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[2016] ZAGPPHC 73
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Rolfes PWM (Pty) Ltd v Golding (3579/2016) [2016] ZAGPPHC 73 (12 February 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
number: 3579/2016
Date:
12 February 2016
Not
reportable
Of
interest to other judges
Revised
In
the matter between:
ROLFES
PWM (PTY)
LTD APPLICANT
And
ROBERT
WILLIAM
GOLDING RESPONDENT
JUDGMENT
PRETORIUS
J.
This
is an urgent application requesting the court to enforce a restraint
of trade agreement as follows:
"2.
Respondent is restrained from the following activities:
2.1.
being interested in
as trustee, proprietor, shareholder, member, manager, director,
adviser, consultant, employee, financier or
agent or for any person
or entity which is directly or indirectly engaged in any activity
which is similar to or competes with
the business of Applicant;
2.2.
enticing any of
Applicant's customers, principals and suppliers away from it or to
terminate its relations with Applicant or to
change its contractual
arrangements with Applicant;
2.3.
encouraging or
enticing any emp oyees of Applicant to terminate its employment with
Applicant;
2.4.
doing any of the
acts listed in clause 5 of Annexure "B" to the Founding
Affidavit.
3.
The aforesaid interdict will be effective for
a
period of two
years commencing on 30 November 2015 within the province of
Gauteng."
(2)
In
Sunshine Records (Pty) Ltd v Frohling and Others 1990(4) SA 782
(A) at 794 B-E
the court summarised the law applicable in
restraint of trades as follows confirming the dictum in
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis 1984(4) SA 874 A:
"For present
purposes the effect of this judgment may be summarised as follows
(vide at 893 - 4). In determining whether a
restriction on the
freedom to trade or to practise a profession is enforceable, a court
should have regard to two main considerations.
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. In applying
these two main considerations
a courl will obviously have regard to
the circumstances of the case before it. In general, however, it will
be contrary to the
public interest to enforce an unreasonable
restriction on a person's freedom to trade."
FACTS:
(3)
From September 2011 until 30 November 2015 the respondent was
employed by the applicant as regional manager in Gauteng. On 5
September 2011 the respondent signed a restraint of trade agreement.
The respondent took up employment with the applicant's direct
competitor, after resigning. On 12 January 2016 the applicant
ascertained that the respondent had made a proposal to one of the
applicant's customers, namely First National Bank, Fairlands, in
regards to an air conditioner for services normally supplied by
the
applicant. The applicant thereafter launched this application,
alleging that the respondent is breaching the restraint of trade.
(4)
It is common cause that the restraint of trade is only valid for
twenty four (24) months and therefore the court is requested
to find
the application to be urgent. Idid hear the matter as an urgent
application.
(5)
On 12 January 2016 one of applicant's regional managers paid a
routine visit to one of the applicant's existing customers, FNB
(Fairlands) to which the applicant renders services in relation to
its air conditioning system, where he found the respondent's
business
card lying on the desk of the FNB representative. He was informed
that G-Chem, where the respondent is presently employed,
had done a
representation for the customer and introduced G-Chem as a supplier
who could deliver the same services as the applicant.
FNB (Fairlands)
was one of the customers which respondent attended to whilst working
for the applicant and the respondent knows
their needs, prices they
pay and who to contact. Respondent was, whilst working for the
applicant, the face of the applicant who
interacted with the clients
on a personal level.
OPPOSITION:
(6)
The respondent opposes the application and alleges that the restraint
is void due to vagueness in respect of the area of its
intended
operation; it is limited in its description of the type of business
in respect of which it operates and the restraint
is unreasonable in
that it protects no proper interest and is too wide in respect of its
duration the capacities of association
with a competitive firm
intended to be covered thereby.
VAGUENESS:
(7)
The restraint provides the territory of the restraint as:
"...any region in
which the Group conducts the Business
as
at the Termination
Date or during the 12 (twelve) month precedent the Termination Date."
It
is clear that the restraint does not relate to specific defined
areas. In the notice of motion the applicant requests the interdict
to be operational for two years from 30 November 2015 in the province
of Gauteng only, thus defining the area.
(8)
In
National Chemsearch (SA) (Pty) Ltd v Borrowman and Another
1979(3) SA 1092 (T) at 1116 D
the Full Bench decided:
"The ratio of
this approach I shall attempt to formulate
as
follows: when
a
restraint according to its terms
as
agreed upon is found to
be unreasonably wide in its scope of operation,
the Court
can, in a proper case, enforce the restraint partially,
by
issuing an order incorporating the addition of such limiting words to
the restraint as agreed upon as
are
appropriate
to
restrict
its
scope
of
operation to what is found to be reasonable."
(Court's
emphasis)
(9)
In
BHT Water Treatments (Pty) Ltd v Leslie 1993(1) SA 47 (W)
Marais J found at page 54:
"In this case,
instead of seeking to defend against attack the prima facie
enforceable restraint clause, the applicant has
in effect said: 'I
seek enforcement of my restraint clause subject to a limitation. To
that extent I concede that the original
clause was too wide.' This
seems to me the only effect of the concession, whether made on the
papers or in argument by counsel.
In the present case it seems to me
that the applicant is saying: 'My original restraint was in principle
good and enforceable,
save that it is geographically too wide and
should be limited to certain territories.' .The applicant, properly
making a concession
that the restraint is geographically too wide,
does not in my view concede that the restraint is otherwise
unreasonable, and I
am of the view that the onus of showing that
enforcement of the cut down restraint is unreasonable, remains on the
respondent."
(10)
I find in the present instance that the above dictum is applicable.
The applicant is only requesting a restraint in relation
to the
Gauteng province. There can thus no longer be any reliance on the
scope of the restraint being too vague in relation to
the territory.
BUSINESS OF THE
APPLICANT:
(11)
"Business"
is defined in the agreement as
"the
business conducted by the Group, namely the business of supplying
services, chemicals, equipment into water treatment,
personal care
and home care industries".
The respondent alleges that the
business of the applicant in this instance is limited and relates to
only two clients.
(12)
"Prescribed customers"
are defined as
"any
person with whom the Group conducted the Business, or any person with
whom the Group held negotiations for the supply
of
Prescribed
Goods or Prescribed Services,
within 12 (twelve) months
prior to the Termination Date."
(Court's emphasis)
(13)
"Prescribed services"
are defined as
"the
services conducted by the Group, including the
business of
supplying services,
chemicals, equipment into water
treatment, personal care and
home
care industries."
(Court's emphasis)
(14)
The respondent contends that if an end customer is not a player in
the
"water treatment industry"
such a customer will
fall outside the definition of
"Business"
and will
thus not be part of the restraint. The definition sets out that the
applicant will be
"supplying services".
(15)
According to the respondent the restraint is confined to customers
who conduct industries
"into water treatment, personal
care
and home care industries".
(16)
The applicant contends that the restraint does not only deal with
customers
"in the
water treatment industry",
but
also with customers who are supplied with services and chemicals
relating to water treatment. The applicant's representative
set out
in the founding affidavit that the main business of the applicant is
the supply of
"water
treatment solutions"
to
various industries. The applicant explains that, for example, should
a client run a cooling tower, the applicant ensures via
the treatment
that the water used does not corrode a customer's equipment. The
applicant conducts site visits on a monthly basis,
where the water is
tested and the relevant chemicals supplied, as necessary. It is thus
clear that the applicant is supplying services
as well.
(17)
The respondent voluntarily agreed to the terms of the restraint
agreement. It is common cause between the parties that, at
the time
of the respondent's resignation, he had paid weekly visits to the
applicant's existing customers, which were approximately
150 in
total; administered service representatives of the applicant for whom
he was responsible and sourcing new customers. To
the aforementioned
customers the respondent was the face of the applicant, representing
the applicant. He had personal contact
with the applicant's clients,
they knew him as the representative of the applicant and dealt with
him on a regular basis.
(18)
In Rawlins and Another v Caravantruck (Pty) Ltd 1993(1) SA 537 at 542
G-H Nestadt JA found:
"Even though the
persons to whom an employee sells and whom he canvasses were
previously known to him and in this sense 'his
customers', he may
nevertheless during his employment, and because of it, form an
attachment to and acquire an influence over them
which he never had
before. Where this occurs, what I call the customer goodwill which is
created or enhanced, is at least in part
an asset of the employer. As
such it becomes a trade connection of the employer which is capable
of protection by means of a restraint
of trade clause."
(Court's
emphasis)
(19)
In
Rawlins and Another v Caravantruck (Pty) Ltd
(supra)
it
was held:
"Much will depend
on the duties of the employees; his personality, the frequency and
duration of the contact between him and
the customers; where such
contact takes place, what knowledge he gains of their requirements
and business; the general nature of
their relationships (including
whether an attachment is formed between them, the extent to which
customers rely on the employee
and how personal their
association
is)"
This decision is
applicable in the present situation, as the respondent had intimate
knowledge of the business of the clients and
interacted with the
clients as the face of the applicant.
(20)
These common cause facts put paid to the respondent's submission that
there are only two clients who would be affected, as
at the time of
respondent's employment with the applicant, the respondent was
responsible for 150 customers. I find that the respondent
is
incorrect when submitting that customers such as FNB (Fairlands) fall
ouside the scope of the restraint. I find that the phrase
"supplying
services etc into
(the)
water treatment industry"
does
not mean that it must be a client in the water treatment industry,
but that customers who use
"water treatment"
products
are included regardless whether it is such a customer's principle
business. It is found that the respondent was known to
specific
customers, knew the products they needed and the prices that they
would pay and knew the price structures of the applicant
to quote to
the customers. I thus find that the applicant has a proprietary
interest. The principles set out in the above
dictum
are
applicable in these circumstances.
UNREASONABLENESS:
(21) The court has to
take cognisance of the fact that the respondent resigned at the same
time that his father and uncle had left
the company and their
restraint had run out. They are now all involved in a new company
which is in direct competition with the
applicant and the respondent
is an employee of the new company.
(22)
There is no reason given as to why the respondent could not be
employed in another province, by the new company. There is no
reason
for the respondent to be unemployed and economically inactive. He was
a highly regarded employee of the applicant, who earned
accolades and
bonuses as a result of his good work. In Den Braven SA (Pty) Ltd v
Pillay and Another 2008(6) SA 229 (D) at paragraph
50 Wallis AJ held:
"The proper
approach in my view is for the court to ask itself whether the
conduct that the applicant seeks to restrain by
way of an interdict
is conduct that falls within the terms of the restraint agreement and
from which the former employee agreed
to abstain. If the answer to
that question s in the affirmative the court then moves to an
analysis of whether it should, in accordance
with the principles of
public policy, enforce the agreement to that extent by granting
relief to the applicant. It has no need
in those circumstances to
have regard to those portions of the agreement that are more
extensive than the relief actually being
sought."
(Court's
emphasis)
(23)
The respondent's submission that a two year period for the restraint
is too long cannot be justified as he had agreed to the
restraint for
such a period when he signed the agreement. I cannot find that it is
against public policy for him to be restrained
for a further twenty
one and a half months.
(24)
In
BHT Water Treatment (Pty) Ltd v Leslie 1993(1) SA 47 (W) at 57J
-
58H
it was decided that a prejudice is met where an employee
takes up employment with a direct competitor even if the person
undertakes
not to divulge confidential information to the new
employer. No such guarantee was provided by the respondent in the
present instance.
(25)
In
Den Braven (supra)
it was decided at paragraph 32:
"In summary the
approach
of
the Constitutional Court
is
that
contractual obligations are enforceable unless they are contrary
to
public policy, which
is to
be discerned from the values
embodied in the Constitution and in particular in the Bill
of
Rights. Where the enforcement
of a
contractual provision
would be unreasonable and unfair in the light
of those
fundamental values it will be contrary
to
public policy
to
enforce the contract
or
the contractual term in question."
And
at p253 D-G Wallis AJ found:
"The person who
sells a
business and then
seeks to
make
use of
the
trade connection that he
sold
will be interdicted from doing
so
even in the absence
of a
restraint
of
trade
agreement.
The employee who seeks to tum their employer's
confidential information, trade
secrets
or
trade or customer connection to their own account for the benefit of
themselves or a competitor of their employer acts in a no
less
reprehensible fashion and I can think of no good reason why our law
should not afford a remedy to a business that seeks protection
against this type of unfair competition.
Where the
business has sought to protect itself by securing
a
restraint
of trade undertaking from the employee there is no reason for the
courts or the law to view this with disfavour. It is
only where the
bounds of public policy are overstepped that the court will withhold
its assistance."
(Court's emphasis)
(26)
I cannot find that the dictum in
Kelly Group Ltd v Capazorio and
Others 2011 JDR 0221 GSJ at 36-41
applicable as the facts in the
present matter differ.
(27)
The respondent has joined a company in direct competition to the
applicants business. He voluntarily agreed to the terms of
the
restraint agreement. The applicant has conceded that the terms of the
agreement are too wide in respect of the region or territory
and
seeks constraint only in respect of Gauteng. I can come to no other
conclusion, but that although 24 months may seem too long,
the
respondent signed the agreement at the time, and never complained
that the restraint was too wide. He is only complaining now
that the
shoe is pinching. In any event two and a half months of the 24 months
have already expired and the scope of the restraint
has been
curtailed to the province of Gauteng only.
(28)
Therefor I make the following order:
1. The application is
urgent in terms of Rule 6(12) and that non compliance with
ordinary time periods is condoned.
2. The Respondent is
restrained from the following activities:
2.1.
being interested in as trustee, proprietor, shareholder, member,
manager, director, adviser, consultant, employee, financier
or agent
or for any person or entity which is directly or indirectly engaged
in any activity which is similar to or competes with
the business of
Applicant;
2.2.
enticing any of Applicant's customers, principals and suppliers away
from it or to terminate its relations with Applicant or
to change its
contractual arrangements with Applicant;
2.3.
encouraging or enticing any employees of Applicant to terminate its
employment with Applicant;
2.4.
doing any of the acts listed in clause 5 of Annexure "B" to
the Founding Affidavit.
3. The aforesaid
interdict will be effective for a period of two years commencing on
30 November 2015 within the province of Gauteng
only.
4. The respondent is to
pay the costs of this application.
______________________
Judge
C Pretorius
Case
number
: 357912016
Matter
heard on : 2 February 2016
For
the Applicant : Adv. FJ Erasmus
Instructed
by
: VDT Incorporated
For
the Respondent : Adv. J Blou SC
Instructed
by
: Cyril Ziman & Associates
Date
of Judgment : 12 February 2016