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[2021] ZAGPPHC 30
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Mutual Safe and Security (Pty) Ltd and Another v Simpson Safes (Pty) Ltd (43393/20) [2021] ZAGPPHC 30; 2021 BIP 8 (GP) (8 January 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(
GAUTENG
DIVISION, PRETORIA)
(1)
REPORTABLE:
NO
(2)
OF INTEREST TO OTHER
JUDGES:
NO
(3)
REVISED.
YES
6
January 2021
CASE NO: 43393/20
In
the matter between:
MUTUAL
SAFE AND SECURITY (PTY)
LTD
First Applicant
MUTUAL
SAFES JHB (PTY)
LTD
Second Applicant
and
SIMPSON
SAFES (PTY)
LTD
First Respondent
ANDREW
MURRAY
SIMPSON
Second Respondent
KYLE
BRADLEY
PEARCE
Third Respondent
NEUKIRCHER
J:
1]
The relief sought by the applicants are a) an interdict in order to
prevent certain
allegedly unlawful conduct and competition by the
respondents specifically pending the institution of an action for
final relief
and damages and b) an order to enforce a restraint of
trade against the third respondent.
THE FACTS
2]
The first applicant (MSS) was established in 1984 and it designs,
manufactures,
produces, sells and maintains a range of safes,
security doors, vaults and security-related products (the product
range) most of
which are listed on its website
[1]
.
3]
The second applicant (Mutual Jhb) was one of several other affiliated
companies
under the MSS umbrella which exclusively marketed,
distributed and sold the MSS product range. It also provided
after-sales maintenance
and services to the MSS clients, as do all
the affiliated companies
[2]
,
throughout the entire South Africa
[3]
.
4]
Although MSS has a production and manufacturing plant in Waltloo,
Pretoria, certain
of its parts and products have also been produced
by 3 other companies, viz:
4.1
RAW Steel (Pty) Ltd (RAW);
4.2
Mutual Hardened Doors (Pty) Ltd (MHD); and
4.3
Mutual Safe & Security (Southern Cape) (Pty) Ltd (MSC): this
company is also responsible
for the sales process and warehousing of
the produced MSS products.
5]
Rhoderick George Murray Simpson (Rhod) is the sole director of MSC
and MHD and one
of 3 directors of RAW. He is also the father of the
second respondent (Andrew).
THE AGREEMENTS
6]
On 24 January 1998 a “Confidentiality and Restraint Agreement &
Undertaking”
(the 1998 Agreement) was entered into between
“
Rhod Simpson and/or RAW Steel (Pty) Ltd and/or Mutual
Southern Cape (Pty)Ltd (a company to be formed) – MSC “the
licensees”
and “The Mutual Security Group of Companies –
MSG “the licensors” incorporating Mutual Security Cape
(Pty)
Ltd (MC) & Mutual Safe & Security (Pty)Ltd (MSS)”.
7]
For purposes of the issues arising out of this application, it is
necessary to
set out the relevant portions of the 1998 Agreement.
Those state:
“
1.
The licensors are the owners of the design patents, the technology
and know how of
all designs which are to be passed down to the
licensees.
2.
The licensors will suffer damage and/or financial loss should the
licensees abuse
or wrongfully use the designs, technology and know
how about to be passed on.
3.
The licensees will be obliged to compensate the licensors for any
damages or
financial loss that the licensors mat suffer as a result
of abuse or wrongful use of the said designs.
4.
The
designs, technology and know how (known as the package)
[4]
may only be used by RAW Steel (Pty) Ltd (RAW) and Rhod Simpson (RS)
within the RAW George factory premises
.
5.
The package may not be disclosed to any party or third party outside
of the RAW
business. Only specific RAW employees employed to
manufacture for MSC may have access to the package on a “need
to know”
basis.
6.
Should any misuse etc occur, the complete package must be returned to
MSG on
demand.
6 (sic) The package is for the
manufacturing use of RAW in its production processes of safes,
cabinets and doors made for MSG.
7.
The directors, shareholders and their respective families bind
themselves in
solidum with the contents of this agreement.
8.
It is further agreed that all directors, shareholders and their
respective families
may not use the package before an agreement is
signed or after such agreement has expired. In addition all directors
agree that
they may not be indirectly involved in using the package
with any other parties whilst the agreement is in place.
9.
Whilst it is not envisaged to impose restraint of trade agreement on
the directors,
it is agreed that the package will not be used in any
way whatsoever once the agreement has expired or cancelled….”
8]
According to MSS, it then provided RAW, MSC and Rhod with the package
and since
1998 the latter 3 manufactured and produced products, and
parts of products, as and when requested to do so by MSS and/or its
affiliated
companies.
9]
MSS is also the proprietor of the ‘Mutual’ trade mark,
registered
in its favour with the Companies and Intellectual Property
Commission (CIPC) in terms of the
Trade Marks Act 194 of 1993
.
According to MSS, the mark formed part of the package provided to
RAW, MSC and Rhod for use under the 1998 Agreement, it is valid
and
in force, it is used extensively both locally and internationally in
relation to MSS’s product range and through extensive
promotion
and advertisement of the product range has a well-established
reputation within the safety and security sector of the
public.
10]
Although the respondents have taken issue with whether or not the
‘Mutual’ mark
is actually registered with the CIPC
[5]
,
there is really no true issue on the papers surrounding MSS’s
allegations regarding the proprietorship of the ‘Mutual’
mark, and it appears from respondent’s own answering affidavit
that RAW/MSC produced products as instructed by MSS for on-sell
with
the ‘Mutual’ mark.
11]
Over and above the mark, MSS states that it is the owner of the
copyright
[6]
in the technical drawings and design drawings provided as part of the
package, supplemented from time to time. In argument Mr Woodrow
submitted that it was irrelevant whether these works were statutorily
protected as they were, in any event, protected via the common
law.
12]
MSS is registered with the South African Bureau of Standards (SABS)
and. Accordingly, “
the categorized safes and other items
within its product range are SABS approved by virtue of the MSS’s
SABS registration
and the certifications obtained by MSS pursuant
thereto.”
These products which MSS claims are SABS approved
fall within the following categories for which MSS has SABS
certification:
12.1
SANS 751
12.2
SANS 953-1; and
12.3
SANS 949.
13]
The point of this is that any ‘Mutual’ SABS approved
product which is
not
sold by MSS, or one of its affiliated
companies, is not actually an SABS approved product and its
irrelevant whether the product
conforms to SABS standards or not.
This then affects the validity of any warrantee that would accompany
the product.
The second respondent
(Andrew)
14]
Andrew was employed by MSS on 1 February 2011 in terms of a written
employment contract
concluded on 18 February 2011. According to his
employment contract his place of employment was Austin SAFES IN
Linbro Park, Johannesburg.
15]
Of particular importance are two specific clauses in the contract
titled “
Trade Secrets/Confidentiality”
and
“
Restraint of Trade
” and these state specifically
the following:
15.1
“
-19.1
The employee undertakes, without prejudice to
any general duty of
confidentiality, not to disclose during the continuance of this
contract or afterwards, any of the trade secrets
of the employer or
any information which is confidential to the employer’s
business.
Trade secrets include the following, which list
will not be regarded as exhaustive man-hour tariffs, logistic
techniques, proposal
contents, client contacts, its systems, methods,
processes, business finance, or other affairs of a confidential
nature
to a third party unless required to do so by law.
-
19.2
The employee further undertakes immediately
after the termination of
his/her services to hand over to the employer all documentation and
data in his/her possession belonging
to the employer, whether in hard
copy, contained on computer disc or any other recording medium,
including cell photos and documents
made by him/her in the course of
his/her employment. The aforementioned implies that any copy,
abstract, or any précis of
any document belonging to the
employee or any other person shall itself belong to the employer.
-19.3
The employee will not be liable to the
employer for information
divulged in terms of legislation or a court order compelling him to
do so.
15.2
“
-17.1
The employee may not for a period of twelve (12)
months from the date
of termination of this contract, whether on his/her own behalf or on
behalf of any other person, close corporation,
partnership or company
solicit custom from, deal with or supply any person, close
corporation, partnership or company with whom
the employer dealt at
any time during his/her employment.
-17.2
Paragraph 18.1
[7]
also applies to potential clients in which the employer has shown
interest or with whom the employer was negotiating at the time
of the
employee’s employment with the company.
-17.3
This limitation of trade is restricted
to the nature of the
employer’s business products and services. The employee
acknowledges that this restraint is reasonable
to protect the
employer’s business.”
16]
It is common cause that Andrew was employed as a corporate sales
executive at Austin Safes
[8]
which later became Mutual Jhb, It is also common cause that at the
time his employment came to an end, he was the branch manager
of
Mutual Jhb. On 27 August 2019, Andrew tendered his resignation with
effect 29 August 2019, via an email to de Villiers
[9]
.
17]
It is also common cause that at the time that this application was
argued, Andrew’
s 12
month restraint had lapsed. However, in
issue was whether or not the confidentiality clauses survived period
of the restraint.
Mr Woodrow submitted that it did. Ms De Kok’s
position was that any restrictions came to an end when Mutual Jhb
closed its
doors on 13 May 2020.
The third respondent –
Kyle
18]
According to MSS, Kyle commenced his employment with it on 22 August
2011. His employment
contract was formally concluded on 24 April
2014
[10]
.
19]
In terms of the 2014 contract, Kyle was employed as a sales executive
with retrospective
effect from 1 March 2013 at Mutual Jhb. The
employment contract was entered into between “
Mutual Austin
Johannesburg of Mutual Safe & Security Pty Ltd
” and
Kyle.
20]
The contract specifically notes that Kyle’s employment
commenced on 22 August 2011
but provides for his employment as Sales
Executive from 1 March 2013.
21]
Paragraph 22 of Kyle’s employment contract provides for the
“
confidentiality & restraint of trade”
. The
clause,
inter alia
, provides for the following:
“
22.1
In accepting employment with the Mutual Safe and Security Group, it
is acknowledged that during the course of his/her
employment or other
association with the Mutual Safe & Security Group, the employee
will develop a close and personal relationship
with the clients of
the Mutual Safe & Security Group, and that the employee may, in
the course of his/her duties, have access
to all confidential
information of the Mutual Safe & Security Group.
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 and conditions and methods
of conducting its business, and/or any other information
confidential
or otherwise.
22.2 The
employee is prohibited, both during the tenure of the existing
employment contract, for a period of unlimited
duration 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.
22.3 This
restriction is applicable during the tenure of the employment
contract with the Mutual Safe & Security
Group,
and continues
to be of full force and effect after the termination of the
employment contract with the Mutual Safe & Security
Group, for a
period of unlimited duration
.
22.4 The
employee further undertakes not to be directly or indirectly
interested in, or to carry on, or to be
engaged in or concerned with,
any business, or to be interested in or concerned with any company,
firm, 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
Mutual Safe & Security Group.
22.5 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 Mutual Safe
& Security Group, or
approach in any manner whatsoever any
employee of the Mutual Safe & Security Group to terminate that
employee’s employment
contract with the Mutual Safe &
Security Group.
The area of
the confidentiality and restraint terms and conditions shall be the
geographical area of Gauteng, for a period of 24
months after
termination, for any reason recognised in law as being sufficient, of
the employee’s employment contract with
the Mutual Safe &
Security Group.
22.6 The
employee acknowledges that the restraints and restrictions placed
upon him/her are reasonable as to subject
matter, geographical area,
and duration.
22.7 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 Mutual Safe &
Security Group, and that such
employment will not impinge upon or contravene any of the conditions
of Clause 22 to this agreement,
and that enforcement of the restraint
will not prevent him/her from earning a livelihood.”
22]
On 11 May 2020 Mutual Jhb sent Kyle a letter in terms of
s189(3)
of
the
Labour Relations Act no 66 of 1995
informing him,
inter alia
,
that the business had closed and “
therefore all employees
working for the Mutual Safes Jhb branch will retrenched”
and that “
no other options which is financially viable for
the company exists”
as it had not been profitable for the
past few years.
23]
On 13 May 2020 Mutual Jhb sent Kyle a letter informing him of the
following:
“
Thank
you for our consultation held on 11 May 2020 where we discussed the
close of the branch. Following this discussion, it is
evident that
the only option is to close the branch with immediate effect.”
The letter informs Kyle that his last day of work would be 13 May
2020 and that he would receive a retrenchment package and his
pro
rata
salary due to him by 28 May 2020.
24]
Kyle then approached Andrew for a job and was employed by him with
effect 1
June 2020.
25]
It is common cause that were Kyle’s restraint to be effective,
it would operate until
13 May 2022. My phrasing of the latter is
deliberate as, in the answering affidavit, the response to the issue
of Kyle’s
employment contract is that:
25.1 he denies
signing one;
25.2 if he did
sign one, a restraint clause was not discussed with him and his
contract did not contain a restraint
clause;
25.3 the
document put up as being his employment contract is “
an
amalgamation of different contracts or documents
”.
The
first respondent – Simpson Safes
26]
In 2003 an entity was registered under the name of Austin Security
Services (Southern Cape)
(Pty) Ltd of which Rhod was one of 4
directors. He became the sole director in May 2005 and on 6 June 2019
he resigned and Andrew
was appointed as sole director. On 29 July
2019 the company changed its name to Simpson Safes. A month later,
Andrew resigned from
MSS and Simpson Safes commenced trading with
Andrew as its CEO and sole director.
The
alleged breaches/infringements
27]
During late August 2020, MSS began suspecting that Simpson Safes was
trading in unlawful
competition with it. This appeared to be
confirmed upon receipt of an email from one of its clients
[11]
in respect of an order placed by it where MSS had been waiting on the
production by MSC for “
an
unusually long time
”.
28]
The email originates from one Corné Bester of JDLV who states:
“
VDLV
needs to know what the way forward will be regarding the order? It
seems like Mutual cannot deliver because of your problems
with
Simpson Safes.
We
cannot drag this out any longer, as you know the client is very
specific and as I understand they have dealt with Simpson safes
directly regarding the design etc. Leroy Merlin will not accept
anything less than what was specified, and I know the units are
lying
ready at Simpson safes, and we need them on site.
VDLV needs
confirmation by no later than COB today regarding the way forward.
VDLV believes that the best way is to terminate between
ourselves and
Mutual safes on this project.”
29]
Pursuant to the receipt of the email de Villiers
[12]
appears to have discussed the matter with Corné of JDLV and
the following is his take out from that conversation:
29.1 that MSC
delayed the order on behalf of Simpson Safes to the detriment of MSS;
29.2 Andrew and
Kyle had approached JDLV directly to inform it that they were trading
as Simpson Safes in competition
with MSS;
29.3 that MSS
would be unable to deliver the order;
29.4 that the
order was available for immediate delivery if purchased through
Simpson Safes that MSS has been
buying its products from them for
years and thus the product quality is exactly the same;
29.5 the
product in question was actually a MSS product.
30]
To compound this, on 22 August 2020 James Chapman (of MSS)
intercepted a trail of emails
between Kyle and one Saleem Malique
(Malique) of “Fours Cash & Carry” which is an
existing client of MSS. It appears
that Kyle, on behalf of Simpson
Safes, had solicited business from Fours. This is can be deduced from
an email sent by Kyle to
Malique on 20 August 2020 which states:
“
So
the ones you have taken in the past is the
LD175CAT5
[13]
drop safe, would
you want that again or
something different”
(emphasis provided)
31]
On 25 August 2020 during a meeting with Woolworths (an existing MSS
client), de Villiers
was informed by the Woolworths head of security
that there are “rumours in the industry” regarding a
split between
MSS and MSC/RAW, with Simpson Safes claiming to be the
leaders in the industry. Woolworths apparently expressed concern
about MSS’s
production capacity in light of the “split”
they had heard about and demanded certain assurances from MSS.
32]
On 27 August 2020 MSS had a similar experience in a meeting that took
place with Shoprite.
The Shoprite Group Loss Provision Manager
informed de Villiers that it had been provided with a proposal
brochure from Simpson
Safes through one of their suppliers, although
Shoprite had not met with Simpson Safes directly. Shoprite had
similar concerns
regarding the state of MSS.
33]
The Simpson Safes brochure that was given to Shoprite contains a
number of claims which
MSS complains are fraudulent and “
which
illustrate the unlawful conduct by the respondent”.
Amongst
them is a claim that:
33.1 “
The
Simpson family has been manufacturing safes and ballistic products in
South Africa since 1976.
After
more than 40 years of supplying customers via intermediary companies,
Simpson Safes was launched in 2019 in order to cut out
the middleman
and provide direct access between the manufacturer and the
customer.”
;
33.2 “
The
Simpson family is also known for setting the benchmark for
scientifically tested blast-resistant doors, after manufacturing
blast-resistant doors for a large petroleum plant in South Africa in
2012.”
;
33.3 “
Not
only does Simpson Safes conform to the minimum SABS guidelines but
far exceeds these specifications with products ranging from
Category
1 to Category 5”
;
33.4 there are
also claims that:
33.4.1
Simpson Safes products are SABS rated;
33.4.2
the premises at 9 Foundry Road, George has “
state of the art
infrastructure
”.
34]
All of this, according to MSS is not only misleading but creates
confusion in the minds
of both the public and existing clients as:
34.1 Simpson
Safes is not the driving force behind the products as those have been
manufactured and produced the
MSS product range since the1998
Agreement was concluded;
34.2 MSS is
also not the “middleman” but the licensor and owner of
the intellectual property rights
in its product range which is
produced and manufactured by RAW and MSC;
34.3 the
products are actually those of MSS and not of Simpson Safes;
34.4 the
reference to the blast-resistant doors produced for a petroleum plant
in 2012 is actually a reference
to the project MSS undertook for
Transnet. These doors were produced and manufactured by MSS at its
Pretoria plant and were assembled
by MSC/RAW as part of that project;
34.5 Simpson
Safes is neither SABS registered, nor are its products SABS certified
and approved; and
34.6 the
Simpson Safes factory is situated at RAW’s premises where the
MSS product range is manufactured
and produced and MSS clients are
aware of this.
35]
Some examples given to found the relief sought regarding the
infringement itself are:
35.1
the Simpson pamphlet incorporates a photograph of a product called
the “Porta Vault”. According
to MSS, this is an MSS
product, designed by MSS for a client in Germiston in February
2018
[14]
.
The vault incorporated MSS’s DS250 2-in-1 CAT5 door and was
manufactured pursuant to MSS’s technical drawings;
35.2 a company
known as SA Bullet informed de Villiers on 31 August 2020 that Andrew
was on their building site
and that safes bearing the ‘Mutual’
mark were being installed – MSS had never processed or invoiced
a transaction
for these safes;
35.3
a meeting between de Villiers and Norman van Rooyen (van Rooyen) of
SA Bullet
[15]
on 11 September 2020 revealed that Andrew had informed the latter
that although he had left MSS he was still able to provide van
Rooyen
with ‘Mutual’ safes an SABS certified ‘Mutual’
safes.
36]
The submission is that these examples then demonstrate that Simpson
Safes is attempting
to pass off the ‘Mutual’ products as
their own.
37]
Thus, according to MSS:
37.1
Andrew/Kyle are approaching MSS existing clients to solicit their
business;
37.2 they are
holding out that Simpson Safes is capable of supplying to those
client’s products which actually
form part of the MSS product
range;
37.3
Andrew/Kyle are doing this by using the client connections they built
up during their employment with Mutual
Jhb in violation of their
restraint and confidentiality agreements;
37.4 they are
“
utilising and disclosing MSS trade secrets, including but
not limited to product range information, logistic techniques,
proposal
contents, client contacts and other information obtained
during [his] employment with MSS in order to compete with MSS in
violation
of the terms of [his] employment contract with MSS and the
confidentiality and restraint contained therein.”
38]
As Kyle is still subject to a 24 month restraint, which only expires
on 13 May 2022, and
he is employed by Simpson Safes, he is in
violation of his restraint.
THE RESPONDENT’S CASE
The application to strike
out
39]
As a first issue, the respondents all take issue with numerous
paragraphs in the replying
affidavit, as well as certain annexures
that accompany the allegedly offending paragraphs. The complaint is
that the facts set
out therein are new matter impermissibly adduced
in reply and/or were known to MSS at the time the application was
launched and
they cannot therefore be used to bolster an application
in reply. The most notable of these are the sudden appearance of the
designs,
drawings and specifications of several of the MSS products
which MSS alleges its intellectual property has been unlawfully
appropriated
by Simpson Safes. The second challenge is aimed at
excluding the proof that the respondents are in fact unlawfully
competing with
MSS by contacting MSS’s existing clients and
“poaching” them and that they are also unlawfully selling
products
with the Mutual brand.
40]
It is trite law
that the general rule is that an applicant must stand or fall by its
founding affidavit and the facts alleged in
it and it is not
permissible to make out new grounds in its replying affidavit.
[16]
41]
In
Titty’s Bar
and Bottle Store (Pty) Ltd v ABC Garage (Pty) Ltd
[17]
Viljoen J put it thus:
“
In submitting that the
applicant may in the replying affidavit supplement a case he has made
out in the founding affidavit Mr van
der Spuy has referred me to a
decision in the matter of Reiter v Bierberg and others 1938 S.W.A.
13, in which the head note reads:
‘
A
petitioner for an interdict is entitled in his petition only
sufficient allegations to establish his right and in his replying
affidavit he may supplement the information in the petition by
anything further to enable him to refute the case put up by the
respondent’
It
lies, of course, in the discretion of the Court in each particular
case to decide whether the applicant’s founding affidavit
contains sufficient allegations for the establishment of his case.
Courts do not normally countenance a mere skeleton of a case
in the
founding affidavit, which skeleton is then sought to be covered in
flesh in the replying affidavit…”
42]
In this case, there is no “
skeleton
of a case”
made
out by MSS. However, MSS has indeed adduced evidence with was
available when this application was launched, most notably paragraphs
25.2 (with Annexures “V5” and “V6”), 25.3,
28.5 (with Annexures “V7” and “V8”),
28.7
(with Annexures “V9.1 and “V9.2”), 28.8 (with
Annexure “V10”), 28.9, 28.10 (and with it Annexures
“V11”
to “V13.2”)
[18]
,
37.3, 70.3, 73.3 (with Annexure “V27”) and 73.4 (with
Annexures “V28”). This being so, these should be
struck
out as constituting new material in the replying affidavit that was
available when the application was initiated.
[19]
43]
In my view, the only other paragraphs that may well come into
consideration to be struck
out are a) paragraph 56.2 and Annexure
“V25”, and b) paragraphs 86.5 – 86.33 and Annexures
“V38”,
“V41” – “V46”. These
paragraphs however pertain to information given to MSS after the
application
was launched and are a rebuttal to the evidence provided
by the respondents in their answering affidavit to demonstrate the
falsity
of those allegations:
43.1 paragraph
56.2 pertains to information gleaned on 19 September 2020 regarding
the fact that Andrew had intended
to start a business in 2019 already
in competition with MSS and he had intended to take employees with
him including Kyle. The
WhatsApp messages are Annexure “V25”
and although they are dated February 2020, it is clear that they were
obtained
as a result of the conversation on 17 September 2020 between
James (of MSS) and Armand Eksteen
[20]
and were not in MSS’s possession prior to that;
43.2 paragraphs
86.5 - 86.33 are a little more complex. They in actual fact relate to
the conversation between
Norman van Rooyen and de Villiers which took
place on 11 September 2020 in respect of the SA Bullet transaction
set out in para
36.2
supra
. All that paragraphs 86.5 –
86.25 do is provide context for the issue surrounding the fact that
the Mutual safes were on
a SA Bullet site, with Andrew seemingly
overseeing the installation process. The main issue being taken with
this is that MSS had
neither invoiced nor processed this transaction,
that SA Bullet was an existing MSS client, and Andrew had no business
being on
site and that it appeared that he was passing off ‘Mutual’
products as Simpson Safes products, especially given that
he had left
MSS in 2019.
44]
Thus, save as set out in paragraph 42
supra
, there is no merit
in the remainder of the application to strike out and it is
dismissed.
The
respondents’ version
45]
Andrew specifically states that when he resigned he informed Jason
(the previous CEO of
MSS) that he intended to sell safes and safety
products for his own account and that he would do this from George (
Simpson Safes)
and from Pretoria via MSS. He states that Jason had no
objection to this.
46]
He states that he was employed by Austin Safes Johannesburg CC which
underwent a name change
in February 2017 to Mutual Jhb and that, as
Mutual Jhb had closed its doors in May 2019, and no longer existed
any restraint, or
confidentiality restraint, had terminated with the
company’s closure. He. In any event, does not recall signing
any restraint
agreement.
47]
Similarly, Kyle was employed by Austin Safes and, he similarly does
not recall any restraint
being discussed with him, nor does he recall
signing any restraint agreement. He, however, goes one step further
and calls the
employment contract attached to the founding affidavit
“
an amalgamation of different documents/contracts…”
.
48]
What did appear from the documents is that where the signatories to
Kyle’s employment
contract appear at the end, Kyle actually
signed where the “employer” was to have signed and Andrew
(on behalf of MSS)
signed where the word “employee”
appears. This was conceded during the argument before me.
49]
Thus is appears that Kyle did in fact sign his employment contract
and was, by implication,
aware of the restraint and confidentiality
clauses. Both he and Andrew’s denials are simply opportunistic
and this especially
so as Kyle’s wife was employed with MSS and
signed an agreement with exactly the same terms as he did.
50]
It is common cause that Andrew’s restraint has already lapsed.
The question is whether
Kyle’s restraint is valid and
enforceable.
Kyle’s restraint of
trade
51]
As has been set out supra, the restraint clause would endure for a
period of 24 months and
be enforceable in respect of the geographical
area of Gauteng.
52]
Kyle’s argument is the following:
52.1 he
specialised in servicing the construction industry and had about 30
regular clients. The LockDown that
was implemented as a result of
COVID-19 in South Africa severely affected his customer base and by
the time that LockDown had eased,
more than half of those had gone
out of business;
52.2 as Mutual
Jhb no longer exists, any restraint clause has lapsed;
52.3 he is 35
years old, has a matric qualification and was employed with Mutual
Jhb since 2013. The skill set
he has was acquired as a result of his
hard work and experience in the products of the security industry and
are his only “
valuable stock in trade”
;
52.4 in the
present economic climate, he would find it difficult to find
employment elsewhere were the restraint
to be enforced;
52.5 he
financially supports his parents, his fiancé and his fiancé’s
parents.
53]
What was also pointed out, over and above the fact that many of MSS’s
products are
imported, is the MSS is not the only company of its kind
in South Africa. There are, in fact, many competitors in the market
which
all sell essentially the same products i.e. a standard range of
safes, ballistic products and vaults in accordance with a standard
range of sizes and dimensions and graded accordingly.
54]
In enforcing restraints of trade, our courts have done so on the
basis that
"If
there is one thing that more than another public policy requires, it
is that men of full age and competent understanding
shall have the
utmost liberty of contracting, and that their contracts when
entered into freely and voluntarily shall be held
sacred and shall be
enforced by courts of justice. Therefore you have this para-mount
public policy to consider - that you are
not lightly to interfere
with this freedom of contract."
[21]
55]
In
Magna
Alloys and Research (S A) (Pty) Ltd v Ellis
[22]
it was stated that the mere fact that the clause may be unreasonable
inter
partes
is
not normally a ground for attacking its validity, since the public
interest demands that parties to a contract be held to the
terms of
their agreement.
[23]
56]
Quoting these principles, the court in
Basson
v Chilwan and others
[24]
went on to distil the principles to be applied to issues regarding
restraints as the following:
56.1 does the
one party have an interest that deserved protection after the
termination of the agreement?
56.2 if so, is that
interest threatened by the other party?
56.3 in that
case, does the interest weigh qualitatively and quantitatively
against the interest of the other
party not to be economically
inactive and unproductive?
56.4 is there
an aspect of public policy having nothing to do with the relationship
between the parties that requires
that the restraint be maintained or
rejected?
56.5 does the
restraint go further than necessary to protect the relevant
interest?
[25]
57]
In
Ball v Bambalela
Bolts (Pty) Ltd and Another
[26]
the manner in which these principles are assessed was put thus:
“
In
Reddy v Sieman Telecommunications (Pty)Ltd, it was held that the
reasonableness of a restraint could be determined without becoming
embroiled in the issue of onus. This could be done if the facts
regarding reasonableness have been adequately explored in the
evidence and if any dispute of fact are resolved in favour of the
party sought to be restrained. If the facts, assessed as
aforementioned,
disclose that the restraint is reasonable then the
party, seeking the restraint order, must succeed, but if those facts
show that
the restraint is unreasonable, then the party, sought to be
restrained must succeed. Resolving the disputes of fact in favour of
the party sought to be restrained involves an application of the
Plascon-Evans rule…”
58]
As to the question of why restraints are generally either necessary
or enforced by our courts,
the following is relevant:
58.1 there are
generally two types of proprietary interests worthy of the protection
of a restraint of trade -
trade secrets and trade connections;
58.2 as regards
the trade connections, the need for an employer to protect its trade
connections arises where
the employee has access to customers and is
in a position to build up a particular relationship with the customer
so that when
he leaves that employment, he could easily induce the
customer to follow him to a new business.
[27]
Once the employer has established the customer contact exists and
that it can be exploited by the employee, it is then up to the
employee to show that he “
never
acquired any significant personal knowledge of, or influence over,
the applicant’s customers.”
[28]
;
58.3 “
The
court must avoid the subconscious temptation in cases such as these
to think that the former employee is ‘just a salesman’
and to treat the attempt to enforce the restraint as a case of the
employer taking a sledgehammer to crack a nut. Obviously each
case
depends on its own facts. A highly successful telemarketer selling to
the public at large on a ‘cold calling’
basis will
probably not establish a distinctive customer connection. However, in
any business dependant for its profits on the
sale of its products,
the sales function is of fundamental importance and the salesperson’s
ability to damage the business
of the employer may be very
considerable or even fatal, notwithstanding the fact that the
salesperson may seem to stand fairly
low in the staff hierarchy.”
[29]
58.4 And in
Poolquip Industries
(Pty) Ltd v Griffin and Another
[30]
the court stated
“
The first respondent,
as the applicant’s managing director, was in overall and
complete control of its business…As
managing director the
first respondent would have in fact had an intimate knowledge of
applicant’s pricing policy and its
costs structure, its
customers, with some of whom he had built up a close relationship
…its existing markets and its plans
to penetrate further
markets and introduce new products. The first respondent has not
denied his knowledge of its pricing policy
and cost structure nor its
plans to develop new markets. This can all be classed as the
applicant’s confidential information
and proprietary interest
which it is entitled to protect, It seems to me that the applicant
had a legitimate interest to ensure
that this information, and the
information and knowledge which a managing director would have of his
company and its customers,
and particularly those with whom the first
respondent had developed a relationship, should not be carried off by
the first respondent
to a rival.”
59]
There is thus, on a proper reading of the above cases, no doubt that
restraints still form
a valid part of South African law and that a
party will be held to their contractual obligations
[31]
.
It is also trite that a party who challenges the enforceability of
the agreement has the burden of alleging and proving that it
is
unreasonable.
[32]
60]
In deciding this issue, the question I raised with Mr Woodrow and Ms
de Kok was the following:
it is clear that the intent of the
restraint is to protect MSS clients in Gauteng. Thus, would Kyle be
in breach of his restraint
if he was based in Gauteng but solicited
clients for Simpson Safes from elsewhere in South Africa? Both
counsel conceded that there
could be no such objection.
61]
Ms de Kok submits that the restraint and confidentiality clauses
cannot survive the demise
of Mutual Jhb as, where an employment
contract is wrongfully terminated by an employer (i.e. where the
employer repudiates its
obligations under the contract), it cannot at
the same time enforce the restraint clause. This she submits is so
because proper
retrenchment procedures were not followed by Mutual
Jhb who, in the letter of 11 May 2020, solicited suggestions from the
employees
to keep Mutual Jhb running and two days later severed the
employment by giving the employees the
s189
letters. She therefore
submits that the restraint clause ceased to operate. In support of
her submissions she cited the following
authorities:
Reeves
& Another v Marfield Insurance Brokers CC & Another
[33]
(Reeves),
Drewtons
(Pty) Ltd v Carlie
[34]
and
Info
DB Computers v Newby & Another
[35]
.
But the principle cited in these cases do not support an argument
regarding a wrongful or unfair dismissal – it supports
an
argument regarding a fraudulent or bad faith termination of
employment.
62]
As examples of these authorities, the following
dicta
are
relevant:
62.1 In
Reeves
the question was whether the words “
cease
to be employed…for any reason whatsoever”
[36]
included a wrongful dismissal, and whether the words “
for
any reason whatsoever”
in a restraint clause should be given a restricted meaning so as to
exclude any wrongful termination of the contract of employment
by the
employer. Scott JA found that the meaning of these phrases is wide
enough to include the wrongful termination of an employment
contract
by an employer and
“
The words ‘ceases
to be employed’ indicate an intention that the restraint is to
operate once there is no longer an
employment relationship between
the employer and employee.
The words that follows, ie
‘for any reason whatsoever’ make it clear that the
circumstances in which the employment
relationship comes to an end or
the underlying cause of its termination are irrelevant to the
operation of the restraint provision…”
62.2 at
772D-773A Scott JA continues as follows:
“
An
employee who by virtue of his employment would be in a position
to exploit on his own behalf his employer's customer connections
is
free on leaving his employment, subject to certain limitations, to
compete with his erstwhile employer for the business of the
latter's
customers unless
restrained
by contract from doing so. See
Freight
Bureau (Pty) Ltd v Kruger and Another
1979
(4) SA 337
(W)
at 341 E - H;
Cambridge
Plan AG and Another v Moore and Others
1987(4)
SA 821 (D)at 846 13 - 847 A;
Meter
Systems Holdings Ltd v Venter and Another
1993
(1) SA 409
(W)
at 430 I - 432 B. The legitimate object of a restraint is to protect
the employer's goodwill and customer connections (or
trade
secrets) and the restraint accordingly remains effective for a
specified period (which must be reasonable) after
the employment
relationship has come to an end. The need for the protection
exists therefore independently of the manner in which
the
contract of employment is terminated and even if this occurs
in consequence of a breach by the employer. Such a breach
may,
of course, take many forms. It may be committed by the employer in
good faith and
be
of a technical nature only. There may be fault on both sides. It
is difficult to imagine that in such circumstances it would
be
against good morals to recognise the restraint and that the
employer should have to forfeit the protection which the
parties
have agreed he should have regardless of how the employment
relationship is ended. Even where the breach on the
part of the
employer is less innocent, it must be remembered that the
employee is always free to pursue his contractual or
statutory remedies against the employer. Where there is
provision for the giving of notice the damage suffered by the
employee may not amount to much. On the other hand, the loss to an
employer in consequence of holding the restraint to be
invalid
may be considerable. In appropriate circumstances, as pointed
out by Georges JA in
Commercial
and Industrial Holdings (Pvt) Ltd and Another v Leigh-Smith and
Others, supra
,
at 238 I, an employee may be entitled to have his damages
assessed on the basis of the existence of the restraint. I can
accordingly see no justification for regarding a
provision such as
the one in issue as
contra
bonos mores
.
Whether such a provision should be enforced in the light of all the
circumstances prevailing when it is sought to invoke the restraint
is
a different question and one to which I shall revert later.”
62.3 It was
only “
Where
the wrongful termination by an employer is fraudulent
, eg
the employee is hired and fired with the sole object of imposing
a restraint upon him, or otherwise amounts to a
wrongdoing on
the part of the employer which is wilful,
ie it involves bad faith on his part
,
a court would on that ground alone decline to enforce the
restraint. Indeed, an express provision in terms of which
one
contracting party undertakes to condone or submit to the
fraudulent conduct of the other will be regarded as
contra
bonos mores
and
so offensive to the interests of society as to render it illegal
and hence void. See
Wells
v South African Alumenite Co
1927
AD
”
(my emphasis)
62.4 In the
Drewtons
case the court also had to answer the issue of
whether a restraint was lawful and stated
“
With
regard to the submission that the restraint went too far because the
contract could be terminated “ for any reason whatsoever”,
in so far as it is suggested that this is unreasonable because the
appellant could unlawfully have dismissed respondent and then
claimed
compliance with the restraint clause, that of course is not so. An
employer cannot repudiate his obligation under the contract
of
employment and at the same time claim to enforce the restraint
clause.”
62.5 The
appropriate word in the above quote is the word “
unlawful
”
– this is not something which is relevant in the context of the
present facts and therefore, in my view, the conclusion
drawn in
Drewtons
cannot be drawn here. This is especially so
given that MSS states:
“
James
Chapman met with Kyle on Thursday 28 May 20020 in the Mutual Jhb
offices where James advised Kyle that there was an alternative
offer
of employment within the Mutual Group that was immediately available.
Kyle immediately rejected this offer. James was informed
that Kyle
and his fiancé…were going to involve themselves in a
company known as “CK” which allegedly
would deal with
face masks and sanitizers.”
63]
In my view it is clear from the authorities cited by Ms de Kok that,
in the absence of fraud
or bad faith, Kyle remains bound by the terms
of his restraint.
64]
One must also bear in mind that the version of both Simpson Safes and
Andrew is that Simpson
Safes operates from George as that is where
the factory is. There can therefore be no argument that the restraint
is unreasonable
because Kyle (if he has to bearing in mind the
concession made in paragraph 60
supra
cannot work anywhere
other than Gauteng as he clearly can.
65]
I also find it implausible and improbable that Kyle had no knowledge
that he was signing
a contract that included a restraint clause
especially given that his signature is to be found at the bottom of
the restraint provision
itself. If he failed to read the contract
properly, then the principles of
George
v Fairmead (Pty) Ltd
[37]
apply where it was held that if a person signed a document which
contained the terms of his contract and he chose not to read those
terms, then he did so with his eyes wide open and could not plead
ignorance of that which he signed or that he signed it in
justus
error
.
66]
As to whether both Andrew and Kyle’s restraint and
confidentiality clauses came to
an end when Mutual Jhb closed, I find
that they did not:
66.1 Andrew’s
contract clearly stipulates that his employer is MSS and that his
place of employment
is Mutual Jhb;
66.2 Kyle’s
contract states that it was entered into between him and “
Mutual
Austin Johannesburg of Mutual Safe and Security (Pty)Ltd”;
66.3 all the
clauses in the restraint provisions refer specifically to “
the
Mutual Safe and Security Group”
.
67]
I also cannot find that the decision to retrench Kyle because Mutual
Jhb was closing down
as it had not been profitable, was either
fraudulent or in bad faith. Therefore, these clauses in my view
survive the closure of
Mutual Jhb and the fact that Kyle was offered
other work within the Mutual Group cements the lack of any bad faith
on MSS’s
part.
68]
The respondents do however, attack both the geographical area of the
restraint and the period
of the restraint which they state is
entirely unreasonable.
68.1 Insofar as
the latter is concerned the following is said:
‘
The
applicants make out no case that the information to which Kyle had
access will still have economic value in two years’
time. No
customer connection will endure for such a long period of time.”
68.2 But this
is not correct. The entire point of building up a relationship with a
customer to that the relationship
forms the basis of recurring trade
and will lead to multiple orders over time with any new project being
taken on by that client.
Just one example of this is to be
found in the fact that van Rooyen had been a client of MSS since
1998.
69]
What in my view is unreasonable however is the length of Kyle’s
restraint. Bearing
in mind that restraints severely impact on the
ability to trade and earn an income, and also bearing in mind that
Andrew was a
branch manager and his restraint was only for a period
of 12 months, I cannot see how Kyle’s restraint of 24 months
could
be reasonable. I am of the view that a 10 month restraint is
reasonable in the present circumstances
[38]
given that he had been a sales consultant only since 2013.
Re the interdict
70]
It is trite that in order to succeed in obtaining the interdict
sought, which is framed
as interim relief, MSS needs to demonstrate:
70.1
a
prima facie
right although open to some doubt;
70.2
a reasonable apprehension of imminent and irreparable harm;
70.3
that the balance of convenience favours the grant of the interdict;
and
70.4
the absence of any other adequate remedy.
[39]
71]
The respondents have, save for the relief sought against Kyle which
they say
is final in effect, accepted that
the remainder of the relief sought is interim in nature and effect.
72]
It is MSS’s contention that it has established, at the very
least, a
prima facie
right to protect its reputation, product
range, confidential information and client connections and that it is
entitled to carry
on its business without the unlawful interference
of the respondents which it says is poaching its clients and the use
of its brand.
It is also entitled to protect the ‘Mutual’
brand.
73]
As part of this
prima facie
right, MSS includes the
copyrighted design drawings that MSS alleges it has provided to
RAW/MSC under the 1998 Agreement and including
drawings that have
been amended or supplemented over the years.
74]
Insofar as the issue of the designs/drawings is concerned, Andrew
states that the “package”
that is mentioned in the 1998
Agreement was in actual fact never provided to RAW/Rhod or MSC.
According to him, RAW produced all
products in accordance with
designs and methods which Rhod had devised over many years and which
were then labelled with the ‘Mutual’
name.
The Interdicts sought
75]
In its replying affidavit MSS states the following:
“
Simpson
Safes is free to obtain customers of its own, but may not do so by
means of unlawfully soliciting the existing clients of
MSS in the
manner that it has done, namely by acting contrary to the interdicts
sought in prayers 2.1 to 2.4 of the notice of motion.
The
respondents may not engage in unlawful competition, or in breach of
contract. The interim interdicts are sought to ensure that
the
respondents conduct themselves lawfully pending the outcome of the
action”
76]
There can be no doubt that to stifle free trade is not only unlawful,
but unconstitutional.
In fact, our courts have gone so far as to
state
“
Wealthy
traders are habitually eager to enclose part of the great common of
the English language and exclude the general public
of the present
days of the lecture from access to the enclosure… The court is
careful not to interfere with other persons’
rights further
than is necessary for the protection of the claimant and not to allow
any claimant to obtain a monopoly further
than is consistent with
reason and fair dealing.”
[40]
77]
But, in my view, that is not what MSS is seeking to do: what it seeks
is to protect its
brand
[41]
,
its reputation, its intellectual property and copyright in the plans
/ drawings etc of the products produced and manufactured
by RAW / MSC
/ Rhod over the 22 year relationship it has shared with those
companies, as well as its client base and reputation.
78]
In order to determine what relief, if any, MSS is entitled to those
issues must be analysed
separately.
The Brand
79]
It is common cause that the MSS brand is the ‘Mutual’
brand. It alleges in its
Founding Affidavit that:
79.1
MSS is the proprietor of the ‘Mutual’ trade mark, which
is registered in
its favour
with CIPC in terms of the
Trade Marks Act 194 of 1993
;
79.2 it also
alleges that the ‘Mutual’ trade mark is valid and in
force and is applied to the MSS
product range;
79.3 that this
mark is used extensively both in SA and internationally and that
“
considerable time, money and effort has been expended by
MSS in the promotion and advertisement of its product range and the
“Mutual”
mark
has, therefore become well-known within the safety and
security sector of the public. MSS thus has well-established
reputation in
its trade mark and its product range
”;
79.4 as part of
its reputation MSS is registered with SABS for which it pays a yearly
fee. This means that it
is entitled to apply the SABS mark to those
products within its product range.
79.5 And
according to MSS:
“
119
As a further consequence of the continuous and extensive use by MSS
of the distinctive trade-marks, and the
design, manufacture and
production of high-quality products, the ‘Mutual” trade
mark and brand has become and is identified
in the minds of the
public with high-quality, SABS-approved safes, vaults and security
products manufactured, produced, marketed
and sold by MSS.”
79.6
Furthermore, the importance of the SABS label is that:
“
Purchasers
and traders, when purchasing SABS-approved safes, vaults and other
security products bearing “Mutual” marks
do so in the
belief that these products emanate from and are supplied by MSS,
either directly or through its affiliated companies
including Mutual
Johannesburg.”
80]
In response to this, the respondents’ stance is the following:
80.1 that MSS
is not the owner of any ‘Mutual’ mark;
80.2 that a
search of CIPC records on 7 September 2020 revealed that MSS only
applied for registration of the
denomination ‘Mutual’ on
8 June 2020 and that the application is still pending;
80.3 that both MSC
and MHD (owned by Rhod) were incorporated with the words “Mutual”
as part of the company
name (but Rhod is in the process of changing
the company name) as “
they want to make it clear that they
are not in any way associated with MSS.”
80.4 that
Simpson Safes sells its products under that name and “
the
founding affidavit contains no allegations that any of the three
respondents use the “Mutual” mark and that it does
not
pass off its products as being the products of MSS.”
80.5 that its
products are clearly labelled “Simpson Safes” and are
visually different from those
supplied by the Mutual Group, i.e.
although they allege that MSS is not the proprietor of the ‘Mutual’
mark, they in
any event deny any infringement of this mark.
81]
In my view the denial of the registration is the ‘Mutual’
mark is neither here
nor there: it is common cause that this name is
used by MSS to brand its products. No issue is taken with the fact
that the ‘Mutual’
name has become synonymous with the
Mutual Group and no true issue can or is taken with the fact that the
‘Mutual’
brand is known both locally and internationally.
Any denial of these facts is without merit.
82]
Similarly the issues surrounding the SABS certification are
non-issues: the point is that
certain products must be SABS certified
e.g. a CAT5 safe (the manufacturer must be SABS approved and carry a
valid SANS 751 certificate).
It is not disputed that Simpson Safes is
not SABS approved and has no SANS 751 certificate. This leads to the
issue of its brochure
and the misleading comments therein to which I
will return.
83]
What is also important about the SABS approval is that if Simpson
Safes is supplying safes
to customers bearing the ‘Mutual’
mark, it is misrepresenting that these are SABS approved – this
places MSS
in a position of liability vis-à-vis the customer
and it constitutes passing off, infringement and possibly fraud in
respect
of the SABS issue. It also causes MSS reputational harm.
The product list
84]
MSS states that its product range is set out in a catalogue attached
to the papers and which
indicates model name, descriptions and serial
numbers (one assumes for easy identification). It states that it “
is
the lawful owner of all intellectual property rights in and
association with MSS’s product range including but not limited
to trade marks and copyright in the designs, technology, model names
and know-how relating to all products within the product range.”
85]
In response, respondents point out that a large number of the
products set out in the product
list attached by MSS are, in fact,
imported primarily from the East and that
85.1
MSS manufactured very few of the products sold by it;
85.2 since the
Simpson Group has ceased manufacturing for the Mutual Group, “
all
ballistic products distributed by it are now manufactured by a
company t/a SA Bullet.
”
86]
The response to the issue regarding the importing of the products, by
MSS is:
“
68. I deny that
these allegations are of any relevance to this application.”
and to the
remainder – a simple denial.
87]
But the issue of whether items on the product list are imported
is
relevant. It is, in my view illogical that MSS can be the owner of
the intellectual property / copyright of a portion of the range
which
appears to be manufactured by an overseas entity and generically
available to anyone who orders it. MSS has provided no proof
that
those imported products were specifically designed by it in
accordance with technical drawings it sent to the overseas
manufacturer.
Given that MSS’s version is that at the time MSC
/ Rhod / RAW manufactured MSS products, such a conclusion would be
illogical.
88]
Furthermore, applicant has failed to identify the specific products
on the product list
which it says are manufactured / produced by
means of its intellectual property / copyright. Where it fails to do
so, it cannot
expect of this court to grant an interdict of the
general and far-reaching variety it asks in the Notice of Motion.
89]
The highwater mark of MSS’s application are the allegations
that it provided RAW /
MSC / Rhod with a “package” when
the 1998 Agreement was concluded. This “package” it says
included the
designs, technology and know-how. As a demonstration of
proof, one such set of technical drawings have been attached in
respect
of vault known as the “Porta Vault” or
“Demountable Vault”. From what MSS states in its papers
it appears
that in respect of most orders, drawings were produced as
part of specific requirements of specific clients. But the interdict
sought is not a specific one – it is broad and very general in
nature and that is where, in my view it goes too far.
90]
Where respondents state that there are many competitors in the market
which all sell essentially
the same products, it means that any
interdict granted which would include these standard products would
effectively shut Simpson
Safes, and perhaps impact other competitors
as well, out of the market and that cannot be the point of this
application.
91]
I am thus of the view that given this, and given that applicant has
failed to properly identify
its intellectual property or copyrighted
drawings, no relief can be granted to it on this basis.
92]
Insofar as the SABS branding is concerned I also cannot see how MSS
is entitled to any relief
in this regard. As a general rule it would
appear to me that if, in fact, respondents are holding out that their
products are SABS
approved and they are not, then this is an issue
that should be raised either by the end purchaser or SABS itself. Of
course, if
Simpson Safes is marketing and selling ‘Mutual’
safes / vaults with the SABS brand then applicant is entitled to
relief.
Is
Simpson Safe using the Mutual mark?
93]
The issue regarding the JDLV contract comes into play here. From the
correspondence it appears
that Andrew and Kyle approached the
end-client directly, informing it that MSS cannot deliver on the
order, that the order is actually
ready in George and can be
delivered immediately if purchased through Simpson Safes; that MSS
has been buying its products for
years so the product quality is
exactly the same.
94]
Respondents version is that the particular product in question was
ordered through Kyle
(at Mutual Jhb) in December 2019 and
manufactured by RAW in February 2020. It was however not delivered
because by that time, Mutual
Jhb owed MSC / RAW substantial sums of
money and delivery would not take place until payment had been made.
In August 2020 Andrew
received a query from Corné Bester of
JDLV and he informed Corné that he and Kyle were no longer
employed by Mutual
Jhb which had closed down; that the product had
already been completed and that RAW and MSC were no longer supplying
to the Mutual
Group.
95]
The point is that, at the time that the latter conversation took
place, the product had
already been invoiced through Mutual Jhb.
96]
The inference drawn by the conversation between Andrew and Corné
is inescapable –
Mutual Jhb had closed, the product
was
available but RAW and MSC were no longer supplying the Mutual
Group. Therefore, if the client wanted the product, it would have to
be ordered through Simpson Safes.
97]
The second incident is that involving Fours Cash and Carry which is
an existing client of
MSS. According to this email, on 19August 2020
one Michel wrote to Kyle asking for a quote on certain specified
items. Kyle provided
that quote on 20 August 2020 and on the same day
Saleem Malique of Fours also asked for a quote for a CAT5 safe.
98]
Kyle’s response was
“
So
the ones you have taken in the past is the LS175CAT5 drop safe, would
you want that again or something different?”
99]
Andrew’s answer to this is the following:
99.1
Kyle confirms that on 19August 2020
Michael of Fours Cash and Carry
in Botswana contacted him telephonically. He told him that he had
been retrenched by Mutual Johannesburg,
who had closed down, and that
he was now working at Simpson Safes;
99.2
Michael asked him to provide him with
a quote for among other things
a CAT5 drop safe;
99.3
Kyle provided Michael with a quote;
99.4
the quote was accepted and the product
would be supplied during
October 2020.
100] But Andrew
also states that the product to be supplied by Simpson Safes is
different from the Mutual Jhb
product:
100.1
the concrete mix is different;
100.2 the lock placement is
different, the bolt works differently, the colour is different and it
has a SS label attached.
101] But it is
not just the product specifications that is the issue here – it
is the fact that Kyle has
made use of his customer connections, built
up over the time he worked for Mutual Jhb, to redirect orders away
from MSS to the
benefit of Simpson Safes. This he may not be under
his restraint.
102] The third
example is that set out in the replying affidavit which relates to
MSS Gun Safes models RHS11,
RH59 and MK15 seen at Safari and Outdoor
in Brooklyn. Although they were painted a different colour and were
branded “Simpson
Safes”, they retained the “
look
and feel”
of the MSS product. It appears that Simpson Safes
therefore solicited the business of this existing MSS client as well.
103] The last
example was the incident regarding Hilton Franks of SA Bullet. In
respect of this de Villiers states:
“
86.24
On 31August 2020 I received a WhatsApp message from
Hilton Franks of
SA Bullet informing me that he was on vault site in Kempton Park.
Hilton phoned me surprised about how many sages
MSS had installed on
the vault. When I told him about these safes he responded by saying
that “my friend”, Andrew,
was there on site 31 August
2020 with Hilton and Norman. Hilton sent me photos of the safes …”
104] These
clearly depict the ‘Mutual’ mark and the SABS mark on the
serial number plate and according
to de Villiers, these were neither
processed nor invoiced by MSS.
105] A
subsequent meeting between Norman van Rooyen and de Villiers revealed
that Andrew had indicated an ability
to provide ‘Mutual’
products.
106] Thus, the
inescapable inference is that Andrew and Kyle (and by implication)
Simpson Safes are using their
customer connections to poach existing
MSS clients.
107] But this
example goes further: it is clear that Simpson Sages is
actually passing off the ‘Mutual’
mark. As Norman states
in an email to de Villiers dated 17 September 2020:
“
I
am aware that Andrew left your Pretoria branch in August of 2019 and
assured us that as a director of Mutual Safes Southern Cape
the
supply and installation of the above will still conform to the high
standards of Mutual Safes and SABS standards.”
The Brochure
108] There are
two specific incidents that are relevant to the complaint about the
content of the brochure itself:
108.1
the first is the meeting with Woolworths
[42]
.
Given what was said, it is quite apparent that MSS reputational
ability to not only service its existing clients, but provides
the
quality products it has in the past was questioned;
108.2
the second incident is the meeting between Shoprite and de Villiers
on 27 August 2020
[43]
where similar concerns were raised. It was subsequent to this meeting
that the Simpson brochure was provided to de Villiers.
109] MSS’s
case is that the brochure has “
the potential to create
uncertainty and confusion amongst MSS’s current and potential
clients as they did with Shoprite.”
110] It
is respondents’ case that this is not the correct test: the
correct test is a
likelihood
of confusion and not a
potential
for confusion and there is no evidence of actual confusion adduced by
MSS.
111] But
the broader question is: what does the brochure say? These are what
the applicant specifically
refers to as “the misleading claims”
which are “
designed to mislead and confuse members of the
public and existing client of MSS
”:
111.1 “
The
Simpson family has been manufacturing safes and ballistic products in
SA since 1976. After more than 40 years of supplying customers
via
intermediary companies, Simpson Safes was launched in 2019 in order
to cut out the middleman and provide direct access between
the
manufacturer and the customer.”
111.1.1
the complaint is that the impression created is that the “Simpson
Family” is the driving force behind these products which it is
not. It has only been manufacturing and producing MSS’s
product
range pursuant to the 1998 Agreement and MSS is not a “middleman”
but the owner of the intellectual property
rights in their product
range;
111.1.2
thus the intention is to mislead the reader into thinking that
the
MSS products are actually Simpson products;
111.1.3
I disagree. It cannot be contested that the Simpson family (which
includes RAW / MSC / Rhod) have been operating since 1976 and that
they manufacture safes and ballistic products and can supply
the
customer directly. There is no reference to MSS here and no inference
of the nature imported by MSS can therefore be made.
111.2 “
The
Simpson family is also known for setting the benchmark for
scientifically tested blast-resistant doors, after manufacturing
blast-resistant doors for a large petroleum plant in SA in 2012”
:
111.2.1
as it turns out this order was produced and manufactured by MSS
at
its Pretoria plant for Transnet (an MSS client) in 2012 and was only
assembled by MSS / RAW as part of the project;
111.2.2
these claims are therefore deliberately misleading and, I agree,
will
create confusion and uncertainty amongst MSS’s current and
potential clients.
111.3 Similarly, the
references to “
Simpson-manufactured safes are commonly found
in the local diamond and jewellery industries. The security needs of
the bulk of local
retail and fast-food chains have also been met by
the Simpson family… ,”
are misleading and will
create confusion and uncertainty amongst MSS’s current and
potential clients as they did with both
Woolworths and Shoprite.
111.4 Then there is
the statement that “
The Simpson family manufacturing plant
was established in 1976 and is situated at 9 Foundry Road, George,
SA, allowing for ease
of service to the network of depots in
Johannesburg, Cape Town, PE and Durban.”
:
111.4.1
the complaint is that many of MSS’s clients are aware that
its
product range is manufactured and produced at 9 Foundry Road and that
the above statement will therefore conflate MSS’s
products with
those of Simpson Safes;
111.4.2
but this claim has no proper standing. It can never be accepted
that
simply because MSC / RAW operated to manufacture MSS products from
this address that, to obviate any possible confusion between
MSS and
Simpson products, the factory would have to operate from different
premises or Simpson Safes may make no reference to their
premises in
any promotional material. In my view, the differentiation between the
two products is in the “labelling”
and not the place of
manufacture. Therefore, to draw the parallel that MSS seeks to do is
artificial. In any event, in order to
obviate any possible confusion
all that would be necessary is for example a statement from MSS that
its products are no longer
manufactured / produced by MSC / RAW.
111.5 As regards the
controversial issue of the SABS mark, the brochure states:
“…
.
Not only does Simpson Safes confirm to the minimum SABS guidelines,
but far exceeds these specifications, with products ranging
from
Category 1 to Category 5 …”
and
“…
The
family’s success within the category of free-standing and drop
has been replicated within the strong room door market.
Simpson
Safes, again has taken the minimum SABS guidelines and has exceeded
the Category 1 up to Category 5 mark in the strong
room vault door
segment …”
111.5.1
the objection to these statements is that these claims are designed
to mislead the reader into believing that Simpson Safes is SABS
registered and its products are SABS certified and approved. By
making these claims, the intention is to confuse the reader into
believing that the products emanating from Simpson Safes are on
par
with these of MSS as regards the SABS certification, which they are
not;
111.5.2
but the brochure does not claim that Simpson Safes products are
SABS
approved
. The brochure states that the products conform to
SABS
specifications
and are SABS
rated
. There is no
indication that this is untrue. In my view, anyone in that industry
and indeed MSS own clients who are knowledgeable
regarding their
products, would know the difference between being “SABS
approved” and “conforming to SABS specifications”;
111.5.3
it would appear from these papers that MSS clients, being the
likes
of SAPS
[44]
,
Safari and Outdoor JDLV (a construction company), Transnet, are
sophisticated clients and discerning clients who would know what
they
are looking for and be able to discern the difference between a
product that is “SABS approved” and one that is
no.
111.6
As to the “Porta Vault” or “Demountable Vault”
that is depicted in the company profile,
MSS states that this was
designed by it
[45]
and thus, by depicting this vault in its brochure, it must lead to
the inescapable conclusion that Simpson Safes produces this
product
which would be an infringement of MSS’s intellectual property
and copyright:
111.6.1
according to Andrew, whilst it is true that the image of the
Porta
Vault
[46]
is a rendered CAD drawing and he was involved in the sale of a
demountable vault whilst employed at Mutual Jhb, various competitors
make these vaults;
111.6.2
he states that the nature and design of this product is essentially
common to all competitors and that, as it is expensive, “
there
are very few customers who would have a need for such a product. As
such no one in the industry would keep the product in
stock, and it
would only be made to order and in accordance with a client’s
specific requirements”;
111.6.3
this statement is not dealt with in the replying affidavit.
The interdict
Re the prima facie right
112]
I agree with MSS that it must establish and found its
prima facie
right. This lies in the right to protect its reputation, its product
range, its confidential information, its client connections
and that
these all stems from the restraints contained in Andrew and Kyle’s
contracts and, in my view, has been established
by MSS in this
application.
Re the irreparable harm
113]
In considering this, it is clear that Andew and Kyle have already
approached MSS clients
and in at least one instance have attempted to
sell a product produced for MSS to the MSS client directly. Both
Woolworths and
Checkers have questioned not just MSS’s ability
to supply but the product quality and JDLV have also threatened to
take their
business elsewhere seemingly as a result of the
respondents’ interference.
114]
Furthermore the harm lies in Andrew and Kyle utilizing their
connections with clients built
up over the period they worked for
Mutual Jhb to poach these existing clients.
115] The
harm also lies in the unauthorised use of the ‘Mutual’
brand which has been established
as belonging to MSS and in respect
of which MSS has spent years building up its reputation and standing
within the specific security
community with clients such as
Woolworths, Shoprite.
116] It
is therefore clear that MSS would indeed suffer irreparable harm were
relief not to be granted.
Re
balance of convenience
117]
Here the test is that the court must weigh the prejudice the
applicant will suffer if the interim
interdict is not granted against the prejudice the respondent will
suffer if it is.
[47]
118] In
my view this favours the applicant as well. The balance of
demonstrates that MSS’s rights
must be protected from
interference given its reputation and standing in the industry and
also given the fact that at least
prima facie
the unlawful
acts of the respondents demonstrate that there are prospects of
success in the action (to be included).
119] I also
bear in mind that the relief does not prevent the respondent from
doing business, it will simply stop
any unlawful competition.
Re any alternate remedy
120]
The last question is whether the applicant has another adequate
remedy
[48]
.
In my view there is no other but for the interdictory relief sought.
The relief itself
121] It is the
respondents case that the relief sought is far too general and
overbroad in its formulation:
Prayer 2.1
121.1
this relief is sought in respect of MSS’s entire product range.
I am of the view that
MSS is not entitled to such overbroad relief.
In my view MSS is entitled to relief interdicting and restraining
respondents from
passing off or selling goods bearing the ‘Mutual’
brand.
Prayer 2.2
121.2
This is in respect of the interdict sought against making use of
MSS’s intellectual property.
Given that allegedly
copyrighted/infringed works have not been properly or clearly set out
in the papers, no relief can be granted.
Prayer 2.3
121.3
Insofar as the relief regarding the existing clients is concerned, it
must be borne in mind
that whilst Andrew’s restraint has
lapsed, Kyle’s has not and insofar as he is an employee of
first respondent, the
relief must extend to both. While applicant
does not set out a full client list in the papers, both Andrew (as
shareholder / director
of Simpson Safes) and Kyle have full knowledge
of the MSS clients – they were after all employed within the
group for over
seven years each. The restraint therefore applies and
this relief is to be granted.
Prayer 2.4
121.4
As regards MSS’s ability to fulfil orders and the quality of
its products, this has been
clearly demonstrated in these papers and
the applicant is therefore entitled to this relief.
Prayers 2.5 and 2.6
121.5
Other than the poaching of clients, MSS has completely fail to
explain what its “trade
secrets” are, what “man-hour
tariffs” are referred to or how this was breached and the same
holds true as regards
“logistic techniques, business and for
finance, systems, methods or processes” or what “other
information of
a confidential nature” was breached. Therefore
applicant is not entitled to this relief.
Prayer 3
121.6
I am of the view that the period of Kyle’s restraint is
unreasonable and a ten month restraint
is reasonable
[49]
and it is also clear that it is limited to the geographic area of
Gauteng.
Costs
122] I bear in
mind that the applicants are to institute action within 15 days of
the order granted herein. Given
the substantial success of the first
applicant, I am of the view that the respondents should be ordered to
pay the costs of this
application, which shall include the costs of
two counsel. I am not of the view that a punitive costs order is
warranted.
Order
123]
Thus the order I make is the following:
123.1
Pending the finalisation of the action to be instituted by the
applicants
against the respondents within 15 days of date of this
order, the following interim interdicts are granted:
123.1.1 the first, second
and third respondents are interdicted and restrained from using the
first applicant’s ‘Mutual’
brand name in any
manner, on any product or promotional material or in any other manner
at all;
123.1.2 the first, second
and third respondents are interdicted and restrained from approaching
the applicants existing clients
with a view to soliciting their trade
until the lapse of the third respondent’s restraint of trade on
31 March 2021;
123.1.3 the first,
second and third respondents are interdicted and restrained from
making any misrepresentations to
any person or entity regarding the
business of the first applicant, the origin and/or quality of first
applicant’s product
range or the ability of the first applicant
to fulfil its orders or any comparative claims between the first
applicant’s
product range and the product range of the first
respondent;
123.1.4 the third
respondent is interdicted and restrained, from date of this order
until 13 March 2021 from being directly
or indirectly interested in,
or carry on or be engaged in or connected with any business, company,
firm, partnership, close corporation,
trust, undertaking or concern
either as an employee or in any other capacity of whatsoever nature,
which carries on business which
competes in any way, either directly
or indirectly, with the business carried on by MSS in the
geographical area of Gauteng.
123.2 the respondents are
ordered to pay the costs of this application, which shall include the
costs of two counsel.
NEUKIRCHER
J
Date
of hearing: 9 October 2020
Date
of judgment: 8 January 2021
Hearing
conducted via videoconferencing
Delivered:
This judgement was prepared and authored by the Judge whose name is
reflected and is handed down electronically
by circulation to the
parties/their legal representatives by email and by uploading it to
the electronic file of this matter on
CaseLines. The date for
hand-down is deemed to be 8 January 2021.
Counsel
for applicant: Adv Woodrow, with him Adv Eagen
Instructed
by: Kriek Wassenaar & Venter Inc
Counsel
for respondent: Adv A de Kok SC, with her Adv Halgryn
Instructed
by: Carvalho Inc
[1]
Together
with pricing
[2]
Of which
there were several
[3]
Mutual Jhb
closed its doors on 13 May 2020 which is why it is referred
to in
the past tense
[4]
“The package” is
described by MSS as including “the technical drawings,
designs, trade marks and further know-how required for the
manufacture and production of MSS’s product range. By
necessary
implication, certain client information forms part of the
package as certain products are designed, manufactured and produced
for individual clients of MSS.”
[5]
The
state that registration was only started in June 2020 and is
presently pending
[6]
This
in in that the copyrighted works fall within the definition of
inter
alia
s2(1)(c)
of the
Copyright
Act 98 of 1978
[7]
Which
deals with the exclusive service portion of the employment contract
[8]
Mutual
Austin Safe and Security (Johannesburg) CC
[9]
The deponent
to the founding affidavit and the CEO of MSS
[10]
It
was noted in the preamble to the terms that the date on which Kyle’s
employment
commenced
was 22 August 2011
[11]
JC van der Linde
and Venter Projects (Pty) Ltd (JDLV)
[12]
The deponent to the
founding affidavit and the CEO of MSS
[13]
The LS175 is a MSS
product and part of the MSS product range
[14]
A transaction
Andrew was involved in at that time
[15]
An existing MSS
client
[16]
Director of
Hospital Services v Mistry
1979 (1) SA 626
(A) at 635H – 636B;
Mauberger v
Mauberger
1948 (3) SA 731
(C) at 732
[17]
1974 (4) SA 362
(T)
at 368H-369B
[18]
Which consist of
the photographs and drawings of the offending items in respect
of
which
MSS
alleges its copyright is being infringed.
[19]
It bears mentioning
that respondents also allege “
107
To make it clear, neither RAW nor
MSC
nor Simpson Safes
are currently making
any
product with a technical design or drawing supplied by MSS.”
(my emphasis)
[20]
A friend of
Andrew’s and a former employee of an affiliated company of
MSS
[21]
Per
Didcott J in
Roffey
v Catterall
,
Edwards
and Goudre (Pty) Ltd
1977 (4) SA 494
(N)
quoting
the
dictum
of Jessel M R in
Printing and Numerical
Registering Co v Sampson
(1875) L R 19
Eq 462
[22]
[1984] ZASCA 116
;
1984
(4) SA 874
(A)
[23]
At
893 H-I
[24]
(332/1991)
[1993] ZASCA 61; 1993 (3) SA 742 (AD) at 767G-H; [1993] 2 All SA 373
(A) (17 May 1993)
[25]
Also Reddy v
Siemans Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA); Odifin
Life
(Pty)
Ltd v Jacobs and Another [2016] ZALCJHB 378 (22 September 2016)
[26]
(2013) 34 ILJ 2821
(LAC) at par [14]
[27]
Medrontic
(Africa)(Pty) Ltd v Kleynhans and Another (2016) 37 ILJ 1154 (LC);
New Justfin
Group
(Pty) Ltd v Turners and Others (J786/14) [2014] ZALCJHB 177, (2018)
38 ILJ (LC) (14 May 2014)
[28]
New Justfin (supra)
[29]
Den Braven SA (Pty)
Ltd v Pillay
2008 (6) SA 229
(D) at par [11]
[30]
1978 (4) SA 353
(W)
at 362B-E
[31]
Also Bedford Square
Properties (Pty) Ltd v Liberty Group Ltd
2010 (4) SA 99
(GSJ) at par
[6]
[32]
Magna Alloys supra
at 893C-G and 897H – 898D
[33]
[1996] ZASCA 39
;
1996 (3) SA 766
(A)
at 775B-H
[34]
1981 (4) SA 305
(C)
at 308E
[35]
1996 (1) SA 105
(W)
at 108H-I
[36]
In Kyle’s
contract the words “…
for
any reason recognized in law as being sufficient”
appear
[37]
1958 (2) SA 465
(A)
[38]
Den Braven SA (Pty)
Ltd v Pillay and Another
2008 (6) SA 229
(D) at 236D-E
[39]
Setlogelo v
Setlogelo
1914 AD 221
; Tshwane City v Afriforum & Another 2016
(6) SA279
(CC)
at par [49]
[40]
Quad
Africa Energy (Pty) Ltd v The Sugarless Company (Pty)Ltd and
Another
2020 (6) SA
90
(SCA) para [1]
[41]
The
‘Mutual’ brand
[42]
see
paragraph 26 supra
[43]
see paragraph 27 supra
[44]
Each year MSS
produces +- 100 MK15 safes
[45]
And the technical
drawing is attached it states that MSS developed and produced
the
vault
and
the rendered drawing in the Simpson profile is in fact the MSS vault
[46]
Which is what
Simpson Safes calls it
[47]
RS v MS and Others
2014 (2) SA 511
(GJ) at par [29]
[48]
National
Chemsearch (SA)(Pty) Ltd v Borrowmon 1979(3) SA 1092 (T) at 1123;
Candid
Electronics
P/L v Merchandise Buying Syndicate (Pty) Ltd 1992(2) SA 459 (C) ;
Moyane v
Ramaphosa
and Others
[2019] 1 All SA 718
(GP)
[49]
See
Den Braven SA (Pty ) Ltd v Pillay and Another
2008 (6) SA 229
(D) at
236 D-E