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[2008] ZASCA 105
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Digicore Fleet Management (Pty) Ltd v Steyn and Another (722/2007) [2008] ZASCA 105; [2009] 1 All SA 442 (SCA) (22 September 2008)
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THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
CASE
NO: 722/2007
No precedential
significance
DIGICORE
FLEET MANAGEMENT (PTY) LTD
a
ppellant
and
MARYANNE
STEYN 1
st
Respondent
SMARTSURV
WIRELESS (PTY) LTD 2
nd
Respondent
Neutral
citation: Digicore Fleet Management v Steyn (722/2007)
[2008] ZASCA 105
(22 September 2008)
Coram
: SCOTT,
BRAND, LEWIS, JAFTA JJA MHLANTLA AJA
Heard
:
8
September 2008
Delivered:
22
September
2008
Summary:
Appeal
against order refusing enforcement of contract in restraint of trade
dismissed: proprietary interest of appellant not threatened
by first
respondent after termination of her employment with appellant and on
her employment by a competitor, the second respondent.
______________________________________________________________
ORDER
On appeal from:
High Court, Durban (Van der Reyden J sitting as court of first
instance)
The appeal is dismissed with costs.
JUDGMENT
LEWIS JA (Scott, Brand and Jafta JJA and Mhlanthla
AJA concurring)
[1]
The appellant,
Digicore Fleet Management (Pty) Ltd (Digicore), seeks to enforce an
undertaking in restraint of trade made in its
favour by the
respondent, Ms Maryanne Steyn. Digicore applied for an interdict,
alternatively interim relief, restraining Steyn
from working for the
second respondent, Smartsurv Wireless (Pty) Ltd, a competitor of
Digicore, for a period of 24 months from
the termination of her
employment with Digicore, in the greater Durban area. The high court
refused the relief sought, finding
that the undertaking in restraint
of trade was unenforceable. Van der Reyden J granted leave to appeal
to this court, however,
on the basis that another court might reach a
different conclusion especially in so far as interim relief is
concerned. Smartsurv
has played no role in this appeal.
[2]
The facts in issue
are largely undisputed and I shall deal with them only briefly. Steyn
was employed by Digicore from May to December
2006 as a ‘sales
executive’ for motor vehicle tracking devices. She signed a
contract of employment that required her
to maintain confidentiality
in her work during the course of her employment, and that restrained
her from competing with Digicore
after the termination of her
employment.
[3]
Digicore’s
business consists in the main of selling various kinds of vehicle
tracking systems to vehicle owners. It sells
to fleet owner clients
that require systems to track vehicles in a fleet; to corporate
clients that require vehicle recovery systems
to protect against
theft, and trace stolen vehicles; and to individual customers who
purchase the second kind of tracking systems
for themselves.
[4]
When Steyn joined
Digicore she had previous experience in selling tracking systems, and
had also worked in the insurance business
for a while. She was
particularly attractive and useful to Digicore because of her
contacts with insurance brokers in the Durban
area who would refer
potential clients to her when they acquired new vehicles and wished
to insure them against theft.
[5]
The period of
Steyn’s employment with Digicore was short: she was approached
by Smartsurv towards the end of 2006 and offered
a more lucrative
position. She gave notice to Digicore and commenced working for
Smartsurv in January 2007. Digicore learned of
approaches to two of
their clients by Steyn in early 2007 and commenced proceedings to
prevent her from working for Smartsurv or
to compete with it for the
period of the restraint undertaking that she had made.
[6]
The restraint
provision in the employment contract reads:
‘
19
RESTRAINT UNDERTAKINGS
19.1 The employee shall be
restrained for a period of 2 years from the date of termination of
this Agreement from working within
a 200km radius of the Durban North
area and / or be:
19.1.1
Directly or indirectly having any interest in (sic), involvement
with, connection to or being employed by any company, corporation,
firm, partnership, association or other form of business entity,
whether incorporated or unincorporated (for convenience “Competing
Business”), which conducts business along lines similar to or
in competition with that of the employer; and
19.1.2 Acting
as employee, director, shareholder, member, partner, consultant,
financier, agent or advisor to any Competing Business
in respect of
the Restrained Activities in the aforementioned areas; and
19.1.3
Directly or indirectly soliciting or offering employment to any
employee of the employer who was an employee as at the date
of
signature of this Agreement, or at any time within 3 (three) months
preceding the date of signature of this Agreement, nor shall
they
attempt to do so;
19.2 The employee acknowledges
that these restraint of trade undertakings and covenants are
reasonable as to the period, the area
of restraint and the nature and
extent of the Restrained Activities.’
[7]
It is now trite that
provisions in restraint of trade are enforceable unless shown by the
person wishing to escape an undertaking
to be unreasonable and hence
contrary to public policy. It is not necessary to rehearse the
principles that have been set out by
this and other courts governing
agreements in restraint of trade. Suffice it to say that Steyn, in
order to escape her contractual
undertaking, must show that Digicore
has no proprietary interest that is threatened by her working for a
competitor of Digicore.
[8]
Digicore contends
that the restraint is reasonably necessary to protect its interest in
its customer base because, when Steyn commenced
her employment with
it, she underwent an induction programme and had training and support
that enabled her to market and sell Digicore’s
stolen vehicle
recovery systems. They contend that she was provided with a client
list with names and contact details, including
the information on the
products previously acquired by clients. Such information was alleged
to be confidential and part of Digicore’s
goodwill. Moreover,
Digicore argues, Steyn had access not just to client information but
also to details regarding confidential
discounts given to certain
clients.
[9]
Steyn’s
response (which we must accept, these being motion proceceedings) is
that she was not trained by Digicore and did
not undergo any
induction programme. She was given no support save for receiving a
laptop computer, a cellular telephone, and brochures
describing
Digicore’s products. She was given no confidential client
information save for the details of about 20 clients
whom a previous
sales executive had cultivated. Digicore had previously concentrated
on corporate and fleet management clients.
By contrast, she had
brought with her contacts with insurance brokers, and had continued
to cultivate those contacts. She had also
shared the information that
she had with another sales executive at Digicore, Mr Stanley Strydom,
with whom she worked. During
her employment with Digicore she
continued to work on her contacts and had followed them up when she
started working for Smartsurv.
[10]
Steyn, as I have
said, came to Digicore with experience in the field of tracking
devices: she had previously been employed by a
company referred to as
Tracker Network, and subsequently by Bandit Vehicle Tracking. She had
also worked for an insurance brokerage.
When she left Digicore she
took with her no more than she had brought to the business in the
first place: experience in the field
and contacts with insurance
brokers in the Durban area. It can hardly be said, in the
circumstances, that Digicore had any proprietary
right that was in
jeopardy when she left to work for a competitor.
[11]
There are two
particular instances where Digicore alleges that Steyn did approach
its fleet management clients: she contacted Mr
Rob Currie, a client
of Digicore, to canvas his business for Smartsurv, and she contacted
Mr Dieter Coetzee, also a Digicore client,
and suggested that he move
his business to Smartsurv. Steyn denies any knowledge of Currie, and
although admitting that she contacted
Coetzee, points out that he
declined to move his company’s business to Smartsurv. In
neither case, therefore, can it be said
that she breached any
obligation to Digicore.
[12]
Steyn contends –
and Digicore does not dispute this – that her value to Digicore
lay in her contacts with insurance
brokers, a source of business
previously untapped by Digicore. Digicore accordingly had no
proprietary interest in her contacts
and thus no right to prevent her
from using them. She maintains also that she did not acquire any
confidential information while
working at Digicore. Although Digicore
claimed that she had access to their databases, Steyn denies that she
had access to anything
that was not in the public domain.
[13]
Accordingly this
matter is entirely different from that in
Reddy
v Siemens Telecommunications (Pty) Ltd,
1
relied on by counsel for Digicore, where a restraint was enforced on
the basis that the employee had in fact undergone extensive
training
and acquired confidential information which warranted protection.
[14]
It seems to me
that, on the facts that are common cause, Steyn has shown that
Digicore did not have any proprietary interest that
warranted
protection. It is useful to invoke the fourfold test enunciated by
Nienaber JA in
Basson v Chilwan
:
2
(a) Is there an interest of the one party (Digicore) which pursuant
to the agreement warrants protection?
(b) Is that interest threatened by the other party (Steyn)?
(c) If so, does that interest weigh qualitatively
and quantitatively against the interest of the other so that he or
she will be
economically inactive and unproductive?
(d) Is there another aspect of public interest that does not affect
the parties but does require that the restraint not be invoked?
[15]
The answers to
these questions in this case are in my view clear. Digicore does have
a proprietary interest in its client base,
and information about it,
that deserves protection. However, Steyn presents no threat to that
interest: she is using only her own
contacts and information,
acquired before joining Digicore, and not making improper use of
information that is confidential to
Digicore. Indeed, Digicore’s
admitted main business is its fleet management systems. Steyn had no
experience of them or the
fleet management clients either before or
after she joined Digicore, and made no attempt to break into that
area of the business.
[16]
To the third
question I would suggest that given the very short period of Steyn’s
employment by Digicore, the fact that she
was recruited for her
contacts with insurance brokers, and that she was doing no more than
cultivating them when she worked there
and then subsequently for
Smartsurv, Digicore’s interest cannot be regarded qualitatively
or quantitatively as warranting
protection.
3
To prevent Steyn from being economically active – by enforcing
the restraint – would not be reasonable. There is no
commercial
justification for enforcing the provision in restraint of trade
against Steyn. The fourth question does not arise here.
[17]
Accordingly the
high court rightly found that any threat that Steyn’s
employment with Smartsurv might have posed did not ‘weigh
qualitatively and quantatively against her interest to be
economically active and productive’ and correctly refused to
interdict
her from working for Smartsurv or working in the vehicle
tracking business.
[18]
In so far as the
alternative relief sought – the interim interdict – is
concerned, Digicore has shown neither an apprehension
that any right
will be infringed by Steyn, nor that the balance of convenience
favours interim relief in its favour.
[19]
The appeal is
dismissed with costs.
______________
C H Lewis
Judge of Appeal
Appearances:
For Appellant: F H Tereblanche SC
H R Fourie
Instructed by:
Edelstein Bosman Inc,
Durban
Israel &
Sackstein Matsepe Inc, Bloemfontein
For Respondent:
F
Rautenbach
Instructed by:
Irish Ashman Attorneys, Durban
Lovius Block, Bloemfontein
1
2007 (2) SA 486
(SCA).
2
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 768F-H.
3
See in this regard
Rawlins
v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA
537
(A) at 541F-I.