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[2016] ZAGPPHC 791
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Montego Pet Nutrition (Pty) Ltd v Bouwer and Another (16575/15) [2016] ZAGPPHC 791 (1 September 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 16575/15
MONTEGO
PET NUTRITION (PTY)
LTD
....................................................................
APPLICANT
And
ANDRIES
MORNE
BOUWER
........................................................................
FIRST
RESPONDENT
SUPREME
PET
CC
......................................................................................
SECOND
RESPONDENT
APPEAL-JUDGMENT
KHUMALO
J
[1]
In this Application, the Applicant is seeking an order
interdicting and restraining the 1
st
Respondent, its
erstwhile employee, Andries Morne Bouwer (“Bouwer”
),
from being employed by the 2
nd
Respondent until 28
February 2017, which is a period of twenty four months from the date
of (“Bouwer”) resignation
from its employ on 27 February
2015.
[2]
When the Application was heard the Andries Morne Bouwer
(“Bouwer”) was already in the employ of the 2
nd
Respondent for a period of five months. The Applicant had
unsuccessfully launched an urgent application on 23 March 2015 to
stop
Bouwer from taking up his new employment on 2 March 2015.
[3]
Bouwer’s new employer, Supreme Pet CC, is cited as the
2
nd
Respondent as a party that might have potential
interest in the matter. No relief is sought against it.
FACTUAL BACKGROUND
[4]
During the tenor of Bouwer’s employment the Applicant
had converted from a Close Corporation called Montego Feeds CC to a
private company in the Applicant’s name “Montego Pet
Nutrition”. Bouwer remained in the employ of the Applicant.
[5]
The Applicant carries on business as a producer and
distributor of animal feed and related products. It operates a
production plant
in Graaf-Reinet and distributes to wholesalers and
retailers throughout the Republic of South Africa and the neighboring
countries
making use of marketing representatives. It is as a result
known as the market leader with many years of experience.
[6]
Bouwer was employed by the Applicant as one of the marketing
representatives for a period of five years, since 1 February 2010,
until his resignation. His contract of employment constituted a
confidentiality agreement that prohibited him from engaging in any
form of trade or a business in competition with the Applicant.
[7]
The Applicant alleges that Bouwer’s work as a
representative which included:
[7.1]
liaising with and keeping contact with the Applicant’s
customers in order to promote and sell the Applicant’s range of
products;
[7.2]
being familiar with the needs and requirements of customers,
maintaining stock levels;
[7.3]
maintaining customer relationships, building loyalty and
support for the Applicant’s range of products and the
Applicant’s
brand and ensuring that the Applicant does “repeat
business” with existing customers.
[7.4]
identifying new customers and in this manner, to increase the
Applicant’s market share and the Applicant’s brand and
product range profile and identifying new and maturing opportunities.
[7.5]
on a daily basis dealing closely and regularly with existing
clients, to be able to keep in touch with client’s needs and
market trends and in which the Applicant is able to maintain service
levels.
Which
all of these has resulted in the Applicant developing a tremendous
goodwill in the market and has secured for itself a place
as a market
leader and in the process the marketing representatives have:
[7.5.1]
forged close, intimate relationships with clients, know
names and addresses of clients and the identity of the contact
persons,
client’s requirements which include stock levels
required from time to time, products preferred by clients; payment
patterns,
clients expectations regarding lead times and delivery and
problems experienced by clients, of whatever nature.
[7.5.2]
attended the Applicant’s annual indaba where the
representatives were informed of the Applicant’s immediate
future plans
and developments that were in the pipeline that includes
identifying new and potential customers and opportunities in the
market.
They discussed and analyzed sale statistics and were
presented with the Applicant’s marketing plan, informed of new
market
messages to be used. They were also provided with a
spreadsheet with sales and marketing strategies which includes
advertising
campaigns, new products, launch dates detailing the three
new products the Applicant intends to launch in
2015.
[8]
The Applicant says all these constitutes confidential
information in the nature of trade secrets, privy to and developed
exclusively
by and for the use of Applicant which they regard to be
of great value and to constitute the basis and the very manner in
which
the Applicant brings its products to market and to secure and
maintain for itself a competitive edge.
Bouwer
has had over the year’s full and unfettered access to all this
business information. The excel spreadsheets are sensitive
and
confidential and were to be made available subject to suitable
confidentiality, undertakings and safeguards.
[9]
The restraint of trade Bouwer signed was for 24 months after
termination of his contract of employment, applicable in the
geographic
area known as Southern Africa.
[10]
According to Applicant the 2
nd
Respondent is a
direct competitor and rival trader of the Applicant rendering for all
intents and purposes identical services and
supplies a competing
brand of a similar product.
Bouwer’s
job description at 2
nd
Respondent includes those that he had whilst employed by the
Applicant. In addition he will also be a brand manager responsible
for developing the 2nd Respondent's marketing strategy from a
managerial position.
The 2
nd
Respondent will
benefit from Bouwer’s knowledge and understanding of inter
alia, the Applicant’s marketing strategies,
campaigns and the
like.
[11]
The Applicant claims Bouwer
is in breach of the restraint by being in the employ of a direct
competitor within the area prohibited
by the restraint, worst in a
managerial position with no doubt that its confidential information
will be imparted to and used for
2
nd
Respondent.
Also, Bouwer’s unlawful conduct poses the
Applicant a significant and substantial threat. By virtue of what
Bouwer knows,
the 2
nd
Respondent now knows all the details
necessary in order to compete for the custom of the Applicant’s
clients, without having
to expend time, cost and energy towards
establishing these relationships. All this indicate that the
Applicant has satisfied the
requirements for the interdict sought.
Without the interdict the Applicant will be exposed to real and
substantial harm, their
apprehension being reasonable.
BOUWER’S
ANSWERING AFFIDAVIT
[12]
Bouwer raised a point in limine, challenging the Applicant’s
locus standi to bring up the application against him when he has
signed his contract of employment with Montego Seeds CC a Closed
Corperation that was converted to a private company and its name
changed to the Applicant. The point was not persisted with during
argument and lacked merit.
[13]
He admits that the 2
nd
Respondent is one amongst
many competitors in the dog and cat food industry of which Applicant
is the market leader whilst the
2
nd
Respondent has a far
smaller percentage of the market.
[14]
He argues that:
[14.1]
competition cannot be excluded in the market place, and is
promoted by society, hence the creation of the Competition Act,
Commercial
Tribunal and Court.
[14.2]
Applicant has failed to make out a case whatever that it has a
protectable interest and the provisions of the restraint are not
enforceable due to the fact that:
[14.2.1]
the period of the restraint is far too long;
[14.2.2]
is too wide, as it excludes any competition on his part in the
entire Southern Africa;
[14.2.3]
it seeks to impose a penalty of R25 000.00 per month as
“damages”
[14.2.4]
infringes on his constitutional right to be economically
active;
[14.2.5]
Seeks to limit competition.
[14.3]
that he was not involved in the scientific formulation of
the pet feed that the Applicant sells.
[14.4]
the pet feed market, especially for dogs and cats is well
established and states that his presence or not therein will not
alter
the competition that exists therein.
[14.5]
he was an experienced marketer and sales representative prior
to being employed with Montego Feeds CC in 2010 when he was employed
as a sales representative for British American Tobacco Company
throughout the Republic of South Africa.
[14.6]
there is nothing specific or special to the sales of pet feed,
that sales representatives of either the Applicant or the 2
nd
Respondent, or any of their competitors within the market would not
know and he did not acquire any specific knowledge or training
that
is so exclusive as to constitute a protectable interest. The bringing
out of new packaging or the bringing out of a new flavour
of dog
biscuit or pet nutrition does not constitute a protectable interest.
[14.7]
typical customers or clients of pet food or nutrition
companies, are pet shops, vet shops and feed shops such as
cooperatives in
the rural areas. Such customers will have on their
shelves pet foods of various competitors.
[14.8]
The Applicant does not allege, and this did not happen in
practice that pet shops sold the pet food of the Applicant
exclusively.
[14.9]
The new marketing details that were given were only expressed
in broad terms without details. He only received limited information
provided to him by his erstwhile employer.
The
messages communicated six weeks in advance to the actual delivery of
the products in question to the customers, and is thereafter
known to
all and the public at large.
[14.10]
He is not in possession of a spreadsheet and denies that it
will be used by the 2
nd
Respondent and that it contains
sensitive or confidential information also that the new product which
includes a new flavor dog
treat constitute a protectable interest.
[14.11]
It is not his or the 2
nd
Respondent intention to
duplicate and / or “counter” any marketing campaigns and
the development of its products. He
is not involved in the
development of new products which he reckons takes many years.
[14.12]
The overlapping to an extent
of his job description with the Applicant cannot be restrained and do
not entitle the Applicant to
the relief sought.
The marketing
strategies and campaigns of all competitors in the market are well
known and established and nothing he acquired within
the employment
context of the Applicant would alter or benefit the 2
nd
Respondent’s position.
[14.13]
Any member of the public can access, via the internet, yellow
pages or the like, who would be the sellers to the members of the
public of pet food, such as vets, pet shops and cooperatives. No
specific industry related knowledge is required.
APPLICANT’S
REPLYING AFFIDAVIT
[15]
Applicant’s response to that is that:
[15.1]
the order sought will not interdict Bouwer from being
economically active, or from being employed. It to the contrary seeks
to interdict
Bouwer from being employed by the 2
nd
Respondent, because in being employed by the 2
nd
Respondent is in breach of the restraint. He is free to seek
employment anywhere in the Republic, provided the restraint is not
breached in the process. Many employers are not in competition with
the Applicant.
[15.2]
It does not seek to enforce the recovery of damages but to
enforce compliance with the restraint only.
[15.3]
It was agreed that the 1
st
Respondent would not be
compensated for complying with the restraint, signing the agreement
with no monetary quid pro quo). Bouwer
was aware of this when he
resigned.
[15.4]
It is not its case that Bouwer was privy to or part of the
technical and manufacturing processes. The relief sought is also not
what is aimed at.
[15.5]
The Applicants protectable interest lies in customer
connections, business and confidential information and interest of
this nature
worthy of protection as any technical process.
[15.6]
The knowledge of customers’
areas of concern, their preferences, payment patterns, preferred
products, names of contact persons
and general requirements and the
like being shared with a direct competitor entitles it to protection
of these interests.
A smaller undertaking like that of the 2
nd
Respondent will undoubtedly benefit from Bouwer’s employment.
Since the industry is small even with more competitors confidential
information trade secrets in the hand of a competitor will cause the
Applicant irreparable and unquantifiable.
ISSUES
TO BE DETERMINED
[16]
The issues to be determined are:
[16.1]
Whether there is a protectable interest that warrants the
enforcement of the restraint of trade.
[16.2]
The reasonableness of the restraint,(looking at the nature,
area, and its duration)of trade.
[16.3]
Whether or not the restraint infringes Bouwer’s
constitutional right to be economically active.
LEGAL
FRAMEWORK
[17]
The following guide has been established by the Appellate
Division in the words of EM Grosskop JA in Sunshine Records (Pty) Ltd
v Frohling
1990 4 SA 782
(A) 794B-E when he said:
“
In
determining whether a restriction on the freedom to trade or to
practice 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 and unfair
The
second consideration is that all persons should in the interest of
society, be permitted as far as possible to engage in commerce
or the
professions or, expressing it 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 court 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.”
(my emphasis)
[18]
In substantiating what was enunciated in Sunshine, Nienaber J
in Basson v Chilwan
[1993] ZASCA 61
;
1993 (3) SA 742
(A) 767H-I crafted the following
four questions that required to be answered in such issues:
(a)
Is daar ‘n belang van die een
party wat na afloop van die ooreenkoms beskerming verdien?
(b)
Word so belang deurdie ander party in
die gedrang gebring?
(
C) Indien wel, weeg sodanig belang kwalitatief en kwantitatief op
teen die belang van die ander party dat hy ekonomies nie onaktief
en
onproduktief moet wees nie?
(d)
Is daar ‘n ander faset van openbare belang wat met die
verhouding tussen die partye niks te maak het nie maar wat verg
dat
die beperking geehandhaaf moet word, al dan nie?
So
ver as die belang in © die belang in (a) oortref, is die
berspreking in die reel onredelik en gevolglik onaf-dwingbaar.
Dit is
n kwessie van beoordeling wat van geval to geval kan wissel
{Sibex
Engineering Sevices (Pty) Ltd v Van Wyk and Another
1991 2 SA 482
(T) te 486H)
[19]
With the dawn of our Constitution in a new democratic South
Africa the endorsement of the requirements carried a constitutional
context in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA
486 (SCA) still in line with the four questions identified in
Basson
Malan AJA stated that:
"The
four questions identified in Basson comprehend the considerations
referred to in s 36 (1) [of the Constitution]. A fifth
question,
implied by question ©, which may be expressly added, vis
whether
the restraint goes further than necessary to protect the interest,
corresponds with s 36 (1) (e) requiring
consideration of less restrictive measures to achieve the purpose of
the limitation. The
value judgment required by Basson necessarily
requires determining whether the restraint or limitation is
“reasonable and justifiable in an open and democratic
society based on human dignity, equality and freedom”
[20]
It has been long standing that a party who alleges that
the enforcement of the restraint of trade against him would be
contrary
to the public interest must prove his contention: see Magna
Alloys 893A-B 898C-D.
[21]
The reasonableness include taking into account the
positions of the contracting parties at the time the restraint of
trade was concluded
assessing their bargaining strength and at the
time of its enforcement, the nature of restraint (Whether or not a
restraint regulates
and promote or restricts or restrain trade thus
injurious to [the public)’.
[22]
In case of ex-employees, it is settled law that a clause
in a contract of employment that prohibits competition per se by the
employee
after he left the employment is void; see Supersafes (Pty)
Ltd v Voulgarides
1975 2 SA 783
(W). His skill is something that he
cannot be prevented from taking away with him, even if acquired as a
result of the employer’s
training, nor can he be prevented from
using his stock or knowledge, skill and experience; see Bonnet
Schofield
1989 2 SA 156.
Christie in the Law of Contract in South
Africa 6
th
Ed says that “To hold otherwise would
place an unreasonable restriction on a person’s freedom to earn
his living in
his chosen occupation.” It is also insensitive to
the right conferring the freedom of trade, occupation and profession
embodied
in s 22 of the Constitution.
[23]
In relation to protectable interest, propriety interest
that can be legitimately protected are trade secrets, including not
only
manufacturing processes but methods of operating and knowledge
of business conditions, and trade connections including lists of
customers or potential customers and the attachment formed between
customers and employee as the individual with whom they had
dealt in
the employers business, provided that such attachment is such that it
will probably enable the former employee to induce
the customers to
follow employee to his new employment or potential customers: see
reddv par 20: Supersafes.
[24]
In the case of Bouwer, contrary to what is alleged by the
Applicant the restraint of trade was signed by Bouwer when he was
looking
for employment with Applicant. It is clear that the Applicant
being in a privileged position of power applied a very burdensome
restraint It contemporary relevance is that Bouwer cannot be employed
anywhere in South Africa by any company that carries on business
of
pet food. Since such business is deemed a direct competitor by the
Applicant. Bouwer attempted to negotiate his exit, equal
bargaining
could neither be achieved nor expected. This is reflective of the
unreasonableness of the restraint and the scope of
area that it was
to cover. A period of two years is a very long time especially for a
restraint that covers the whole country in
South Africa.
[25]
The Applicant is not apologetic that what it tried to
bring to the fore with the restraint was to avoid Bouwer being in a
position
of competition with their business. That is why the fact
that he will be in a managerial position did not augur well with the
Applicant
who regards that as direct competition with a competitor.
Ignoring that it obviously also stifles Bouwer’s growth and
being
able to take advantage of available opportunities and in that
way affect his constitutional right and freedom to participate in
the
economy, which is contrary to public interest and constitute an
unreasonable restriction on a person’s freedom to trade.”
It is therefore so , that a restraint of trade designed to present
competition perse is unreasonable; see Basson 771 E-F.
[26]
Applicant’s allegation that
Bouwer employment as a manager will put him in a position where he
will be able to use their trade
secrets gained in its employ even
better and effectively as a manager, cannot justify preventing him
from putting into use his
skills and knowledge in the industry, an
opportunity presented by the higher position in a competing company
albeit smaller.
Bonnet
has already ruled
out the suppression of the usage of skills and knowledge gained from
previous employment. Bouwer however denies
that he acquires any
specific knowledge or training that is so exclusive as to constitute
a protectable interest.
[27]
The Applicant has alleged that Bouwer is said to have been in
a position where he gained access to vital and confidential
information
as a marketer claiming that its protectable interest lies
in customer connections, business and confidential information and
interest
of this nature that is worthy of protection. The Applicant
further reckons that the knowledge of customers’ areas of
concern,
their preferences, payment patterns, preferred products,
names of contact persons and general requirements and the like being
shared
with a direct competitor entitles it to protection of these
interests.
[28]
Mere customer connection and the like are insufficient to
create a protectable interest. The Applicant has not alleged or
raised
any concern with regard to attachment formed between Bouwer
and the customers as an individual with whom they had dealt with in
Applicant’s business, that such attachment is such that it will
probably enable Bouwer to induce the customers to follow
him to his
new employment or potential customers: See Rawlins and Another v
Caravantruck (Ptv) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541. Where the
customers solely reliant on Bouwer?, And how personal was their
relationship. Was such attachment such that
they can be expected to
be easy endues to change loyalty in a brand?, These been some of the
issues Applicant should have dealt
with to show a protectable
interest.
[29]
Bouwer has indicated that he joined the Applicant being a
marketer already with vast marketing skills and knowledge and that he
is not in possession of the spreadsheet that the Applicant is
alleging has the sensitive and confidential information it regard
as
part of its protectable interest. Also that the marketing strategies
were discussed in general terms at the indaba. Applicant
in its Reply
does not challenge Bouwer’s denial. As a result this will be
regarded as a valid statement. Hence absent such
information there is
nothing to protectable interest.
[30]
Applicant contends that a smaller undertaking like that of the
2
nd
Respondent will undoubtable benefit from Bouwer’s
employment. Bouwer on the other hand indicates that the 2
nd
Respondent is a relatively very small company t it can hardly be
regarded as a threat to the Applicant’s business to such
an
extent that a restraint of such a wide scope would be necessary. The
marketing strategies and companies of all competitors in
the market
are well known and established so nothing he acquired within the
employment contents of the applicant would alter or
benefit the 2
nd
Respondent position .The manner in which marketing at Applicant’s
place has been described to take place by Bouwer indicates
that after
a certain period that information is no longer useful as a product
would have been launched and known to the public.
Therefore the set
up does not amount to a protectable interest.
[31]
Bouwer has successfully shown that the applicant has no
interest to protect arising from his employment, and that the
restraint
of trade is contrary to public interest due to its
unreasonableness.
[32]
Under the circumstances:
The
Application is dismissed with cost.
N
V KHUMALO J
JUDGE
OF THE HIGH COURT GAUTENG DIVISION: PRETORIA
For
the Applicant: JASPER DANIELS
Instructed
by:
C J Bouwer Attorneys
Tel:
NO
336- 9581/2/3 Ref: S deLange5582
For
the 1
st
Responden
t: C R DU PLESSIS Instructed by
Klinkenberg
Inc
Tel:
Oil 1001715 Ref: SMyburgh