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[2018] ZAGPJHC 558
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AJM Engineering Services (Pty) Ltd v Tshabalala and Others (7756/2018) [2018] ZAGPJHC 558 (3 October 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE NO:
7756/2018
In the
matter between:
AJM
ENGINEERING SERVICES (PTY) LTD
Applicant
And
RICHARD
TSHABALALA
1
st
Respondent
KHULA
CRANES (PTY) LTD
LESIBA
HEZEKIAL MAGONGOA
NKULULEKO
DHLAMINI
2
nd
Respondent
3
rd
Respondent
4
th
Respondent
JUDGMENT
INGRID OPPERMAN j
Introduction
[1]
The applicant seeks to enforce a
contractual restraint of trade and confidentiality agreement against
the first respondent arising
out of an employment contract and to
interdict the first and second respondents from unlawfully competing
with the applicant. Although
the notice of motion does not provide
for it expressly, the applicant, during argument and relying on the
alternative relief prayer
in the notice of motion, also sought relief
against the third and fourth respondents in the form of an interdict
preventing them
from unlawfully competing with the applicant.
[2]
The core facts are not disputed. The
first respondent was a branch manager of the applicant. He dealt
closely with the applicant’s
customers and was intimately
acquainted with the applicant’s pricing strategies. Before
resigning from the applicant’s
employ, the first respondent
agreed to take up shares in the second respondent and become a
director of the second respondent.
The applicant found substantial
information on his work laptop showing that he had acquired shares
and was actively involved in
the second respondent by no later than
29 August 2017. The first respondent describes this evidence as
“
inconsequential
”
and says that he can “
see no
reason why the court should be burdened with this hogwash
.”
[3]
The first respondent resigned from the
applicant’s employ on 31 October 2017. He did so without
notice. According to the first
respondent, the circumstances of his
resignation “
have no relevance to
the relief sought. Whether I planned the resignation or it happened
in the spur of the moment makes for no
difference.
”
[4]
The first respondent does not dispute
that he is a shareholder and director of the second respondent in
direct competition with
the applicant.
CONTRACTUAL RESTRAINT
[5]
The first respondent was initially
employed as a sales consultant in terms of a fixed term contract. He
was subsequently employed
on a permanent basis as branch manager.
[6]
Both contracts contained identical
restraint of trade and confidentiality clauses. Reliance is placed on
the latest agreement. The
respondents do not dispute the conclusion
of the agreements or the restraint and confidentiality clauses.
Rather, they challenge
the enforceability of the clauses.
[7]
A restraint of trade is enforceable
unless the respondents can show that:
“
.
. . at the time the enforcement is sought, the restraint is directed
solely to the restriction of fair competition with the ex-employer
(the covenantee); and that the restraint is not at that time
reasonably necessary for the legitimate protection of the
covenantee's
protectable proprietary interest, being his goodwill in
the form of trade connection, and his trade secrets.
”
[1]
The test for determining
the reasonableness or otherwise of the restraint of trade provision,
is the following:
‘
[15.1]
Is there an interest of the one party which is deserving of
protection at the termination of the agreement?
[15.2] Is such interest
being prejudiced by the other party?
[15.3] If so, does such
interest so weigh up qualitatively and quantitatively against the
interest of the latter party that the
latter should not be
economically inactive and unproductive?
[15.4]
Is there another facet of public policy having nothing to do with the
relationship between the parties, but which requires
that the
restraint should either be maintained or rejected?’
[2]
[8]
Accordingly,
the restraint will be enforced if it protects a proprietary interest
of the applicant. ‘
Such
interest may take the form of trade secrets or confidential
information or goodwill or trade connections
’.
[3]
[9]
In
considering such a defence, the Court must make a value judgment with
two principle policy considerations in mind. The first
is the public
interest which requires parties to comply with their contractual
obligations. The second is that all persons should,
in the interests
of society, be permitted to engage in trade and commerce. Where the
protectable interest is the risk of harm to
the applicant’s
trade connections and, in particular, its connections with its
customers, the test is whether the employee
had access to customers
and was in a position to build up a particular relationship with the
customers so that, when he left the
employer's service, he could
easily induce the customers to follow him to a new business.
[4]
[10]
The
applicant does not have to show that the first respondent is in fact
utilising the confidential information or his customer
connection. It
need only show that the first respondent could do so.
[5]
[11]
The first respondent signed two
contracts. He signed the contracts and thereby undertook to comply
with these provisions. He should
be held to his contractual
undertakings unless he can show that the enforcement of these clauses
in the context of this case, is
unreasonable.
[12]
The circumstances of the first
respondents planned resignation, despite his protestations to the
contrary, are relevant, perhaps
not to the relief sought in this
application, but more about that later. The first respondent
cynically executed his resignation
without notice. It had been
planned and was not a spur of the moment decision. His inappropriate
language and callousness in the
answering affidavit do not assist his
case. In the answering affidavit, the first respondent says that he
only worked for the applicant
for a short period of time. He in fact
worked for AJM from February 2016 to October 2017. This is a period
of 20 months. It is
not a very short period of time.
[13]
The first respondent was the Pretoria
branch manager. The respondents do not dispute that the Pretoria
branch’s largest customer
is Transnet Koedoespoort (Transnet’s
largest depot and manufacturing plant). The first respondent contends
that although
his relationship with key personnel at Transnet
Koedoespoort was maintained during his employment with the applicant,
it had already
been established whilst with his previous employer, a
competitor of the applicant.
[14]
Much reliance was placed on the fact
that the first respondent was responsible for compiling tenders for
the applicant and was privy
to the applicant’s price lists and
pricing strategy. The existing contract with Transnet came to an end
in April 2018. Transnet
being a state owned entity will be obliged to
invite and accept tenders which comply with regulations on public
procurement. There
will be nothing to prevent the applicant from
submitting a fresh bid for consideration. It is not entitled to, in
the context of
the current factual matrix, prevent the second
respondent from tendering for such work.
[15]
Even
if the respondents were restrained, the Applicant will not
necessarily be awarded the Transnet tenders because those contracts
require an objectively scrutinized tender process and as such
the presence or absence of the Respondent/s should not sway
the award
of the tender in one or other direction. The best man for the job
will have to get it. Thus even if there is a proprietary
right (which
I shall assume to be established) the applicant has not shown that it
is being prejudiced as per the second requirement
of
Sibex
[6]
and it is not in my opinion of the policy considerations worthy of
protection through enforcement of the restraint clause. The
enforcement of the restraint will thus only serve to stifle and
sterilize the first respondent from practicing his trade without
in
any way protecting any right of the Applicant.
DELICTUAL WRONG –
UNLAWFUL COMPETITION
[16]
Froneman
J recently reiterated that our law is not a law of torts but a law of
delict based on the Aquilian action.
[7]
He said:
“
The
development of the law of unlawful competition must thus be
accomplished in terms of the general principles of Aquilian
liability.
In general this involves conduct in the form of an
unlawful and culpable act or omission that causes damage in the form
of economic
loss to another. It is not the conduct itself that
establishes unlawfulness, but its harmful result. In the case of an
interdict,
as here, actual loss need not necessarily be shown, only
potential impending or continuing harm. There is no general right not
to be caused pure economic loss, but in unlawful competition cases,
as this one is, our courts have recognised that the loss may
lie in
the infringement of a right to goodwill or in the legal duty to
respect the right to goodwill.”
[8]
[17]
It is not disputed that:
17.1.
The applicant’s price list
disappeared.
17.2.
After the first respondent had been
allocated shares and while his appointment as a director was being
formalised, the second respondent
submitted an application for credit
to the applicant. It did not disclose the first respondent’s
involvement despite the
fact that this was obviously relevant.
17.3.
Shortly after the first respondent’s
resignation, it received an enquiry from PRASA relating to its
failure to submit a bid
for a substantial contract. The applicant was
not aware of the bid despite PRASA having sent all the documentation
to the first
respondent. The applicant avers that the first
respondent was obliged to either prepare and submit the bid himself
or refer this
to senior management. Instead, he simply appears to
have ignored the invitation to submit a bid. The bid documentation
could not
be located in the first respondent’s former office.
The applicant called upon the respondents to provide a proper
explanation
for the aforegoing, including whether the first
respondent informed the second respondent of the possible contract;
and whether
the second respondent submitted a bid for this contract
and, if so, who prepared the bid documentation. No explanation was
received.
[18]
The aforegoing conduct could well found
a cause of action for a claim for damages. However, it is past
conduct, all of which occurred
when the first respondent was in the
employ of the applicant. There exists no threat of future conduct
which could form the basis
for interdictory relief, but even if I
were wrong, there is little future for the restraint left. The
applicant has, both in respect
of the relief relating to the
restraint of trade, and the unlawful competition, limited its
application to relief which would interdict
the respondents only
until 1 November 2018. Interdictory relief is discretionary.
Had I found that there was a proprietary
interest being threatened
and worthy of protection, I would have exercised my discretion
against the granting of the interdictory
relief by virtue of the
limited duration during which it would operate.
COSTS
[19]
It would seem that the respondents’
conduct might have been unlawful, though an interdict is not the
appropriate remedy. The
first respondent’s dismissive attitude
to his duties as an employee would tend to demonstrate a wrongful
state of mind potentially
deserving of damages against himself and
his fellow wrongdoers.
[20]
The applicant has plainly been wronged
but has not qualified for a remedy given the effluxion of time and
the nature of the remedy
chosen. The respondents have been dismissive
of the applicant’s rights and have not conducted themselves in
the manner that
ordinary people of business would consider fair. They
have thus disqualified themselves from the benefit of the usual rule
relating
to costs.
[21]
Each party shall bear its own costs of
this application.
ORDER
[22]
In the circumstances, I grant the
following order:
22.1.
The application is dismissed.
22.2.
Each party shall bear its own costs.
___________________________
I
OPPERMAN
Judge
of the High Court
Gauteng
Local Division, Johannesburg
Heard:
21 August 2018
Further
heads of argument received: 22 and 23 August 2018
Judgment
delivered: 3 October 2018
Appearances:
For
Applicant: Adv S Vivian SC
Instructed
by: Guiseppe Fizzoti Attorney
For
Respondent: Adv I Mureriwa
Instructed
by: Moila Fhatu Inc Attorneys
[1]
Sibex
Engineering Services (Pty) Ltd v Van Wyk and Another
1991
(2) SA 482
(T) at 503A
[2]
Experian
South Africa (Pty) Ltd v Haynes and Another
2013
(1) SA 135
(GSJ) at para 15 applying
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 767 G - H
[3]
Townsend
Productions (Pty) Ltd v Leech
2001
(4) SA 33
(C) at 48B
[4]
Den
Braven SA (Pty) Ltd v Pillay
2008
(6) SA 229
(D) at 236 D - E
[5]
Experian
South Africa (Pty) Ltd v Haynes and Another
,
supra
at para 22
[6]
Footnote
1
supra
[7]
Masstores
(Pty) Ltd v Pick n Pay Retailers (Pty) Ltd
2017
(1) SA 613
(CC) at para 21
[8]
Masstores
(Pty) Ltd v Pick n Pay Retailers (Pty) Ltd
,
supra
,
at para 30