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[2023] ZAKZPHC 154
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Indwe Risk Services (Pty) Ltd v Coyne and Another (16343/2022P) [2023] ZAKZPHC 154 (28 November 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NUMBER: 16343/2022P
In
the matter between:
INDWE
RISK SERVICES (PTY) LTD
APPLICANT
And
CHANTAL
COYNE
FIRST
RESPONDENT
SURELINK
CC
SECOND
RESPONDENT
JUDGMENT
P
C BEZUIDENHOUT J:
[1]
The application was filed at court on 24 November 2022. The
answering affidavit by First
and Second Respondent’s was filed
on 16 of January 2023 and the replying affidavit was filed on 6
February 2023. The
matter was on the opposed roll on 1 November
2023. On 20 October 2023 various documents were filed by
Respondents which included
a supplementary index, a confirmatory
affidavit by one M Gosman and Respondents heads of argument.
[2]
At the commencement of the hearing Applicant objected to the
confirmatory affidavit by Mr. Gosman
on the basis that it was not
merely a confirmatory affidavit but that it contained more and
appeared more like a supplementary
affidavit and that there was no
application for condonation for the late filing of the said
affidavit. It was further submitted
that there was no material
dispute of facts, that if the confirmatory affidavit of Gosman was
allowed it could create a dispute
of fact. It was prejudicial
to Applicant and should therefore not be allowed.
[3]
In response it was submitted on behalf of Respondents that Gosman was
referred to in the affidavit
of Second Respondent and that all that
was required was an affidavit from him that he had read the affidavit
and confirmed what
was said relating to him. Paragraphs 4 to 8
of his affidavit can therefore be struck out and it would then merely
be a confirmatory
affidavit.
[4]
As set out the confirmatory affidavit of Gosman was filed
approximately 9 months after that of
First Respondent. No
reason was provided in the affidavit as to why this was so, nor was
there any application for condonation
for the late filing thereof.
In my view it would not be prudent to exclude certain paragraphs of
Gosman’s affidavit
and due to the fact that it was merely filed
when there was ample time to file an application for condonation or
to provide an
explanation at least as to why it was filed at such a
late stage nor even an oral application for condonation that the
affidavit
of Gosman should be excluded in the determination of these
proceedings.
[5]
The relief which is being sought is: Firstly, that First
Respondent be interdicted and restrained
form misappropriating or
exploiting for her own or Second Respondent’s benefit
confidential information of Applicant.
Secondly that First
Respondent be restrained from canvassing, recruiting or soliciting
Applicant’s existing short term insurance
clients and accepting
short term insurance form Applicant’s existing client base or
accepting appointment as broker of Applicant’s
existing
clients. Thirdly that First Respondent surrender to Applicant
all confidential information, databases, etc. in her
possession.
Fourthly that First Respondent be ordered to comply with the
undertakings contained in the revised restrained
and confidentiality
agreement signed by her on 16 June 2015. Fifthly that Second
Respondent be restrained form using or accessing
Applicant’s
confidential information, intellectual property records, customer and
clients lists, etc. and Sixthly that Second
Respondent surrender to
Applicant all Applicant’s confidential information
documentation, customer lists, etc. that it may
have in its
possession. Seventhly that costs be paid on an attorney and
client scale.
[6]
From the relief being sought and what was submitted on behalf of
Applicant it is not seeking any
relief prohibiting First Respondent
from being employed by Second Respondent or working with Second
Respondent, but the relief
sought is to prevent First Respondent
admitting existing clients of Applicant and using any client lists,
etc. or confidential
information which First Respondent may have in
her possession resulting from her employment by Applicant.
[7]
It is common cause that First Respondent was employed by Applicant
for a considerable period of
time and had been promoted to a
managerial position in 2015. For reasons, which are not
relevant at this stage, she was later
demoted and thereafter resigned
and the matter ended up in the CCMA where it was settled between the
parties. The basis for
the referral to the CCMA was that of
constructive dismissal. No further information in this regard
has been provided.
[8]
it is also common cause that thereafter she commenced working for
Second Respondent, either as
an agent or as an employee, which was
one of the issues raised by Applicant in these proceedings.
[9]
It was submitted on behalf of Applicant that there was an existing
restraint of trade, that First
Respondent has misappropriated
confidential data to enable her to work in direct competition with
Applicant. It was submitted
on behalf of Applicant that First
and Second Respondent failed to provide undertakings not to solicit
clients and that Applicant
has suffered loss due to the relocation of
clients as set out in the replying affidavit at page 208 of the
record. The terms
and duration of the restraint of trade
undertaking is set out in paragraph 4 of the Restraint and
Confidentiality agreement (2015).
[10]
In her answering affidavit, Fist Respondent set out that certain
clients had followed her when she moved
namely a Mrs. Van Staden, a
personal friend and Mr. Gosman in respect of his personal assets and
also that of his business, Amlec.
First Respondent in her answering
affidavit states that she destroyed all confidential information of
Applicant she had on the
advice of her attorney. It was
submitted by Applicant that the least that was required was an
affidavit form the attorney
confirming this. Although First
Respondent alleges that it was destroyed, Applicant has lost 3
clients which First Respondent
contends, independently and on their
own account moved their short term insurance to Second Respondent.
[11]
Applicant submitted that the contract which First Respondent refers
to between her and Second respondent
is on a reading thereof, an
employment contract and not an agency agreement and that this was
indicative that First Respondent
was acting in bad faith. It
was submitted that First Respondent works from the premises of Second
Respondent and that she
only mentioned Ms. Van Staden and Mr. Gosman
in her affidavit, but failed to mention Colour Displays and Enermous
Investments (Pty)
(Ltd), which also moved their business to Second
Respondent. It was noteworthy that there were no confirmatory
affidavits
from these two entities. It was submitted that there
was no material dispute of fact and that letters had been addressed
to First and Second Respondents to desist from their conduct but that
they refused to do so and accordingly that a punitive costs
order is
warranted against First Respondent.
[12]
It was submitted on behalf of Applicant that they did not wish to
prevent First Respondent form being employed
by Second Respondent,
but that Respondents were not allowed to use confidential information
and customer lists to solicit clients
of Applicant to transfer their
policies to Second respondent. It was submitted on behalf of
Applicant that there was no breach
of the restraint of trade if a
present client of Applicant transfers its business to Second
respondent as long as First Respondent
did not deal with that
specific client. Accordingly, if an existing client of
Applicant transferred its business to Second
Respondent, then someone
else employed there, and not First Respondent, must deal with that
specific policy.
[13]
It was submitted on behalf of Respondents that the information set
out in the affidavit of First Respondent
which deals with the
resignation from Applicant was necessary to address paragraph 16 of
Applicants founding affidavit, where it
specifically mentioned that
First Respondent sought and misrepresented that she wanted to take
early retirement when she had already
taken up employment with Second
Respondent. It is submitted that there is no longer any
confidential information and documentation,
as it has been destroyed
and some is also attached to the founding affidavit of Applicant.
First Respondent has set out that
she has deleted all information
that she had.
[14]
It was submitted by Respondents that there was a material dispute of
fact and if Applicant does not want
to refer the matter for oral
evidence the application must be dismissed. Respondents main
argument was for this relief although
it mentioned that the restraint
of trade policy was against public policy and not enforceable.
[15]
It was submitted by Applicant’s counsel that the conversations
between First Respondent and clients,
such as Mrs. Van Staden, were
grey areas. There was no evidence to show that these previous
clients were solicited by phoning
them or doing anything to attract
them to move their business. It was not to determine which
version was more probable.
It was submitted by Respondents that
Applicant did not allege that the clients had been solicited and
therefore there was no case
for First Respondent to answer. It
was immaterial whether it was an agency or employment agreement.
It was further
submitted that there were indeed various responses by
the attorney acting on behalf of First Respondent as set out in pages
178
to 180 to the letters which Applicant has submitted were sent to
First Respondent prior to the launching of the application.
There was no allegation that there is a client list or confidential
client list which was in the possession of Respondents.
[16]
It was submitted on behalf of Applicant that soliciting was taking
away and by merely approaching someone
was a breach of the
restraint.
[17]
It is common cause that First Respondent had been employed by
Applicant for a considerable period of time
and thereafter moved to
the employ of Second Respondent. It is also common cause that
at least four previous clients of Applicant
have for various reasons
moved their business across to Second Respondent. It was stated
by First Respondent that she had
destroyed all confidential
information due to the advice of her attorney. It is therefore
clear therefrom that when she moved
across from Applicant to Second
respondent that she indeed did take with her certain confidential
information of Applicant and
only did so once advised to do so by her
attorney. She knew she had signed a restraint of trade
agreement and must have understood
its terms having been in the
insurance business for long time.
[18]
It was submitted on behalf of applicant that Applicant did not wish
to prevent First Respondent from being
employed but that she had to
abide with the restraint of trade agreement which she had entered
into in 2015 which was termed the
revised restraint of trade
agreement. It is common cause that she signed the said
agreement and First Respondent during argument
has not challenged the
terms of the said agreement but stated that there is a dispute of
fact relating to the clients who have
moved to Second Respondent and
that the matter therefore has to be referred for the hearing of oral
evidence. There are no
allegations in the papers of any direct
soliciting of clients by First Respondent but it is indeed so that
certain clients have
moved across with her. Although First
Respondent states that she has destroyed all the confidential
information that she
had taken with her, there is no proof exactly as
to what it entailed and what she destroyed except a bold statement to
that effect.
[19]
In the event of Applicant choosing to argue the matter on the papers
and not accepting that there is a dispute
of fact then it is trite
that Plascon Evans Paints Ltd v Van Riebeek Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3)
SA 623
(A) is applicable. On behalf of Respondents reliance was
placed on the judgment in the matter of Indwe Risk Services (Pty)
Ltd
v Sure Insurance Brekas (Pty) Ltd and other (25300/2007)
[2008]
ZAGPHC 291
(14 March 2008), especially paragraphs 15 and 16.
This deals with the referral of evidence when there is a dispute of
fact
but it is also noteworthy that in that case the order that was
sought relating to the confidential information etc. was granted.
It is common cause that clients have moved across and, in my view,
there is accordingly not a dispute of fact in that regard.
There is nothing that Respondents have placed before this court that
there was any soliciting, phoning or any form of pressure
placed on
these individuals to move their insurance across. Accordingly,
there is no dispute of fact that necessitates the
matter to be
referred for the hearing of oral evidence.
[20]
In considering a restraint of trade such as the present it must
firstly be considered whether there is a
protectable interest, if
there are trade secrets such as customer lists, operating procedures
etc. Secondly, if they were
not being enforced if there would
be serious or potential harm to Applicant. And thirdly, is it
reasonable in the circumstances.
A further factor is the
employee’s right to work. As was submitted on behalf of
Applicant they do not wish to stop
First Respondent from working but
she may not deal with any of the clients of Applicant that had moved
across to Second Respondent
as set out in paragraphs 4.1.2 and 4.1.3
of the Restraint of Trade Agreement.
[21]
The onus lies on the employee to show that the restraint is
unreasonable and contrary to public policies.
In the case of
Magma Alloys and Research SA (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) it
was held that agreements that were freely entered into between
parties should be honoured. However, it further held
that
everyone should be free to trade. That unreasonable
restrictions would be contrary to public policy.
[22]
In the case of Reddy v Siemens 2007 (2) 486 (SCA) it was held in
paragraph 10 that restraint of trade agreements
were valid and
enforceable unless the parties seeking to escape, their workings
showed that they were unreasonable and contrary
to public policy.
In paragraph 20, it was held as the appellant had taken up employment
with a rival company, in a position
similar to the one he had
occupied with respondent, the disclosure of confidential information
presented on obvious risk to the
respondent. This was
sufficient for purposes of granting the order that appellant could
disclose information if he or she
so chose which was the risk against
which respondent had sought to protect itself by means of the
restraint clause.
[23]
The time period of the restraint of trade agreement in this matter,
as well as the area it covers as set
out in paragraph 4 of the
agreement is in my view totally unreasonable and contrary to public
policy. In paragraph 4.1 thereof
the restraint is for a period
of two years after termination of employment and refers to any
competition within the Republic of
South Africa or any other country
where the employer conducts business. Firstly, the period of
two years is unduly long and
secondly the whole of South Africa makes
it virtually impossible for a person to occupy any position to
sustain himself or herself.
[24]
Clause 4.1.2 refers to accept or take up any short-term insurance
business form any client and in 4.1.3 to
accept appointment as
short-term insurance broker or intermediary by any client.
Paragraph 4.1.4 refers to the confidential
information, data,
documents, customer lists etc. All these are however subject to
the two (2) year period and the area of
South Africa.
[25]
As was conceded on behalf of Applicant it is very difficult to
establish whether any business which is moved
to Second Respondent is
being done by First Respondent. First Respondent is prohibited
form being the broker of any of the
previous clients of Applicant,
although it was submitted on behalf of Applicant that they did not
wish to prevent previous clients
form moving their business across to
Second Respondent if they so wish as long as First Respondent did not
deal with those clients.
[26]
As set out in the case of Reddy above the disclosure of confidential
information is a risk and is sufficient
to grant the order.
[27]
Having considered all the above I am satisfied that Applicant has
made out a case for the relief sought to
except that the period and
area is unreasonable and contrary to public policy for the reasons
set out above.
[28]
In my view considering the facts of this case a punitive cost order
is not warranted.
Order
1.
That First Respondent
for a period of six (6) months from the date of this judgment:
1.1
Be interdicted and
restrained form misappropriating, exploiting and/or utilizing for her
benefit and/or the benefit of Second Respondent,
Applicant’s
confidential information, data, intellectual property, records,
documentation, customer and client lists, names
and contact details
of Applicant’s trade secrets, trade connections and
confidential information, programmes and databases.
1.2
Be interdicted and
restrained from canvassing, recruiting or soliciting Applicant’s
existing short-term insurance clients,
accepting short-term insurance
from Applicant’s existing client base and accepting
appointments as a short-term insurance
broker or intermediary by any
of Applicant’s existing clients.
1.3
That First Respondent
forthwith surrender to Applicant all of Applicant’s
confidential information, data, intellectual property,
records,
documentation, customer and client lists, names and contact details
of Applicant’s trade secrets, trade connections
and
confidential information, programmes and databases that may still be
in First Respondent’s possession and/or control.
2.
That Second Respondent
for a period of six (6) months form the date of this judgment:
2.1
Be interdicted and
restrained from using, accessing and/or misappropriating Applicant’s
confidential information data, intellectual
property, records,
documentation, customer and client lists, names and contact details
in respect of Applicant’s short-term
insurance client’s
and trade secrets, trade connections, confidential information,
programmes and databases belonging to
Applicant, by through or under
the direct and/or indirect assistance, involvement and procurement
thereof by First Respondent.
2.2
Forthwith surrender to
Applicant all of the Applicant’s confidential information,
data, intellectual property, records, documentation,
customer and
client lists, names and contract details of Applicant’s trade
secrets, trade connections and confidential information,
programmes
and databases it may have in its possession.
3.
First and Second
Respondents jointly and severally the one paying the other to be
absolved to pay the costs of the application.
P
C BEZUIDENHOUT J.
JUDGMENT
RESERVED:
1
NOVEMBER 2023
JUDGMENT
HANDED DOWN:
28
NOVEMBER 2023
COUNSEL
FOR APPLICANT:
M
D SALANDINO
Instructed
by:
D
Naidoo & Associates
c/o
Botha & Olivier Inc
Pietermaritzburg
Tel:
033 342 7190
Ref:
S Hariparsad/jd/D.1057
Cell
number of Mr Salandino
081
486 0463
COUNSEL
FOR RESPONDENTS:
J
W TEMLETT
Instructed
by:
M
C Wilkinson & Co
Hilton
Tel:
033 343 3088
Ref:
none provided