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[2021] ZAGPJHC 497
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Cargocare Freight Services (Pty) Ltd v Raath (2021/37630) [2021] ZAGPJHC 497 (28 September 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
Case
number: 2021/37630
REPORTABLE:
OF
INTEREST TO OTHER JUDGES:
REVISED
In
the matter between:
CARGOCARE
FREIGHT SERVICES (PTY) LTD
Applicant
And
RAATH
NADIA
LAURA
Respondent
Delivery:
This judgment was handed down
electronically by circulation to the parties' legal representatives
by email, and uploaded on caselines
electronic platform. The date for
hand-down is deemed to be 28 September 2021.
Summary:
Urgent application, restraint of trade interdict. The principle
governing restraint of trade restated
JUDGEMENT
Molahlehi
J
Introduction
[1]
The applicant,"
Cargocare Freight Service (Pty) Ltd, a company registered in terms of
the South African company laws, seeks
an urgent restraint of trade
interdict against the respondent, Mrs Laura Nadia Raath. The order
sought in terms of the notice of
motion reads as follows:
1.
‘
The
applicant's non-compliance with the Rules of this Honourable Court,
to the extent necessary and directing that this application
be heard
as one of urgency, in terms of Rule 6(12), is condoned.
2.
The respondent
is ordered to comply with the provisions of Annexure "FA2",
alternatively, "FA2.1" and "FA2.2".
3.
The respondent
is interdicted from:
3.1.
continuing her employment and/or business relationship with Cargo
Compass SA (Pty) Ltd ("Cargo Compass"), including
with any
of its subsidiary companies, related companies, affiliates and/or
associates and/or agents, for a period of 12 months
from 30 July
2021, alternatively, 29 March 2021; and
3.2.competing
for, or soliciting the business of the applicant's clients or
suppliers (whether in the name of the applicant, or
otherwise) whose
businesses are situate within the geographical are of Johannesburg,
alternatively, within the geographical area
which is 20 km from the
applicant's principal place of business in Modderfontein at Unit 2,
Westlake Park, 38 Avalon Road, Modderfontein,
Germiston, 1614, for a
period of 12 (twelve) months from 30 July 2021, alternatively 29
March 2021; and
3.3.
directly or indirectly, breaching the Confidentiality Clause in
Annexure "FA2", alternatively, "FA2.1"
and
"FA2.2" to the Founding Affidavit, or divulging or
disclosing to any competitor of the applicant, any trade secrets
as
identified in the Confidentiality Clause and/or retaining any of the
applicant's property as defined under the Confidentiality
Clause,
whether in electronic format and/or hard copies;
3.4.
pursuing or attempting to pursue any persons employed by the
applicant during the period of their employment with the applicant.
3.5.
acting in unlawful competition with the applicant in relation to the
Clearing and Forwarding Industry and/or any of the services
offered
by the applicant.
4.
The respondent
is ordered to pay the applicant's costs on the scale as between
Attorney and Own Client.’
[2]
The respondent,
correctly, accepted that the matter is urgent but opposed the relief
sought.
[3]
The deponent to the
founding affidavit in support of the application, Mr Methew Raath and
the respondent are husband-and-wife currently
involved in acrimonious
divorce proceedings.
[4]
It is common cause
that the respondent is a former employee of the applicant. At the
time of her resignation, she was employed as
the freight executive.
After her resignation, she instituted the proceedings in the CCMA
alleging that she was constructively dismissed.
Those proceedings
have no bearing on the determination of the present matter.
The
case of the applicant.
[5]
The applicant's case
is that the respondent is in breach of her employment contract
relating to the restraint of trade provisions.
[6]
In support of its
claim that the respondent is in breach of the restraint of trade
covenant the applicant relies on the terms of
the employment contract
and its policy provided for in annexures FA2, and FA 2.1, and FA 2.2
attached to the founding affidavit.
[7]
Annexure FA2 is the
letter of appointment dated 3 March 2017, and FA 2.1 is another
letter of appointment dated 01 September 2015
and FA 2.2 is a policy
document of the applicant, which amongst others provides as follows:
"The
restraint territory shall be within the Magisterial Jurisdiction of
Germiston, which is engaged in a business similar
to that of
Cargocare."
[8]
The applicant further
relies on the information it obtained from certain sources regarding
the alleged breach of the restraint of
trade. In this respect, the
applicant relies on information obtained from Desire Ludick, it's
forwarding manager, who in the confirmatory
affidavit alleges that he
received a phone call from Mr Van der Merwe, an employee of one of
the clients of the applicant looking
for the respondent. He took over
the cell phone number previously used by the respondent whilst she
was in the applicant's employ.
Ludwick says Van der Merwe realised
that the person who answered the phone was not the respondent and
said he would phone the respondent
at her number.
[9]
Following the above
advice from Ludick, the applicant noticed that it was losing clients.
It then investigated the matter by contacting
some clients who
informed it that they were doing business with Compass Cargo. The
applicant seems to infer from this information
that the respondent
was the cause of clients moving to Compass Cargo.
[10]
The applicant's other
information is from Charlene Meyer, who refutes the allegation that
the respondent is unemployed in a confirmatory
affidavit. She alleges
that Compass Cargo employs the respondent, and she based this
allegation on the business card and email
addresses, reflecting that
the respondent is employed at Cargo Compass.
[11]
The other point made
by the applicant in support of its case is that on 6 August 2021, it
discovered that in February 2021 before
her resignation the applicant
copied customer lists and emailed it to herself.
The
respondent's case
[12]
In her opposition to
the applicant's application, the respondent contends that the two
documents the applicant relied on in support
of its case have been
manipulated and that the contents thereof do not represent those that
she signed. She contends that even
if the contents of the documents
were to be accepted, they do not contain a restraint covenant
restraining her from being employed
by a business that competes with
the applicant. According to her, the restraint is for one year, and
it is merely against the use
of confidential information and
solicitation of applicant's employees and its clients. She further
contends that the restraints
in the covenant are unreasonable because
they are contradictory. For this reason, the provisions of the
covenant, according to
her, are unenforceable.
[13]
The other defence
raised by the respondent is that in terms of the applicant's policy
document, the territorial limit of the restraint
is confined to the
magisterial district of Germiston.
[14]
She further contends
that if the Germiston geographic limitation was to be ignored, then
it would mean the geographic restraint
is unlimited and thus cover
the whole country. It would, accordingly, mean that the restraint is
unreasonable.
[15]
About the alleged
solicitation of the applicant's clients, the respondent refuted that
and stated that the clients approached her
because they were
dissatisfied with the services provided by the applicant. She then
directed them to Cargo Compass.
The
legal principles
[16]
It is trite that a
restraint of trade clause in an employment contract restricts an
employee's freedom to trade, practice his or
her profession, or
participate in business or economic activity. However, the covenant
is regarded as enforceable against the employee
because the public
policy directs that contractual obligations bind on people based on
the sanctity of contracts.
[17]
A
restraint of trade clause is unenforceable in a case where it is
found that it unreasonably restricts an employee's freedom to
trade
because that would be contrary to public policy.
In
Basson
v Chilwan,
[1]
the court had to
determine the enforceability of a restraint of trade signed by an
employee skilled in the art of building and
designing buses. The
contract restrained him from working for any similar business in the
whole of Southern Africa for five years.
The Court found that the
restraint was unreasonable and thus unenforceable.
[18]
The
underlying purpose of the restraint of trade clause in an employment
contract is to restrict an employee's freedom in the future
to
perform trade with a third party in the manner in which he or she may
elect to do. The purpose of the restraint of trade was
described as
follows in Reefs v men field insurance Brokers:
[2]
"The
legitimate object of restraint is to protect the employer's good will
and customer connections [or trade secret) and the
restraint and
accordingly remains effective for a specified period (which must
remain 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."
[19]
The
court may, however refuse to enforce a restraint covenant if it is
unreasonable based on public policy considerations. The consideration
of whether a covenant is unreasonable depends on the circumstances of
each case.
[3]
[20]
The court will also
not enforce a restraint of trade covenant unless the employer can
show that the object of the covenant is to
protect the confidential
or trade secrets that the employee acquired during employment. The
threshold of the status of confidentiality
depends on the
circumstances of each case and must satisfy the following:
a.
it must be
useful and applicable in the trade industry of the employer.
b.
the
information must not be public knowledge and public property and be
restricted to a number of people.
c.
It must be of
economic value to the applicant.
d.
the
employer must show that objectively determined the information is
confidential.
[4]
[21]
In
Telefund Raiser v Isaacs,
[5]
the
court held that for information to satisfy the confidentiality
threshold, it must not be something that is public property
or public
knowledge.
[22]
It is trite that in
weighing the reasonableness of restraint of trade covenant for the
purpose of enforcement, the court will take
into account the duration
of the restraint, the reasons for the restraint; the geographical
area to which the restraint applies;
the proprietary interest or
capital asset that the employer seeks to protect.
Evaluation
[23]
It is common cause in
the present matter that the restraint of trade does not prohibit the
respondent from accepting employment
with any of the applicant's
competitors. Although the respondent disputes having signed annexures
FA2 and FA 2.1, considering the
facts and the circumstances, it seems
the most plausible version to accept is that of the applicant.
[24]
In my view, the issue
upon which this matter turns on is the alleged solicitation of the
applicant's clients, and it's related issue
of the geographic extent
of the restraint. The respondent contends that she did not approach
the applicant's clients, but instead,
they came for assistance to her
as they were dissatisfied with the applicant's service. This version
does not seem farfetched and
thus has to be accepted as the truth.
That being the case, the enquiry is whether the approach by the
clients in the circumstances
amount to the solicitation. It should,
however, be noted that there is no evidence from the clients
confirming that the respondent
had approached them to do business
with Cargo Campus.
[25]
The employment
agreement as contained in either FA2 or FA2.1 do not define the word
'solicitation.' In its ordinary meaning, the
word 'solicitation'
comes from the word 'solicit', which means 'to request' or 'to
entreat.' In the Oxford Combined Dictionary
of Current
and Modern English Usage, the word 'solicit' is defined as 'Ask
repeatedly or invite.’
[26]
On the facts stated
above, it does not appear that the respondent approached the clients
of the applicant and invited them to join
or use the services of
Cargo Campus. In my view, for this reason alone it cannot be said
that the respondent breached the restraint
clause in the employment
contract.
[27]
The applicant's case
still stands to fail even if it was to be found that the respondent's
advice to the applicant’s clients
to approach Cargo Campus for
assistance amounted to solicitation. It would fail because it has not
been disputed that all the clients
that approached the respondent are
based outside the magisterial district of Germiston contrary to what
is envisaged in the applicant's
policy set out in FA2.2, a policy
document relied upon by the applicant in prayer 3.3 of the notice of
motion.
[28]
The applicant
contends that the limitation to the Germiston magisterial district
finds no application because there is no such provision
made in FA2
and FA2.1. This does not assist the applicant's case because it would
mean that there is no geographic limit to the
application of the
restrain covenant. In other words, it would mean that the restraint
applies across the whole of the country
or even outside the borders
of South Africa. In that case, the restraint would be unreasonable
and accordingly unenforceable.
[29]
In light of the above
I find that the applicant’s case stands to fail.
Order
[30]
In the premises the
following order is made:
1.
The
application is treated as one of urgency and accordingly
non-compliance with the time frames set out in the Rules is condoned
2.
The
application is dismissed with costs.
E
Molahlehi
Judge
of the High Court,
Gauteng
Local Division,
Johannesburg.
Representation:
Counsel
for the applicant: Adv M Nowitz
Instructed
by: Nowitz Attorneys
Counsel
for the respondent: Adv. George Kairinos SC
Instructed
by: Steve Merchak Attorneys
Date
for the hearing: 24 August 2021
Judgement
delivered: 28 September 2021
[1]
1993
3 SA 742 (A).
[2]
1996
[3] SA 766 [A] at 772.
[3]
J
Louw and Co (Pty) Ltd v Ritcher and Others
1987 (2) SA 237
(N) at
243BD.
[4]
See
Alum-Phos
(Pty) Ltd v Spatz [1997]1 B All SA 616 (W) at 623-4;
[5]
1998
(1) SA 521
CPD et 528 E-F.