About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, East London Local Court
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, East London Local Court
>>
2016
>>
[2016] ZAECELLC 7
|
|
How Do You Want It (Pty) Ltd t/a Dreadlocks Studio One v Matyumza and Others (1147/2016) [2016] ZAECELLC 7 (27 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(EAST
LONDON CIRCUIT LOCAL DIVSION)
CASE
NO: 1147/2016
DATE:
27 SEPTEMBER 2016
In
the matter between:
HOW
DO YOU WANT IT (PTY) LTD
T/A
DREADLOCKS STUDIO
ONE
.......................................................................................
Applicant
And
THANDILE
MATYUMZA
..........................................................................................
First
Respondent
ZIYANDA
MATYUMZA
.........................................................................................
Second
Respondent
ZIZIPHO
MGQOLOZANA
......................................................................................
Third
Respondent
ZAMA
MTHETHWA
...............................................................................................
Fourth
Respondent
BUHLE
MAPHASA
.....................................................................................................
Fifth
Respondent
SPHAMANDLA
NKOHLA
........................................................................................
Sixth
Respondent
ZIZIPHO
MGQOLOZANA
...................................................................................
Seventh
Respondent
BHEKISISA
MJOLI
.................................................................................................
Eighth
Respondent
JUDGMENT
MBENENGE
J:
[1]
The applicant, a private company with limited liability and
conducting business as a special dreadlocks hair salon in East
London, Queenstown, Butterworth, King Williams Town and Mthatha,
seeks to enforce a restraint of trade clause embodied in service
agreements allegedly concluded by and between the applicant and the
respondents on diverse occasions. The notice of motion prays,
in the
main, for an order interdicting and restraining the respondents from
–
“
1.1.1
Soliciting the custom of and dealing with or in any way transact in
competition to the applicant, any business, company firm,
undertaking, association or person which has been a client of the
employer;
1.2.2
Approaching, advising or contacting in order to, directly or
indirectly solicit the custom of any person or entity who was
a
customer with whom or to whom, on behalf of the applicant,
negotiations, discussion or representations were entered into or made
during the period of the respondents’ employment with the
applicant;
1.1.3
Being directly or indirectly employed by or have an interest in ,
either as an employee, principal, agent, member, shareholder,
director, partner, consultant, financier or advisor or in any other
capacity in any concern or entity which carries on the same
business
or a business similar to or like the business of the applicant....”.
[2]
The applicant has further prayed that the order sought be operative
the Province of the Eastern Cape over.
[3]
For purposes of this judgment it is necessary to quote the relevant
restraint of trade clause in its entirety. The clause reads:
“
21.
RESTRAINT OF TRADE
21.1
The Employee acknowledges that he is one of the key personnel
by the Employer and by reason of his employment is possessed
of and
shall continue to have access to the company’s accumulation of
trade secrets, formula’s, price lists, lists
of client and / or
other confidential information.
21.2
The Employee acknowledges that if, on termination of his/ her
employment for any reason, he/ she takes up employments or otherwise
becomes associated with or interested in any competitor of the
Employer, the Employer’s proprietary interests will be
materially
prejudiced and he therefore recognises that good and
lawful reasons exist for the Employer to be protected. The
Employee
acknowledges that the provisions herein after set out are
fair and reasonable and necessary for the protection of the
proprietary
interests of the Employer.
21.3
Specifically for the purposes of this particular clause, the
following words shall have the following meaning(s):
21.3.1
“
Business
” shall mean any person, business,
company, association, corporation, partnership, undertaking, trust,
whether incorporated
or not;
21.3.2
“
Interest/ interested
” shall mean interested or
concerned directly or indirectly, whether as proprietor, partner,
shareholder, employee, agent,
financier, shareholder or in any other
capacity whatsoever, and / or permitting his/ her name to be used in
connection with or
in any manner relating thereto;
21.3.3
“
The territory”
shall mean the following municipal
district of the province of the Eastern Cape:
21.3.3.1
East London - Buffalo City Municipality;
21.3.3.2
King William’s Town - Buffalo City Municipality;
21.3.3.3
Butterworth – Mnquma Municipality;
21.3.3.4
Mthatha – King Sabata Dalindyebo Municipality;
21.3.3.5
Port Elizabeth – Nelson Mandela Metropole.
21.3.4
“
The Employer
” The Employer shall mean Dreadlocks
Studio One, its successors in title and/ or any other companies,
subsidiaries or legal
entities within the Employer’s group of
companies.
21.4
all the provisions of this restraint of trade shall strictly apply to
the Employee in respect of all clients, activities, undertakings,
business, operations and services of the Employer.
21.5
The Employee records that he agrees to the restraint of trade in
consideration of:
21.5.1
All benefits which has all will accrue to him from the Employer
21.5.2
His/ her knowledge of and/ or access to the business methods,
business secrets, technological information and data
and/ or
manufacturing/ service methods of the Employer, which are to be known
to and which will be gained by him/ her;
21.5.3
The goodwill factor and technological, manufacturing, service and
sales expertise in a business and/ or undertaking
such as the
business and/ or undertaking of the Employer;
21.5.4
the confidential nature of the information, documentation and other
data relating to the clients of the Employer, which
are available to
the Employee;
21.6
In terms of this restraint of trade, the Employee specifically
undertakes and agrees to:
21.6.1
not
to be interested in any business in the territory which
carries on business, manufactures, sells, or supplies any
commodity
or goods, brokers or acts as agent in the sale or supply of
any commodity or goods and/ or performs or renders any service, in
competition with or identical or similar or comparative to that
carried on, sold, supplied, provided, brokered or performed by the
Employer, during the period of the employment of the Employee up to
and including the last day of the employment of the Employee;
and
21.6.2
not
to solicit the custom of or deal with or in any way
transact with, in competition to the Employer, any business, company,
firm,
undertaking, association or person which has been a client to
the Employer in the territory during the period of
2 (two)
years preceding the date of termination of the employment of the
Employee;
and
21.6.3
not
to directly or indirectly offer employment to or in any
way cause to be employed any person who was employed by the Employer
as
at the termination of the employment of the Employee or at any
time within a period of
2 (two)
years
immediately
preceding such termination.
21.6.4
Each and every restraint in this entire clause shall operate and be
valid and binding for a period of
2 (two)
years in the
territory, calculated from the date of termination of employment of
the Employee in terms of this agreement. This
restraint shall apply
irrespective of what the cause or reason of such termination may be
and whether the fairness of the termination
of the Employee’s
employment is challenged or not by the Employee.
21.7.
Each restraint in this entire clause shall be construed as being
severable and divisible and applicable to the Employee, whether
that
restraint is in respect of:
21.7.1
Nature of business or concern;
21.7.2
Area or territory;
21.7.3
Articles, commodities or goods sold and/ or supplied;
21.7.4
Services performed or rendered;
21.7.5
Company or concern entitled to the benefit thereof
21.8
Each restraint in this entire clause shall be deemed in respect of
each part thereof to be separately enforceable in the widest
sense
possible from the other parts thereof, and the invalidity or
unenforceability of any part thereof shall not in any way affect
or
taint the validity or enforceability of any other part of such
restraints, or in fact any other terms of this agreement.
21.9
All restraints in this clause are for the sole benefit of the
Employer.
21.10
The Employee specifically acknowledges and agrees
21.10.1
That he has carefully read and considered all the terms and
provisions of this clause relating to the restraints applicable
to
him;
21.10.2
That this clause and / or all the restraints contained therein, after
taking all circumstances into account, are fair and
reasonable; and
21.10.3
That should he at any time dispute the reasonable or fairness of any
of the provisions of this clause and/ or restraints,
then and in such
event he will have the onus to provide or prove such unreasonableness
or unfairness.” Sic.
[4]
The applicant upon whom it is incumbent to allege and prove the
agreement and its breach by the respondents,
[1]
has, besides motivating why the application deserves of being heard
as one of urgency, alleged that the respondents were employed
by the
applicant on different occasions. The first and second respondents
terminated their services with the applicant without
giving the
requisite notice on or about 26 April 2016, whereas the third to the
eighth respondents are said to have left the employ
of the applicant
without due notice on different occasions between May and June 2016.
[5]
The service agreements concluded by and between the applicant and the
respondents in East London, within this court’s
area of
jurisdiction, embody the restraint of trade clause referred to in
paragraph [3] above. In the case of the first and
second
respondents the restraint of trade is to endure for two years from
the date of termination of services, whereas in the case
of the rest
of the respondents for a period of six months. The applicant
has alleged that this court has jurisdiction to
entertain this matter
purely by reason thereof that the agreements giving rise to the cause
of action were concluded in East London.
[6]
The launch of the application was triggered, not by the alleged
untimely termination of services by the respondents, but by
the
following events:
“
23
On the 24th August 2016. After the respondents left employment on the
26th of April 2016, I saw the first respondent outside
the premises
of the applicant coming to fetch one of the applicant’s old
clients and walking towards the direction of union
street. I
suspected the first respondent to be convincing the client that since
she has cut ties with the applicant the client
should then follow her
to her new trading area situated at ANO’s HAIR BOTIQUE, Shop
No. 5, Union Street, East London.
24
At that time, I had already noticed that between the months of April
and June 2016, the 1st to the 8th respondent terminated
the
employment without notice to the applicant, the applicant experienced
a diminishing number of clients, in all of Queenstown,
East London
and King Williams Town branches, which causes a dwindle in the income
and turnover of the business.
25
My curiosity became increasingly wide after having noticed that the
first respondent was in breach of the restraint provisions.
Sometime
last week on the 27th August 2016, I met with one of the usual
customers of the applicant from whom I grasped that she
was invited
by the 1st respondent to Ano’s Hair Salon in East London where
the first respondent now moved to and trades in
the same business.
The client has apparently been attending to the first respondent for
the past two months.
26
I then continued to make a further search in King Williams since I
was intrigued by the changing turnover of the business of
the
applicant, on my arrival in King Williams Town I noticed that the 2nd
to the 4th respondents are trading solely at Perfect
Point Salon in
King Williams Town in defiance of the restraint clause and have
continued to turn clients from going to the applicant’s
branches to do business.
27
Thereafter, I requested one of my staff members to record the
whereabouts of the fifth to eighth respondents. I also
discovered
that the same situation takes place as well in Queenstown
were the 5th to the 7th Respondent have done similar acts and trading
at Lukhanji Retail Park in Komani street and have been contacting the
applicant’s clients to stop doing business with the
applicant
and come them.
28
I also witnessed that the 8th Respondent is operating on his own
account at Lukhanji Mall in Queenstown and has also made contacts
with the applicant’s clients. The effects of the changing
financial stability of these branches of the applicant made
me
realise that the applicant is now in competition with the respondents
with applicant’s clients. This conduct was
of course in
defiance of the restraint of trade clause signed by the parties.”
Sic.
[7]
It is these events, narrated in the applicant’s founding
affidavit, that are the
fons et origo
of this application, and
which constitute the breach relied on by the applicant. The
applicant solicits protection from this
court and, to that end, has
alleged that the exploitation of the trade connections of the
applicant by the respondents to fulfill
their self-interest is not
only prejudicial to the applicant’s financial interests but
poses a threat to the interests of
the remaining employees who run
the risk of not receiving their salaries due to the sudden decrease
in the applicant’s business
turnover. It is further
contended that the continued loss of income resulting from the breach
of the restraint of trade agreement
might render the applicant’s
business dysfunctional.
[8]
The application is being opposed by the respondents, but only the
first respondent, allegedly on behalf of the other respondents
as
well, has deposed to the affidavit filed in opposition to the
application. The other respondents have not delivered any
confirmatory affidavits in support of the allegations made by the
first respondent in the opposing affidavit. The respondents’
attorney’s authority to represent all the respondents has,
however, not been challenged.
[9]
The first respondent, whilst not contesting the citation of the
parties to these proceedings, has denied that the sixth respondent
is
involved in a dreadlock undertaking and has alleged that he is an
employee of Avis car hire. The fact that the respondents
had
been in the employ of the applicant and have left such employment is
not placed in dispute. The first respondent further
denies that
the respondents ever bound themselves to the restraint of trade
clause in question, but does not deny that they signed
the relevant
service agreements.
[10]
Most importantly, the first respondent claims to have no knowledge of
whether the rest of the respondents concluded identically
worded
service agreements embodying the restraint of trade clause subject to
this application. He also claims to have no
knowledge of all
the allegations implicating the respondents as having acted in breach
of the restraint of trade clause.
[11]
At the hearing of this application four preliminary issues were
raised on behalf of the respondents. It was contended,
first,
that the application lacked urgency. Second, the applicant was
accused of raising disputes of fact rendering it inappropriate
for
the applicant to institute an application, and not an action.
The third preliminary point raised was that the applicant’s
cause of action is unsustainable due to lack on its part to allege
that the business is unique. Finally, it was contended
that the
failure on the part of the applicant to indicate or state the amount
of remuneration received by the respondents rendered
the employment
contract null and void.
[12]
The respondents’ contention of lack of urgency is predicated on
the ill-begotten notion that the cause of action in this
matter arose
on or about 26 April 2016, when the first respondent is said to have
touted customers who had attended upon the applicant’s
premises
in East London. 26 April 2016 is the date the first respondent
is alleged to have left the employ of the applicant.
It is
clear from the factual background presented above that the date on
which the first respondent touted customers was 24 August
2016, and
not 26 April 2016. The application was launched within a
reasonable time after the first breach of the restraint
of trade
agreement was committed. As long as the issue concerning the
alleged breach has not been resolved the applicant’s
continued
operation as a business entity would remain uncertain. This
case is not of importance to the applicant only, but
to the
respondents as the affected individuals. Even though this
matter is commercial in nature
,
it is sufficiently urgent.
[2]
[13]
The argument that the applicant has raised disputes of fact is devoid
of merit. In the first place, the first respondent
has claimed
to have no knowledge of the essential allegations made in the
applicant’s founding affidavit. It is trite
law that a
statement of lack of knowledge coupled with a challenge to the
applicant to prove part of his or her case does not amount
to a
denial of the averments by the applicant.
[3]
Subject to what is stated in the penultimate paragraph of this
judgment, there is no dispute of fact as to the existence
of the
restraint of trade agreement and its breach by the respondents.
[14]
The third point
in limine
relating to the uniqueness of the
business whose interests are sought to be protected is similarly
devoid of merit. As already
pointed out above, the party
wishing to enforce a restraint of trade agreement need only allege
and prove the agreement and its
breach by the respondent/s.
[15]
It is so that the amount of remuneration payable to the respondents
is not specified in the agreements. That does not,
however,
render the agreement in its entirety invalid, especially where, as
here, the employees are remunerated on a commission
basis.
[16]
There is not much to be said on the merits of this application.
This is so because of the cavalier attitude adopted by
the
respondents in opposition to the application. They have either
proffered a bold denial to the essential allegations or
claimed to
have no knowledge of those allegations. For instance, they do not
dispute having signed the agreements. No confirmatory
affidavits placing the facts applicable to the second to eighth
respondents have been filed. The respondents’ cavalier attitude
is further demonstrated by the first respondent’s claim to have
no knowledge of the breach alleged by the applicant, even
though the
deponent to the founding affidavit has presented a welter of detail
regarding how each of the affected respondents is
said to have acted
in breach of the agreement.
[17]
Even in a constitutional dispensation any party to any agreement
where a restraint clause is regarded as material is free to
agree to
include such a clause in the agreement and the common law in this
regard is of general application.
[4]
One would have expected the respondents to seek to absolve themselves
from the restraint of trade agreements by proving that,
at the time
enforcement is sought, the restraint is directed solely at the
restriction of fair competition with the covenantee
and that the
restraint is not, at that time reasonably necessary for the
legitimate protection of the covenantee’s protectable
proprietary interests (goodwill or trade secrets),
[5]
or alleging and proving that the enforcement of the restrictive
conditions would be contrary to public policy.
[6]
The respondents did not come anywhere near raising that contention.
[18]
The next issue for determination is the area of operation of the
restraint of trade agreement. The restraint of trade clause
specifies
the areas in which it is applicable; these being Port Elizabeth, East
London, King Williams Town, Butterworth and Mthatha.
One can
immediately discern that Queenstown is not part of the area of
operation of the restraint of trade agreement. It is trite
law that
parties are bound to the terms of their agreements. This is true for
the applicant as well. The restraint of trade agreement
is
operational in the areas defined as “
the territory
”.
In these circumstances, this court is not in a position to enforce a
term that is not part of the restraint of trade in
question.
Therefore, the prayer to enforce the restraint of trade agreement in
Queenstown cannot stand.
[19]
It is not clear from the papers whether the respondents are
incolae
or
peregrini
within this court’s area of jurisdiction. Having regard to the
territorial nature of jurisdiction and the principle of
effectiveness,
this court would have jurisdiction to grant the
prohibitory interdict sought if the act complained of is to be
prevented within
the area over which the court exercises
jurisdiction.
[7]
This court
lacks the jurisdiction to enforce the restraint of trade agreement in
areas outside of its area of jurisdiction. Even
upon the application
of the principle enunciated in
Zokufa
v Compuscan (Credit Bueau)
[8]
i.e. that if the requirements for the grant of an interdict are
satisfied by facts within the territorial jurisdiction of a High
Court, the court will possess the jurisdiction to decide the matter,
the prohibitory interdict sought relates, in part, to conduct
complained of in King Williams Town, Butterworth, Mthatha, and Port
Elizabeth, outside of this court’s area of jurisdiction,
rendering the order sought in respect of those areas incompetent.
[20]
From what is stated above, nothing stands in the way to granting the
relief sought by the applicant insofar as it relates to
East London.
The application insofar as it relates to all respondents, albeit that
it applies to East London, must therefore succeed.
The applicant has
been successful in demonstrating that it is possessed of legitimate
interests which it seeks to protect by means
of the restraint. This
is so regardless of the fact that the application has succeeded in
relation to the East London area only.
There is no reason why costs
should not follow the result. I was urged to consider the parlous
financial position of the respondents
and not to award a cost order
against them on that basis. No facts were pleaded from which I could
even begin to exercise my discretion
in the respondents’ favor.
[21]
I therefore make the following order:
21.1
The respondents are interdicted and restrained from:
21.1.1.
soliciting the custom of and dealing with or in any way transacting
in competition to the applicant, any business, company,
firm,
undertaking, association or person which has been a client of the
applicant;
21.1.2
approaching, advising or contacting in order to, directly or
indirectly, solicit the custom of any person or entity who was
a
customer with whom or to whom, on behalf of the applicant,
negotiations, discussions or representations were entered into or
made during the period of the respondents’ employment with the
applicant;
21.1.3
being directly or indirectly employed by or have an interest in,
either as an employee, principal, agent, member, shareholder,
director, partner, consultant, financier or advisor or in any other
capacity in any concern or entity which carries on the same
business
or a business similar to that of the applicant.
21.2
The duration of the restraint in respect of the first and second
respondents shall be two years from 26 April 2016, and six
months
from 31 May 2016 in the case of the third to eighth respondents.
21.3 The territory
of application of the interdict shall be East London
21.4
The respondents shall pay the costs of this application, jointly and
severally, the one paying the other to be absolved.
S
M MBENENGE
JUDGE
OF THE HIGH COURT
Counsel
for the applicant: Mr D Skoti
Instructed
by MT Klaas Attorneys
East
London
Counsel
for the respondents: Mr V Msikinya
Instructed
by Tshiki and Associates
Queenstown
C/O
Mtima Attorneys
East
London
Date
heard : 21 September 2016
Date
Delivered : 27 September 2016
[1]
Harms,
Amler’s
Precedents of Pleadings
,
Butterworth (2015) 8ed, pp 324 – 6.
[2]
Cekeshe
and Others v Premier, Eastern Cape and Others
1998
4 SA 935(Tk)
D at 948D-H; see also
Mozart
Ice Cream Franchises (Pty) Ltd v Davidoff and Another
2009 (3) SA 78
(C) at 89A wherein it was held that breaches of
restraint of trade have an inherent quality of urgency.
[3]
Gemeenskapontwikkelingsraad
v Williams (2)
1977
(3) SA 955
(W) at 957E;
Room
Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949
(3) SA 1155
(T) at 1163;
Saflec
Security Systems (Pty) Ltd v Group Five Building (East Cape) (Pty)
Ltd
1990
(4) SA 626
(E) at 631D.
[4]
Fidelity
Guards v Pearmain
2001
(2) SA 853
(SE) 862B-C.
[5]
Value
Logistics Limited v Smith and Another
[2013] (4) AllSA 213 (GSJ).
[6]
Magna
Alloy and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984
(4) SA 874
(A) at 893.
[7]
Pistorius D,
Pollak
on Jurisdiction
,
2 ed (1993) JUTA Cape Town at 115;
Ex
parte Winter
1948 (3) SA 377
(W);
Kibe
v Mphoko and Another
1958 (1) SA 364(O)
;
Mtshali
v Mtambo
1962 (3) SA 469 (GW).
[8]
2011 (1) SA 272
(ECM) at para [61].