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2021
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[2021] ZAGPJHC 441
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Kevro Trading (Pty) Ltd t/a Barron v Silverman and Another (41168/2021) [2021] ZAGPJHC 441 (23 September 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE
HIGH
COURT
OF SOUTH
AFRICA,
GAUTENG
LOCAL
DIVISION,
JOHANNESBURG
Case
Number: 41168/2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED:
NO
23/09/2021
In
the matter between:
KEVRO
TRADING (PTY) LTD
t/a
BARRON
Applicant
And,
MARK
SILVERMAN
First Respondent
AMROD
CORPORATE
SOLUTIONS
(PTY)
LTD
Second Respondent
JUDGMENT
FISHER
J:
Introduction
[1]
This matter comes before me in the urgent court. It is a restraint
of
trade matter and my view is that it should be dealt with as one of
urgency.
[2]
The Applicant ("Kevro") seeks, to enforce against the First
Respondent ("Silverman") restraint of trade obligations
contained in a written employment contract. Enforcement is sought
for
24 months, throughout South Africa and "any other territory
which the Board has resolved the Group should enter within
6 months
of the Termination Date".
[3]
Silverman was retrenched by Kevro on 19 April 2021 with effect from
19 May 2021. Silverman thereafter became engaged by the Second
Respondent, Amrod as an independent contractor. Relief is also sought
against Amrod in relation to the employment of Silverman. Amrod
abides the decision of this Court in relation to the relief sought
against it.
[4]
Silverman opposes the relief sought by Kevro on the grounds that
(i)
the restraint of trade clauses are, on the face of them, vague and
ambiguous and not applicable to the position that Silverman
held with
Kevro and the position that he has with Amrod and (ii) in any event
the enforcement of the restraint of trade obligations
would be
unreasonable and contrary to public policy in that there are no
protectable interests warranting the enforcement of the
restraint of
trade especially for 24 months and throughout South Africa and "any
other territory which the Board has resolved
the
Group
should enter within 6 months of the Termination Date".
[5]
I shall in due course deal with these grounds in turn and with
reference
to the applicable legal principles, but before doing so I
shall deal with the salient facts of the matter, most of which are
common
cause.
Salient
facts
[6]
Silverman is 46 years old. His entire working experience since he
left school in 1984 has been in the safety workwear industry.
Silverman's knowledge and skills are limited to sales in the safety
workwear industry. i.e. the sale of safety overalls (referred to in
the industry as a "conti suit"), safety work trousers,
safety footwear, high visibility safety wear in the form of
reflective vests, bibs, jackets and the like, chef wear, security
wear (clothing for security personnel), safety gloves, head
protection, eye protection, ear protection, rainwear and freezer wear
being clothing for low temperatures. Silverman does not have a
tertiary education or any qualifications save for a sales and
marketing
online course which he undertook in 1999. Silverman does
not have knowledge of any other industry. Silverman's knowledge of
safety
workwear has been built up over many years and he had this
knowledge prior to becoming employed by Kevro.
[7]
He says the following in relation to his store of knowledge:
'I
know which particular safety workwear is the most appropriate to be
used in any particular situation. For example. I know inter
alia:-
35.1
which safety footwear should be used in a high temperature
environment (a rubber sole
with
a higher melting point as opposed to a polyurethane sole which hasa
lower melting point);
35.2
which safety footwear should be used in a wet and muddy environment
(a gum boot as opposed to
a leather safety boot);
35.3
which safety workwear (conti suit) should be used in a high
temperature environment (100% cotton
safety workwear which is less
flammable as opposed to polyester safety workwear which is more
flammable); 35.4 which safety workwear
(conti suit) is appropriate to
be used when handling highly flammable liquids and acids (i.e. which
safety workwear is the most
flame resistant and acid resistant);
which
high visibility safety workwear is the most appropriate to be used
during the day and at night;
35.6
which head protection (hard hats) is the most appropriate to be
used'.
[8]
It is not disputed that in addition to his knowledge and experience
of the safety
workwear industry, he is also well-known, liked and
trusted in the safety workwear industry.
[9]
The Applicant is a wholesaler of safety workwear as is Amrod.
Wholesalers do not sell
safety workwear directly to the ultimate end-
user such as a business or any other organisational institution.
Instead, they sell
wholesale to thousands of what are known as
resellers who in turn sell to the end-user.
[10]
In general, the wholesalers of safety workwear in South Africa do not
manufacture the safety
workwear they supply to the resellers. Instead
the products are primarily sourced from overseas, mainly China
although there are
some local suppliers and suppliers in neighbouring
countries.
[11]
The pricing in the industry is competitive and the margins relatively
similar. There are a limited
number of manufacturers servicing the
industry and the manufacturers prices are known by all wholesalers.
Silverman alleges that
the industry is competitive and that no
wholesaler can afford to price itself out of the market. The
resellers also have a sense
of the margins which are employed by the
wholesalers. There is little room to compete when it comes to pricing
as the margins are
small. In order to be competitive a wholesaler
needs to have stock on hand.
[12]
Some wholesalers of safety workwear, such as Kevro, Amrod and
Jonsson, not only sell safety workwear to resellers,
but also sell
branded safety workwear with the name of the reseller's customer
thereon. These wholesalers of safety workwear have
in-house branding
departments which embroider or screen print the name of the
reseller's customer onto the safety workwear. This
aspect is
important with reference to the application of the restraint and will
be dealt with in more detail later.
[13]
Prices are not static in the industry and change at least three times
a year. The volatile rand dollar exchange
rate also affects pricing
in the industry. Silverman makes the point that any knowledge of
pricing at the time or his retrenct1ment
would be out of date at
present.
[14]
Silverman was employed by Kevro during November 2012 as a General
Manager in Kevro's safety workwear
department. He was however only
asked to sign the contract in issue which includes the restraint
agreement on 9 June 2015.
[15]
Clause 3.2 of the contract refers to functions to be performed by
Silverman as described in the job description
being annexure "A"
to the contract. However, annexure "A" headed "JOB
DESCRIPTION" is blank.
[16]
Silverman was based at Kevro's head office in Johannesburg. As part
of his job he interacted
with customers in South Africa, Botswana,
Mozambique, Namibia and Swaziland by telephone, email and face to
face meetings, and
to this extent he had access to Kevro's customers
and communicated with them. It is not in dispute that the customer
base serviced
comprises more than 250 customers.
[17]
Silverman says that he did not establish key relationships with any
of Kevro's customers such
that any of them could or would follow him
to a new employer. None of Kevro's customers have followed him to
Amrod. Silverman makes
the point the sales made were not in terms of
over-arching contracts with resellers. He says sales in the industry
are concluded
on an ad-hoc basis. It seems that vast majority of
resellers who are customers of Kevro are also already customers of
Amrod.
[18]
During 2020, Kevro embarked upon a restructuring process. This
restructuring process involved
Kevro closing all of its branches,
retaining the Johannesburg head office and Kevro reducing its work
force.
[19]
Pursuant to the restructuring process Kevro retrenched, a number of
employees including Silverman. At a stage during
this restructuring
process Silverman was offered the position of "Key Accounts
Manager"." This position was not
limited to selling safety
workwear to resellers but also involved other aspects of Kevro's
business being the sale to end-users
of gifting (branded corporate
gifts - pens, lanyards, notebooks, etc), apparel (branded lounge
shirts, golf shirts, t-shirts, trousers,
Jackets, etc), display
(gazebos, pull up banners, harp banners, etc), sport (school
sportswear) and headwear (caps). Silverman
is not experienced in this
field. The salary offered for this position was lower that held by
Silverman. Silverman's position of
general manager: workwear fell
away as part of the restructuring process.
[20]
A significant aspect of the restraint is the express limitation
thereof in clause
14.2
to which reads as follows:
'The
fields ofactivity in respect of which the restraint applies will be
in respect of the marketing, sale and/or distribution of
corporate
and promotional products
as conducted by the Group as at the
Termination Date.'
[21]
Silverman states that he was not involved at all in the marketing,
sale and/or distribution of corporate and promotional
products and
that his functions and duties as General Manager: Workwear had
nothing whatsoever to do with the marketing, sale and/or
distribution
of corporate and promotional products. He says that safety workwear
is not corporate or promotional products. This
aspect is important to
the dispute.
[22]
The main source of Kevro·s aggrievement is that on 27Jul 2021
t, Amrod in an online event
introduced Silverman as its new Head of
Workwear.
[23]
The following was said of silverman by a director of Amrod, Gabi
Bricker: 'When we go into a
new category, we spend a large amount of
time researching the category, understanding the products,
understanding what it is that
you as resellers require to be
successful in this category. We speak to experts. We travel the world
to look for the best products
and then the best machinery and, most
importantly, we make sure we have the best people. It became apparent
to us really early
on in the process that for workwear it was
critical for us to get an industry expert. A person who really
understands how workwear
is sold how it's used and how to train and
upskill our reseller community in selling these products. We are
ecstatic that Mark
Sliverman will be heading up workwear at Amrod.
Mark is well known to man of you on this launch. He's been involved
in PPE and
the workwear industry for over 20 years and brings with a
real wealth of knowledge and expertise. Most importantly everyone
loves
Mark.'
[24]
The contention of Kevro is that this shows that Silverman has key
customer connections and information
belonging to it which he should
be restrained from using in competition with the Kevro and for the
benefit of Amrod.
[25]
I now move to discuss the main defences raised by the respondent
being the vagueness and inapplicability
of the contract and the lack
of protectable interest.
Contract
in restraint of trade is inapplicable.
[26]
The restraint of trade is not a model of clarity. It appears to be a
template document
which requires to be added to in order to comply
with the needs of the employer in each particular instance. To this
end a portion
of the agreement requires the employee's job
description to be set out. This has not been attended to in the
contract in issue.
[27]
Ms Salduker for Kevro argued that this was of no moment as the
undisputed evidence was to the
effect that Silverman had been
employed by Kevro as a sales manager in the safety workwear
department. In my view this submission
makes sense. It is at least
tacit and probably implicit that the agreement was entered into on
that basis.
[28]
What is more problematic is the description in the agreement of the
activities in respect of which the restraint
applies. It is stated to
be ·corporate and promotional products.'
[29]
The focal point of Silverman's position and expertise within Kevro
appears, on all the facts,
to be workwear and not the corporate and
promotional products, which both the Kevro and Amrod trade in.
[30]
Ms Salduker argued that reference to the respective websites reveals
that there is a promotional
aspect to the workwear in that both
companies offer a branding service in relation to the workwear
products sold by them. The evidence
is however that the workwear
products have their own identity as such. The fact is also that the
knowledge and skill which Silverman
brings to his employment is his
expertise in relation to workwear products. The fact that both
companies offer a promotional service
in relation to these products
does not change their main identity as workwear.
[31]
Thus it seems to me that on the plain meaning of the contract Kevro
has not shown that the restraint
applies to prohibit the present
employment of Silverman. I thus find that the applicant has not shown
that the respondent is in
breach of the restraint.
[32]
In any event and even if this were not so, to my mind to enforce the
agreement would be contrary
to public policy. I examine this aspect
of the enquiry below.
Legal
principles
re
enforcement
[33]
It is now settled that whether a restraint is to be enforced or not
depends upon whether it would
be contrary to the public interest to
do so.
[34]
This is to be assessed in the light of the circumstances prevailing
when it is
sought
to
enforce
the
restrain
and
involves the weighing up
of
two main
considerations. These were summarised by E M Grosskopf JA in
Sunshine
Records (Ply)
Ltd
v Frohling
and
Others
[1]
as
follows:
'The
first is that the public interest requires, in general, that parties
should comply with their contractual obligations even
if these are
unreasonable or unfair. The second consideration is that all persons
should, in the interests of society, be permitted
as far as possible
to engage in commerce or the professions or, expressing this
differently, that it is detrimental to society
if an unreasonable
fetter is placed on a person's freedom of trade or to pursue a
profession.'
[35]
In general, the enforcement of an unreasonable restraint on a
person's freedom to trade will be contrary to the public
interest.
The principal inquiry therefore is whether, having regard to the
facts of this case, the restraint can be said to be
reasonable.
[36]
Silverman
has the onus to show that the
restraint
is unreasonable.
[2]
[37]
The
circumstances to which regard may be had cover a wide field and
include
typically
those pertaining to the nature, extent and duration of the restraint
and the legitimate interests of the respective parties
in relation
thereto.
[3]
[38]
The terms of the restraint are characterised by an element
'overkill'. Firstly, the restraint
precludes trade throughout Africa.
Ms Salduker accepts that the applicant is not jurisdictionally
entitled to this relief. She
contends that the applicant is entitled
to be protected against competition in the whole of South Africa. The
fact that the agreement
purports to allow the applicant's Board to
control Silverman's ability to trade
even
after his leaving of
the applicant's employ in that it precludes trade in any territory
that "it resolved the Group should
enter within 6 months of the
Termination Date" is in line with this overly ambitious
approach.
[39]
To my mind, on the facts the applicant has not established that it
has an interest worthy of protection. The customer
base is vast -
Silverman serviced up to 250 customers in the carrying out of his
functions. The applicant cannot point to any key
relationship in this
large sea of customers which can be said to be under threat and thus
worthy of protection. It is clear that
the pricing in the industry is
in flux and dependent to a large extent on the cost price of imported
goods and thus the Rand/Dollar
exchange rate. It is not in dispute
that the industry is competitive and the profit margins similar. To
my mind these aspects militate
against Silverman being the repository
of information belonging to the applicant which would be useful in
competition with the
applicant.
Conclusion
[40]
The applicant has not shown that the activities in issue are
protected by the contract.
However even if it could be said to have
done so, to my mind, the respondent has shown that it would be
against the public interest
to enforce the restraint.
Order
[41]
I thus order as follows:
1.
The matter is dealt with as one of urgency
2.
The application is dismissed with costs.
FISHER
J
HIGH
COURT JUDGE
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Date
of Hearing:
15 September 2021.
Judgment
Delivered
23 September 2021.
APPEARANCES:
For
the applicant:
Adv A Saldulker
Instructed
by:
Schindlers Attorneys
For
the first Respondent:
Adv L Hollander
Instructed
by:
SWVG Inc.
[1]
1990 (4) SA 782
(A) at 794C-D.
[2]
Basson v Chi/wan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 7761-J.
[3]
See CTP Ltd and Others v Argus Holdings Ltd and Another
[1995] ZASCA 32
;
1995 (4) SA
774
(A) at 7646.