the lower end of the market and
he recalls selling only one forklift
in this capacity;
(d)
During March 2013 he
was appointed National Product Manager, which was a technical
position in line with his expertise. In this
position he carried out
technical training in respect of forklifts that had been sold or
rented out by the Applicant, both in-house
and to the customers.
He travelled to Johannesburg on occasions. He was not involved
in the sale of forklifts and his
only concern was technical support –
repair and maintenance;
(e)
At the time the
Applicant dealt with Still forklifts, a German make, and he was sent
to Germany for technical training in respect
of this brand. The
Applicant subsequently switched to the Komatsu brand;
(f)
At the end of 2016 he
was advised that if he wanted to remain National Product Manager you
would have to move to Johannesburg. He
declined and was re-assigned
the post of Area Manager for the Eastern Cape, his supervisor being
one van der Wath;
(g)
Again, this was a
technical position which did not involve sales. The people who
reported to him were technicians and service advisers
who dealt with
repairing and servicing forklifts at the customers’ premises;
(h)
In his capacity as Area
Manager the First Respondent did indeed attend customer meetings with
van der Wath, which were held on a
monthly basis. His role was
to provide technical input. He was, however, aware of the duration of
contracts as this was relevant
to the maintenance timetables;
(i)
In the course of
performing is duties he did on several occasions accompany van der
Wath for lunch and/or drinks with customers,
which would coincide
with the monthly meetings;
(j)
At the end of 2017 the
Applicant stopped purchasing Still forklifts and around the same time
various people resigned or were retrenched.
The Applicant’s
sales division was not flourishing at the time. However, in early
2019 a new Area Sales Manager was appointed,
who breathed new life
into the Applicant’s Port Elizabeth sales and rental division
and it was he, together with van der
Wath, who established
relationships with customers;
(k)
At the end of August
2019 he and his family emigrated to New Zealand, but it didn’t
work out and he returned after a few months
and managed to get his
old position back, his duties being exactly the same as before. He
was, however, not happy because
of the unpleasant manner in which he
was being treated by van der Wath;
(l)
In July 2020 and
ex-colleague, who had previously been employed by the Applicant in
Cape Town, but who was now employed by the Second
Respondent, said he
should send in his CV, as the Second Respondent had a area sales
manager position available in Port Elizabeth.
Although not his field
– his “
comfort
zone”,
as he
put it – he did so;
(m)
He was interviewed and,
in due course, on 15 October 2019, he was offered a job by the Second
Respondent. He resigned his
employment with the Applicant on 16
October 2020, effective on 13 November 2020;
(n)
After the Applicant
became aware of this development he continued in his position, the
only change being denied access to a shared
folder (whatever that
is);
(o)
Insofar as clause 23 of
the FML Agreement is concerned the First Respondent denies he was
enticed or solicited to take up employment
with the Second
Respondent. Clause 23 is in any event contrary to public policy
as it acts unfairly against the Applicant’s
employees. The
Applicant had failed to set out any justification for the need for
this clause.
(p)
Furthermore, as he had
already taken up employment with the Second Respondent, terminating
his employment at that stage would
be contrary to public policy
and contrary to various labour laws of the country, namely ss 22 and
23 of the Constitution,
ss 1
,
4
and
5
(4) of the
Labour Relations Act
of 1995
,
s 79
of the
Basic Conditions of Employment Act of 1997
and s
6 of the Employment Equity Act. Various other provisions contained in
the Constitution were thrown in for good measure.
[23]
Insofar as the knowledge of the Applicant’s business is
concerned, the First Respondent
states that prior to 2017 the
Applicant supplied Still and Komatsu forklifts, which it continued to
use until 2019, when it moved
to Hangcha, which machines are made by
a Chinese company. While good machines they are entry-level and
technologically behind those
operated by the Second Respondent and
others. They are also cheaper.
[24]
The First Respondent states that he received no training in respect
of Hangcha forklifts and,
in particular, the battery in these
machines uses different technology and is inferior to those used by
the Second Respondent.
The point the First Respondent appears
to be making is that, although the Applicant and the Second
Respondent both do business
selling and hiring out forklifts, they do
not compete with each other and he is not in a position to do the
Applicant any harm.
[25]
His explanation as to why he emailed the Service Manual to himself is
as follows:
(a)
In the middle of
October 2020 he was contacted by an ex-colleague from his Toyota
Forklift days, one Crane, who now works for Goscor
in East London;
(b)
Crane asked him for
some professional advice in respect of a Hangcha forklift to which a
customer wanted to do alterations. Goscor
did not have a copy
of the service manual in question;
(c)
The First Respondent
was of the view that the alterations could not be done, but undertook
to email the service manual to Crane,
which he did. He goes on to
state in his affidavit:
“
In
the back of my mind, I realised that at some level my doing so might
not be in keeping with the applicant’s policy, and
it was for
this reason that I emailed the manual to my personal email. In
retrospect I should not have emailed the manual to my
personal
account, and realise that it may be regarded as being against the
applicant’s policy.”
[26]
Despite this obvious subterfuge the First Respondent alleges that the
Service Manual is not confidential
information nor a trade secret, as
it is readily available and was in any event being sent to someone
who was using a Hangcha machine.
[27]
He denies having made the Service Manual available to the Second
Respondent (which the Second
Respondent confirms). Finally, he
states that all this happened before he received an offer from the
Second Respondent, which
came through the following day.
[28]
As to the nature of his employment with the Second Respondent, the
First Respondent’s job
is to canvass for customers specifically
in order to build up the Second Respondent’s small enterprise
customer base from
scratch. He has approached approximately 50
businesses, none of which “
as
far as he can see”
use the Applicant’s machines or are the Applicant’s
customers. He would “
In
any event… not dream of approaching any of the applicant’s
existing customers. This conduct would also not be countenanced
by
the second respondent.”
[29]
From his experience the First Respondent is of the view that the Port
Elizabeth and Eastern Cape
market is far from saturated and the
Applicant probably has only a 15% share of the market, which has
shrunk in recent years.
[30]
In conclusion the First Respondent denies that the Applicant has made
out a case that it has
a protectable or proprietary interest and that
he is in breach of the restraint.
[31]
In the alternative, the First Respondent takes issue with the
duration of the restraint and its
geographical extent, both of which
he alleges are unreasonable. He also points out that whereas
the Applicant is involved
in a wide range of activities in the
logistics industry, the Second Respondent deals only in forklifts,
which is the only area
where the two businesses overlap. The
Applicant’s other areas of business include clearing and
forwarding of imported
and exported goods, warehousing, both general
and chemical, truck rental, rental of refrigerated containers,
courier services,
and more. It would thus be totally unfair to
prohibit him from being employed by another company involved in any
of the above
when his employment with the Applicant was limited to
dealing with forklifts.
[32]
The First Respondent also challenged urgency on the basis that the
Applicant knew as far back
as mid-September 2020 of the possibility
of his taking up employment with the Second Respondent and that there
had been an undue
delay in launching the application and, in the
result, urgency had been lost.
THE
APPLICANT’S REPLY
[33]
The Applicant responded to the First Respondent’s opposition by
pointing out that his version
is, to large extent, self-defeating.
Thus, the Applicant points out that in his CV (which is a
document the First Respondent
attaches to his answering affidavit) he
describes one of his attributes as follows:
“
builds
strong client relationships based on trust, delivering great
results”.
[34]
The Applicant also alleges that the First Respondent
admitted/conceded that:
(a)
He had built strong
relations with the Applicant’s customers concerning operational
and technical matters relevant to forklifts
rented to customers in
the Eastern Cape;
(b)
He assisted in
resolving on-site technical problems and would visit customers for
this purpose;
(c)
He held regular monthly
meetings with certain of the Applicant’s customers and some of
them were taken out on several occasion
for drinks or lunch, which he
attended;
(d)
Insofar as the forklift
division is concerned the business of the Applicant and the Second
Respondent overlap;
(e)
He recognised that in
emailing the Hangcha Service Manual to himself and thereafter on to
Crane, who works for a direct competitor
(which is something the
First Respondent omitted to mention), he was in breach of the
Applicant’s confidentiality policy;
(f)
He had knowledge of the
Applicant’s business and was aware of the contracts with key
customers, the duration of such contracts
and the rates charged.
[35]
The Applicant persisted that the First Respondent was in breach of
its confidentiality policy
and that it had a proprietary interest to
protect and that, therefore, the restraint was reasonable in respect
of both duration
and geographical extent.
THE
SECOND RESPONDENT’S OPPOSITION
[36]
I turn now to the Second Respondent’s opposition. The Second
Respondent describes
the nature of its business as follows:
“
The
majority of the second respondent’s business revolves around
rentals. The priority is to obtain rental contracts in conjunction
with maintenance contracts. The second respondent would look to sign
customers for long-term rentals (anything from 12 months to
5 years),
with short-term rentals becoming more prevalent and appropriate for
those machines that are reaching the end of their
lifespan.”
And
further, in response to the Applicant’s description of the
nature of its business the Second Respondent states:
“
The
second respondent is not a logistics company. Its sole business is
the supply of forklifts and other related material handling
equipment, through either rental or purchase agreements. The second
respondent also provides servicing, maintenance and repairs.”
[37]
The Second Respondent attacked clause 23 of the FML Agreement on the
following grounds:
(a)
The person who signed
the FML Agreement on behalf of the Second Respondent, one Govender,
who was a short-term rental manager, did
not have the necessary
authority to sign the FML Agreement and certainly did not have
authority to bind the Second Respondent in
respect of clause 23;
(b)
Clause 23 is not the
sort of provision one would have expected to find in a rental
agreement and the Second Respondent’s attention
should have
been specifically drawn to the existence thereof which, if it had
been, would not have been agreed to;
(c)
Clause 23 is designed
to stifle competition
per
se
and is contrary
to public policy. The unintended consequences thereof is that it
would apply to all the Applicant’s employees,
whatever their
capacity;
(d)
Clause 23 amounts to an
unethical business practice;
(e)
The Second Respondent
did not solicit nor entice the First Respondent away from the
Applicant;
(f)
These no justification
for the enforcement of the clause;
(g)
Having taken up
employment with the Second Respondent, terminating the First
Respondent’s employment would be contrary to
public policy;
(h)
Clause 23 is in breach
of the statutory provisions referred to by the First Respondent (see
paragraph [22](p) above).
[38]
The Second Respondent explains how the FML Agreement came into
existence:
(a)
Through its German
holding company the Second Respondent has a world-wide contract with
DHL, another logistics company, to supply
DHL with forklifts;
(b)
Volkswagen had a
contract with Schnellecke, also a logistics company, and pursuant
thereto the Applicant supplied forklifts to Schnellecke
in order for
Schnellecke to perform its contract with Volkswagen;
(c)
When Schnellecke’s
contract came to an end it was awarded to DHL. Pursuant thereto
the Second Respondent had to supply
DHL with a new fleet of
forklifts;
(d)
This fleet had to be
imported. While awaiting its arrival the existing fleet (the
Applicant’s fleet) had to carry on
doing the job. To this
end a contract was concluded between the Applicant and the Second
Respondent that, pending the arrival
of the new fleet, the
Applicant’s existing fleet of forklifts would be utilized by
DHL;
(e)
This type of contract
is known as a cross-hire contract and the Second Respondent was, in
effect, the go-between;
(f)
Due to the logistical
problems the new fleet was delayed, as a result of which the FML
Agreement was extended on a monthly basis
until the end of April
2020.
[39]
As I understand it, the FML Agreement was intended to be a temporary
arrangement – a stop-gap
– pending the arrival of the
Second Respondent’s new fleet of forklifts. In these
circumstances, according to
the Second Respondent, it would never
have agreed to clause 23, which is totally inappropriate in the
circumstances.
[40]
According to the Second Respondent, when it interviewed and
subsequently concluded an employment
contract with the First
Respondent, it was not aware of clause 23, nor did the Applicant draw
its attention thereto once it became
aware of the First Respondent’s
intention to take up employment with it, only doing so after the
contract of employment had
already been concluded. In the
circumstances, so it is alleged, reliance on clause 23 was an
afterthought.
[41]
The Second Respondent denied that the Service Manual was sent to it,
which document would, in
any event have been of no use to it. The
Second Respondent went further, stating that the Service Manual is
readily available on
the market and is not proprietary to the
Applicant. Anyone who has to service a Hangcha machine, and in
this regard there
are over 500 000 such machines in China, will have
a copy of the manual.
[42]
Although the Second Respondent denies having dealt “extensively”
with the First Respondent,
it admits that it did so with regard to
repair and maintenance issues. In this regard, there were
discussion in respect of
the cost of batteries and chargers.
[43]
The Second Respondent also challenged the restraint on the same
grounds as the First Respondent
and accordingly made common cause
with the First Respondent.
[44]
The Second Respondent also challenged urgency, but does so almost as
an afterthought.
THE APPLICANT’S
REPLY
[45]
The Applicant deals with the Second Applicant’s attack on the
FML Agreement as follows:
(a)
An email sent by the
Applicant to Govender states:
“
Hi
Revani
Kindly find attached
agreement for your signature, please can you ensure the duly
authorised person signs.
Please take careful
note of the following:
-
Each and every page,
including the cover page, must be initialled by the main signatory
and TWO witnesses;
-
Full signatures and
names on page 11 in the designated space;
-
The resolution on
page 21 is to be completed, alternatively, a copy of Jungheinrich’s
own resolution may be attached;
-
The debit order
mandate on page 22 is to be completed;
-
The ORIGINAL
correctly signed agreement to be returned to the legal department for
countersignature, whereafter a copy of the countersigned
agreement
will be provided for record purposes.”
(b)
There followed certain
negotiations relating to payment details;
(c)
The signed FML
Agreement was returned, to which was attached a resolution by a
director of the Second Respondent, one Langrish-Smith,
addressed to
“
To Whom It
May Concern
”,
stating:
“
I,
Lucile Langrish-Smith, Passport Number 15AR81269, hereby give full
authorization to Revani Govender, Identity Number 8410250231084
to
act on behalf of myself in all matters pertaining Value Logistics
LTD.
I
confirm this delegated authority includes the signing of applications
and contracts.”
(d)
The FML Agreement was
signed by Govender, but had to be returned to Govender for the
witnesses to sign.
[46]
The Applicant states further:
(a)
Where a lease is
coupled with a maintenance obligation, clause 23 is common in the
industry because there will inevitably be interaction
between the
lessee and the lessor’s employees, the object being to protect
its relationship with it own employees;
(b)
The FML Agreement is a
standard document and since 2010 the Applicant must have concluded
about 250 such contracts;
(c)
It is highly likely
that the contract between the Second Respondent and DHL contains a
similar clause and the Second Respondent
was invited to disclose that
agreement (an invitation which the Second Respondent did not take
up);
(d)
Clause 23 does not
constitute a harmful and unethical business practise, nor is it
contrary to public policy;
(e)
That Clause 23 offends
the various statutory provisions relied upon is also denied.
[47]
The Applicant persisted with its case that clause 23 of the FML
Agreement was binding on the
Second Respondent.
URGENCY
[48]
Although dealt with in passing on the papers by both the First and
Second Respondents (particularly
the Second), in argument counsel
argued vociferously that the Applicant had been dilatory and as a
consequence urgency had been
lost.
[49]
It was argued that the Applicant knew as early as mid-September 2020
that the First Respondent
had held an interview with the Second
Respondent, but it instituted the application only on 19 November
2020, approximately two
months later.
[50]
On face value this does appear to be an unnecessary delay.
However, if one examines the
unfolding of the events I am of the view
that the Applicant did not drag its feet unduly. The starting
point, in my view,
is the date upon which the First Respondent handed
in his resignation – 16 October 2020. Prior thereto there
was only
a possibility that the First Respondent would take up
employment with the Second Respondent. In this regard the
following
is relevant:
(a)
In the founding
affidavit it is alleged that in mid-September the First Respondent
informed van der Wath that he had been offered
employment by the
Second Respondent;
(b)
In response thereto the
First Respondent denies this and states as follows:
“
149.4
I deny that I informed van der Wath that I had been offered
employment by second respondent.
What I told her was that I had
not been offered employment at that stage but would let her know if
and when such an offer came
through.
149.5
I believe that van der Wath did raise the issue with me on several
occasions. On each
of these occasions the situation had not
changed.”
[51]
One must accept the First Respondent’s version. Thus, on
his own version, no decision
has been made in mid-September.
The Applicant warned the First Respondent of the consequences of
taking up employment with
the Second Respondent, but it could hardly
institute proceedings based on something that might never happen.
[52]
However, the resignation letter and the First Respondent’s
admission that he has been offered
a job by the Second Respondent was
another matter. This was 24 Court days prior to the institution
of the application. During
this time the Applicant was not
supine. It engaged both Respondents on a number of occasions in
an attempt to resolve the
matter without having to resort to
litigation. It investigated the matter by going into its
server. It took legal advice
and acted on that advice.
When it was clear that there was no alternative the application was
launched without delay, giving
the Respondents reasonable time limits
in which to oppose and file papers.
[53]
In addition, the harm that the Applicant alleges (if it is proven) is
on-going. In the
circumstances I am satisfied that the matter
was of sufficient urgency to warrant the abridgment of the time
limits provided for
in the Rules of Court.
DISCUSSION:
THE FIRST RESPONDENT
[54]
The covenant in restraint of trade, clause 16 of the contract of
employment, reads as follows:
“
16.1
You agree that in the nature of your employment you will have access
to confidential information of the Company
and may develop relations
with the Company’s customers. You agree that the restraints set
out in this clause are reasonable
and necessary in duration, scope
and area, to protect the Company’s proprietary information and
business interests.
16.2
For the purposes of this clause:
16.2.1
Group
Company
means any subsidiary of the Value Group Ltd and/or any
subsidiary of Value Logistics Limited;
16.2.2
Restricted
Business
means the business of the Company or any Group Company
at the time of the termination of your employment with which you were
involved
to a material extent during the period of 24 (twenty-four)
months prior to the date of the termination of your employment;
16.2.3
Restricted
Customer
means any firm, company, business or other person who,
during the period of 24 (twenty-four) months prior to the date of the
termination
of your employment, was a customer or client of the
Company or any Group Company and with whom you had regular contact in
the course
of your employment;
16.2.4
Restricted
Employee
means any person with whom you had material contact
during your employment who, at the date of the termination of your
employment,
either (i) was employed by the Company or any Group
Company, or (ii) was an employee of the Company or any Group Company
who could
materially damage the interests of the Company or any Group
Company if he/she became employed in any business concern in
competition
with any Restricted Business, or (iii) was employed by
the company or any Group Company and perform duties for or with
you
which materially supported you in the duties you performed for
the Company.
16.3
During your employment and for a period of 24 (twenty-four) months
after the termination of your employment
for any reason, you will
not:
16.3.1 solicit or
endeavour to entice away from the Company or any Group Company the
business of a Restricted Customer with a view
to providing services
to that Restricted Customer in competition with any Restricted
Business;
16.3.2 provide
services to, become employed by or otherwise have any business
dealings with any Restricted Customer;
16.3.3 have any
interest in or be engaged in any business concern which is in
competition with any Restricted Business.
16.4
The obligations imposed on you by this clause extend to your acting
not only on your own account but also
on behalf of any other firm,
company, business or other person and shall apply whether such party
or person acts directly or indirectly.
16.5
The area in which the restraints set out above shall apply shall be a
radius of 75 kilometres of any of the
Company’s Group Company’s
premises within South Africa and Namibia.
16.6
By your signature to this agreement, you acknowledge and agree that:
16.6.1 the restraints
set out above are reasonable and fair as to the subject matter, area
and duration to protect the Company’s
and/or any Group
Company’s proprietary interests;
16.6.2 each of the
restraints set out above are separate and independent restraints
severable from any of the other restraints;
16.6.3 the provisions
of clause 16 shall be construed initially in their widest possible
cumulative sense provided. However, that
if such construction is
found for any reason by any court to be unenforceable, the provisions
of clause 16 shall be construed as
imposing separate severable and
independent restraints in respect of:
16.6.3.1
the magisterial districts of the Territory; and
16.6.3.2
each calendar month within the Restraint Period;
16.6.3.3
each act or activity or nature of interest;
16.6.3.4
on the basis that notwithstanding a finding that the restraints in
their widest sense referred to above are unenforceable, it is
intention of the parties that you should be bound by such narrower
construction as may be found to be enforceable;
16.6.4
if any one or more of the restraints set out above is invalid or
unenforceable for any reason, the validity of any of the
other
restraints shall not be affected thereby.”
[55]
It is not in dispute that, insofar as the sale, rental and
maintenance of forklifts is concerned,
the Second Respondent is a
direct competitor. It is also not in dispute that the First
Respondent’s employment with the Second
Respondent relates
directly to forklifts, albeit in a different capacity as he was
employed by the Applicant.
[56]
On his own version the First Respondent:
(a)
Established
relationships with customers, albeit limited to operational and
technical matters, subject to approximately a year in
sales at the
outset;
(b)
Made on-site visits to
ensure machines were in good running condition;
(c)
Attended meetings with
the Applicant above a sales team and took part in tender meetings “…
in respect of key
accounts which the Applicant would tender on from time to time for
the purpose of obtaining national contracts”
;
(d)
Had drinks and lunch
with some of the Applicant’s customers;
(e)
Had knowledge of the
Applicant’s business and knew the details of certain accounts.
[57]
On the face of it, on his own version, the First Respondent breached
the restraint. In
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A)
at
776H – 777E it was held that:
“
The
incidence of the onus in a case concerning the enforceability of a
contractual provision in restraint of trade does not appear
to me in
principle to entail any greater or more significant consequences than
in any other civil case in general. The effect of
it in practical
terms is this: the covenantee seeking to enforce the restraint need
do no more than to invoke the provisions of
the contract and prove
the breach; the covenantor seeking to avert enforcement is required
to prove on a preponderance of probability
that in all the
circumstances of the particular case it will be unreasonable to
enforce the restraint;
if
the Court is unable to make up its mind on the point, the restraint
will be enforced.
The covenantor is burdened with their onus because public policy
requires that people should be bound by the contractual undertakings.
The covenantor is not so bound, however, if the restraint is
unreasonable, because public policy discountenances unreasonable
restrictions on people’s freedom of trade. In regard to these
two opposing considerations of public policy, it seems to me
that the
operation of the former is exhausted by the placing of the onus on
the covenantor, it has no further role to play thereafter,
when the
reasonableness or otherwise of the restraint is being inquired into.
‘The paramount importance of upholding the
sanctity of
contracts’, which is emphasised by Eksteen JA, finds its
complete expression in the rule of the law that the
onus is on the
covenantor; it has no bearing on the issue whether the particular
restraint in question is unreasonable. Accordingly
I cannot agree
with the statement that where parties contract on a basis of equality
of bargaining power the principle pacta sunt
servanda ‘will
find strong application’. Equality of bargaining power cannot
affect the nature of the onus; it is relevant
only as one of the
multitude of factors to be taken into account in the enquiry as to
the reasonableness of the restraint. And
in relation to this enquiry
I venture to suggest that it serves no useful purpose to invoke the
observation, made with reference
to contracts contrary to public
policy in general, that the Court’s power in this regard should
be exercised ‘only
in the clearest of cases’. By a long
process of judicial development it is clearly established that, in
the particular case
of a contract in restraint of trade, an
unreasonable restraint is contrary to public policy, and that the
covenantor can avoid
contractual liability by discharging the onus of
proving unreasonableness, according to the ordinary standard of proof
required
in a civil case.”
[58]
Basson v Chilwan
has been approved and followed countless times by the Courts.
[59]
In
Experian South
Africa (Pty) Ltd v Haynes and Another
2013 (1) SA 135
(GSJ)
at paras 20 – 22 the principles were expressed thus:
“
[20]
As I have pointed out above, the onus is on the respondent to prove
the unreasonableness of the restraint.
You must establish that he had
no access to confidential information and that he never acquired any
significant knowledge of, or
influence over, the applicant’s
customers while in the applicant’s employ. It suffices if it is
shown that trade connections
through customer contact exist and that
they can be exploited if the former employee were employed by a
competitor. Once the conclusion
has been reached and it is
demonstrated that the prospective new employer is a competitor of the
applicant, the risk of harm to
the applicant, if it’s former
employee were to take up employment, becomes apparent. See Den Braven
SA (Pty) Ltd v Pillay
and Another
2008 (6) SA 2
to 9 (D) ([2008]
2
All SA 518
paras 17 – 18).
[21]
Where an applicant as employer has endeavoured to safeguard itself
against the unpoliceable danger
of the respondent communicating its
trade secrets to, or utilising its customer connection on behalf of a
rival concern after entering
that rival concern’s employ, by
obtaining a restraint preventing the respondent from being employed
by competitor,
the risk that the respondent will do so is one
which the applicant does not have to run and neither is it incumbent
upon the applicant
to enquire into the bona fides of the respondent
,
and demonstrate that he is mala fide, before being allowed to enforce
its contractually agreed right to restrain the respondent
from
entering the employ of a direct competitor (see IIR South Africa BV
(incorporated in the Netherlands) t/a Institute for International
Researchv Tarita and Others 2004 (four) SA 156 (W) ([2003]
3 All SA
188)
at 166I – 167C). In such circumstances all that the
applicant need do is to show that there is secret information to
which the respondent had access, and which,
in theory
, the
respondent could transmit to the new employer should he desire to do
so.
[22]
The
ex-employer seeking to enforce against his ex-employee a protectable
interest recorded in a restraint does not have to show
that the
ex-employee is in fact utilised information confidential to it: it
merely show that the ex-employee could do so
.
The very purpose of the restraint agreement is to relieve the
applicant from having to show bona fides or lack of retained
knowledge
on the part of the respondent concerning the confidential
information. In the circumstances, it is reasonable for the applicant
to enforce the bargain it is exacted to protect itself. Indeed, the
very ratio underlying the bargain is that the applicant should
not
have to content itself with crossing its fingers and hoping that the
respondent would act honourably or abide by the undertakings
that it
has given.
It
does not lie in the mouth of the ex-employee who has breached a
restraint agreement by taking up employment with a competitor
to say
to the ex-of an employer, ‘Trust me, I will not breach the
restraint further then I have already been proved to have
done
.’”
(My
underlining)
[60]
The First Respondent states that, as far as he is aware, he has not
canvassed any businesses
with which the Applicant does business, nor
would he do so. His protestation rings hollow when one
considers his behaviour,
and his lame explanation, in respect of the
Service Manual, which smacks of
mala
fides.
He
knew he was doing wrong, hence the subterfuge. What he did, on
his own version, was in flagrant breach of the Applicant’s
confidentiality policy. That the Service Manual may have been
obtainable elsewhere, as the Second Respondent alleges, is
irrelevant
and is also not supported by the objective facts. If this was the
case, why did Crane contact the First Respondent in
order to obtain a
copy of the Service Manual which, apparently, even the owner of the
Hangcha machine in question was not in possession
of. It
is relevant that the First Respondent holds the exclusive
distribution rights to Hangcha machines in South Africa.
(Thus,
the fact that there may be 500 000 manuals circulating in China
is actually irrelevant). The alterations to this
machine is
something the Applicant should have attended to.
[61]
It does not help the First Respondent’s case that he passed on
the Service Manual at a
time when he was in the process of
negotiating his exit from the Applicant’s employ. Nor is
it relevant that the Service
Manual was forwarded to someone other
than the Second Respondent, as the Applicant reasonably assumed at
the time. The fact
of the matter is, on his own version, the
First Respondent was knowingly and intentionally in breach of his
contractual obligations
to the Applicant.
[62]
The First (and Second) Respondent contends that the Applicant has
failed to make out a case for
a proprietary interest either in the
form of customer connections or protectable confidential information
deserving of protection
and that the Applicant’s papers consist
of vague and generic allegations in this regard.
[63]
That the Applicant’s founding papers may lack specificity in
certain respects is so. But
this is frequently the case in
restraint matters as the nature and extent of the ex-employee’s
breach is peculiarly within
his/her knowledge. That is why
there is an onus to rebut on a respondent. In any event, I am
of the view that the Applicant
does indeed make out a case, which
case is fortified by the First Respondent’s own admissions
(dealt with above). The
mere fact that the Second Respondent
approached the First Respondent and offered him a job speaks volumes.
[64]
I am also of the view that the fact that the First Respondent is
employed by the Second Respondent
in a different capacity is
irrelevant. The distinction between his previous and present
job descriptions is not such that
they do not overlap to a large
degree. While he may not have been directly responsible for the
conclusion of the sale or
rental agreements when employed by the
Applicant, he was directly involved in the process. He was also
directly involved in the
after-service provided by the Applicant.
The Second Respondent would not have hired him as a salesperson
if it did not believe
he was able to add value to its business. In
fact, through the FML Agreement the First Respondent and the Second
Respondent dealt
directly with each other for a period of
approximately a year, during which time the Second Respondent was not
only a direct competitor
but also a customer.
[65]
It is also not relevant that the Applicant deals exclusively in
Hangcha machines, whereas the
Second Respondent deals in Still
machines. This is actually a negative factor insofar as the
First Respondent is concerned:
he is in an ideal position to
persuade a potential customer why the Second Respondent’s
machines are better than the
Applicant’s.
[66]
It would be apposite at this stage to quote from the matter of
Value
Logistics Ltd v Da Costa Rosario
2009 JDR 2387 (GJ)
,
ironically involving the same applicant
:
“
[18]
A party
seeking to enforce a covenant in restraint of trade is required only
to invoke the restraint agreement and prove a breach
thereof.
Thereupon, a respondent who seeks to avoid the restraint has an onus
to demonstrate on a balance of probabilities that
the restraint
agreement is unenforceable because it is unreasonable
.
See Basson v Chiwan and Others 1993 (SA) 742 (A at 776I –J;
Magna Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A)
at 892I – 893E; Reddy v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 46
(SCA) at paras 10 to 14.
[19]
In Reddy v Siemens Telecommunications (Pty) Ltd (supra) the Supreme
Court of Appeal per Malan
AJA emphasised that the constitutional
values underlay not only a respondent’s freedom to engage in
economic activity, but
also the applicant’s corresponding
right. At para 15 Malan JA had this to say:
‘
[15]
A court must make a value judgment with two principal policy
considerations in mind in determining
the reasonableness of a
restraint. The first is that the public interest requires the party
should comply with their contractual
obligations, a notion expressed
by the maximum pacta servanda sunt. The second is that all persons
should in the interests of society
be productive and be permitted to
engage in trade and commerce or the professions. Both considerations
reflect not only common
law but also constitutional values.
Contractual autonomy is part of freedom informing the constitutional
value of dignity, and
it is by entering into contracts that an
individual takes part in economic life. In this sense, freedom to
contract is an integral
part of the fundamental right referred to in
s 22.’
[20]
The onus is on the first respondent to prove the unreasonableness
of the restraint. She must establish that she had no access to
confidential information and that she never acquired any significant
personal knowledge of or influence over the applicant’s
customers whilst in their employ
. This is the first respondent
has not done, in fact, she admits that the information she took from
the applicant is its confidential
information. She says however that
she does not intend using same. That being the case and since it has
been demonstrated that
the prospective new employer is a competitor
of the applicant, the risk of harm to the applicant if it’s
forming employee
were to take up employment becomes apparent.
[21]
The applicant had put in place certain safeguards to protect itself
against the risk of the first
respondent, or any other of its other
employees, communicating its trade secrets to, or utilising its
customer connections on behalf
of a rival concerned. This the
applicant did by imposing a restraint on the first respondent, which
prevented her from being employed
by a competitor.
This means that
it is not necessary for the applicant to have to run after the first
respondent and neither is it incumbent upon
the applicant to enquire
into the bona fides of the first respondent and to demonstrate that
she is mala file before being allowed
to enforce it contractually
agreed right to restrain the first respondent from entering the
employ of a direct competitor
.
[22]
All the applicant is required to demonstrate is that there is secret
and confidential information
to which the first respondent had
access, and which
in theory
the first respondent could
transmit to the new employer should she desire to do so. This the
applicant has clearly done. The first
respondent admits that she is
in a position to disseminate the confidential information presently
in her position, but, so she
alleges, she has chosen not to do so.
[23]
It is not
necessary for the applicant to show that the first respondent has in
fact utilise the confidential information. Applicant
only has to show
that the first respondent could do so
.
The very purpose of the restraint agreement is that the applicant
does not have to rely on the bona fides or lack of retained
knowledge
on the part of the first respondent of the confidential information.
It cannot be unreasonable for the applicant in the
circumstances to
enforce the bargain it has exacted to protect itself. The applicant
should not have to content itself with crossing
its fingers and
hoping that the first respondent would act honourably or abide by the
undertakings that she had given. It does
not lie in the mouth of the
first respondent, who has breached the restraint agreement by taking
up employment with a competitor,
to say to the applicant ‘trust
me: I will not breach the restraint further than I have already been
proved to have done.’
(Reddy v Siemens Telecommunications
(supra) at pg 499 – 500, para 20).”
[67]
The respondent in the
Value
Logistics v Da Costa Rosario
matter was employed by the applicant as a sales representative. Her
new employment was as a key accounts manager. The restraint
was for a
period of two years and a 75 km radius from any of the applicant’s
business premises throughout South Africa and
Namibia. It thus
appears to be very much along the same lines as the present matter.
[68]
The restraint was upheld.
[69]
In the short space of time prior to the launch of this application
the First Respondent claims
to have visited approximately 50 entities
in order to canvas business for the Second Respondent. The fact
that the Applicant
does not do business with these entities, as for
as the First Respondent is aware, is irrelevant. Firstly, his
ipse dixit
is
equivocal. Secondly, as the authorities quotes above clearly
establish, protestations of innocence stand to be ignored.
[70]
From the foregoing it is clear that I intend to enforce the
restraint. The question which then
arises is whether the time period
and geographical extent are reasonable. In
Kwik Kopy
(SA) (Pty) Ltd v Van Haarlem and Another
1999 (1) SA 472
(W)
at 484E the Court held that in addition to the traditional enquiry
enunciated in
Basson
v Chilwan
(at
767G –H) should be added the enquiry: is the restraint
wider than necessary to protect the protectable interest?
[71]
A Court is entitled to interfere with a restraint that is
unreasonably wide, but will not fashion
a new contract for the
parties. In
Nampesca (SA)
Products (Pty) Ltd v Zaderer and Others
1999 (1) SA 886
(CPD)
at
896A – C it was held that:
“
A
court may excise unreasonable parts of a restraint only if it does
not defeat the parties’ intention or offend against the
fundamental rule that a court may not make a contract for the parties
(see the Coin Sekerheidsgroep case supra at 571H –I).
Our
Courts furthermore are reluctant to cut down restraint clauses,
unless it can be done by deleting the oppressive parts neatly
and
conveniently (see MacPhail (Pty) Ltd v Janse van Rensburg and Others
1996 (1) SA 594
(E) at 599B)…”
[72]
In addition, the restraint clause in the instant matter specifically
enjoins the Court to, if
necessary, fashion a reasonable prohibition.
[73]
Having regard all the factors already dealt with I am of the view
that the restraint is unreasonable
in respect of both time and
extent. A period of two years is excessive and should only be
enforced in exceptional circumstances,
which is not the case here. A
geographical area of 75 km from any of the Applicant’s premises
will effectively prevent the
First Respondent from taking up
employment anywhere in South Africa and Namibia. It is common cause
that he was employed in Port
Elizabeth for the entire time that he
worked for the Applicant, although he did commute to Johannesburg at
one stage. Thus
his knowledge of the Applicant’s business
is limited in extent.
[74]
It is interesting to note that the contract
of employment that the First Respondent concluded with
the Second
Respondent also contains a covenant in restraint of trade. That
contract provides that on the termination of his
employment the First
Respondent is restrained from being employed by a customer of the
Second Respondent for a period of twelve
months in the “
Prescription
Area
” which
is defined as “…
any
area in the Republic of South Africa, and any country in which the
business is or has been conducted.”
[75]
Thus, although the period of the restraint is less onerous the
geographical extent is far more
onerous and notionally could include
the whole world.
[76]
Having regard to the competing interests I am of the view that it
will do justice to the parties
if the restraint is limited to a
period of twelve months and to the municipal boundary of the Nelson
Mandela Bay Municipality (in
effect, Port Elizabeth, Uitenhage and
Despatch). This will permit the First Respondent to take up
employment in his chosen
field but not in his old stamping grounds
(as it were) during the period of the restraint. He is also at
liberty to engage
in any other activity, provided it does not involve
the sale, rental and maintenance of forklifts.
[77]
To date the First Respondent has not tendered to return copies of the
Service Manual and/or delete
copies thereof from any computer device
over which he has control. Given his admission that he knew he
was doing wrong when
he downloaded it to his personal computer, this
is indeed strange. The Applicant is also entitled to an order
in this regard.
[78]
Insofar as the First Respondent’s challenge to clause 23 of the
FML Agreement is concerned,
I deal therewith below.
DISCUSSION:
SECOND RESPONDENT
[79]
The Second Respondent’s half-hearted denial that Govender did
not have the necessary authority
to bind it in respect of the FML
Agreement cannot be taken seriously. The Second Respondent
itself describes in detail how
and why the contract came into being
and it was clearly implemented by the parties. It is difficult
to appreciate how a contract
which was concluded without authorities
could have been terminated by it. That Govender did not have
authority to conclude
the contract is comprehensively debunked by the
blanket authority give to her by one of the Second Respondent’s
directors.
[80]
For the same reason I reject the contention that, even if Govender
has authority to bind the
Second Respondent to the FML Agreement, she
had no authority to do so in respect of clause 23. She clearly
had a blanket
delegated authority to as “…
in
all matters pertaining Value Logistics Ltd”
,
which if one has reference to the date, was obviously given in
respect of the FML Agreement.
[81]
In addition, the document went back and forth a couple of times and
everything was done in the
open. There is no suggestion
Govender didn’t read the document and in any event the maxim
caveat subscriptor
finds application.
[82]
Which brings me to the other grounds of objection raised by the
Second Respondent (and the First
Respondent, for that matter).
[83]
For a variety of reasons the Second Respondent alleges that clause 23
is unconstitutional and
contrary to public policy. It is trite
that all contracts must pass constitutional muster.
[84]
It is relevant that at common law it is not unlawful to solicit the
services of another business’s
employee. In
Atlas
Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd & Other
1981 (2) SA 173
(T)
this
very issue arose. At 200D – G the Court stated:
“
This
poses the following question. Is it unfair competition to
induce an employee to terminate his contract of employment
lawfully?
Put differently, can it be unlawful conduct to exhort someone to do
something lawfully? This proposition
falls strange on the ear.
In our competitive economy it is normal for employers to bid for
their labour, the price of which
is subject to the law of supply and
demand. As long as the employee is free to leave others are
entitled to offer him terms
of employment. The fact that the
loss of the employee might cause damage to the employer is incidental
and irrelevant.
Cf New Klipfontein Co Ltd v Superintendent of
Labourer
1904 TS 241.
This
does not mean that should a businessman systematically induce his
competitor’s employees to leave, his conduct would
necessarily
be lawful. In my view, public policy would dictate that, where
the aim in inducing a competitor’s employees
to terminate their
employment is not to benefit from their services but to cripple or
eliminate the business competitor, this action
be branded as unlawful
competition. Cf Callmann (supra vol II para 33.1 (a)).”
[85]
There is no suggestion on the papers that the Second Respondent’s
motives in offering the
First Respondent a job are anything other
than legitimate.
[86]
There is also merit in the Second Respondent’s submission that
clause 23 may have unintended
consequences. It will apply to
all employees, present and future, irrespective of their work
description and length of service.
It will apply to the
cleaning staff. It will apply to someone whose services, at the
end of a probationary period, is not
retained by the Applicant.
It will even apply to someone who is retrenched. It will apply
even to those employees not
subject to a covenant in restraint of
trade. This list is not exhaustive.
[87]
This issue was dealt with in
Kores
Manufacturing Co Ltd v Kolok Manufacturing Co Ltd
[1957] All ER 158
and
on appeal, the reference being
[1959]
ch. D 108.
[88]
In both the Court
a
quo
and on appeal
an agreement similar to the present was found to be unenforceable as
being contrary to public policy. In
Hanover
Insurance Brokers Ltd & Another v Schapiro and Others
[1993] EWCA Civ 2
;
[1994] IRLR 82
, in
dealing with a similar situation the Court held:
“
But
the difficulties in law in the way of a non poaching agreement
between employers are very clearly explained in the decision
of the
Court in
Kores
Manufacturing Co. Ltd. v Kolok Manufacturing Co. Ltd
[1959] Ch 109.
In particular, the employee has the right to work for
the employer he wants to work for if that employer is willing to
employ him.
Moreover the restriction as drawn would apply to all
employees of HIB irrespective of expertise or juniority and would
apply to
those who were employees at the time of the solicitation or
enticement, even if they had only become employees after all the
defendants
had left HIB's service. HIB cannot impose a mere covenant
against competition on the defendants. That is why a covenant not to
canvass persons who had become customers of HIB only after the
defendants had ceased to be employees of HIB would be invalid: (see
Konski v Peet
[1915] 1 Ch 530).
The same must be the case with employees. I agree
with the judge on this and would dismiss the cross-appeal.”
[89]
What distinguishes clause 23 from a covenant in restraint of trade in
an employment contract
is that the employee, without being a party
thereto and without having any knowledge thereof will be prohibited
from taking up
employment with another company.
[90]
Another factor to be taken into account is that the FML Agreement
arose out of the peculiar circumstances
dealt with above. It
was a temporary arrangement intended to be of relatively short
duration. To embargo all the Applicant’s
employees for a
period of two years after the termination of the FML Agreement,
including those who might be employed after the
date of termination
and who never had any contact with the Second Respondent, from taking
up employment with the Second Respondent
is, in my view, indefensible
and the clause is accordingly unenforceable.
[91]
I must hasten to add that my decision must not be construed as a
finding that all non-solicitation
clauses are bad in law.
Counsel for the Respondents did not refer me to any South African
authority directly on the point,
nor was I able to find any. My
finding is confined by the specific circumstances of this case.
[92]
Given the views expressed above it is not necessary to deal with the
other grounds of opposition
to clause 23 raised by both Respondents.
COSTS
[93]
Insofar as the First Respondent is concerned there is no reason why
costs should not follow the
event.
[94]
Although the Second Respondent has been successful in respect of its
challenge to clause 23 of
the FML Agreement, it made common cause
with the First Respondent in respect of its opposition to the
covenant in restraint of
trade by denying on a number of occasions
that in taking up employment with the Second Respondent the First
Respondent was in breach
thereof. In this regard it has also
been unsuccessful.
[95]
In the circumstances I intend ordering the Second Respondent to pay
the costs of the application
jointly and severally with the First
Respondent.
ORDER
[96]
The following order will hereby issue:
1.
The First Respondent is
hereby interdicted and restrained for a period of one year as from 13
November 2020 from being employed
by any business concern (including
the Second Respondent), which conducts the business of rendering
logistics material handling
services, being the sale of, supply of
and rental of forklifts and spare parts to customers requiring same,
such restraint to be
limited to the geographical boundary of the
Nelson Mandela Bay Municipality.
2.
The First Respondent is
hereby ordered to return all copies of the service manual for a 1.0t
– 5.0t Lead Acid Battery Counterbalanced
Forklift Truck
manufactured by Hangcha Group Ltd and to forthwith delete the said
service manual from any computer device under
his control and to
furnish proof to the Applicant that he has done so.
3.
The First and Second
Respondents are ordered to pay the costs of the application jointly
and severally, the one paying the other
to be absolved.
________________________________
N.J. MULLINS
ACTING
JUDGE OF THE HIGH COURT
Obo the
Applicant:
Adv. JL Kaplan
Instructed
by:
IAN LEVITT ATTORNEYS
The
Leonardo, Office Level 12
75
Maude Street
SANDTON
c/o
BROWN BRAUDE & VLOK INC.
317
Cape Road
Newton
Park
PORT
ELIZABETH
Obo of the
Respondents: Adv.
T Ossin
Instructed
by:
WERTHSCRODER INC.
300
Acacia Road
Darrenwood
Randburg
GAUTENG
c/o
BOQWANA BURNS
Boqwana
House
84
– 6
th
Avenue
Newton
Park
PORT
ELIZABETH