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[2016] ZAGPPHC 894
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MPU Copiers (Edms) Bpk v Canon Business Centre (Nelspruit) Operated by CBC Business Centre Gauteng t/a Canon and Others (50910/2016) [2016] ZAGPPHC 894 (23 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
23/9/16
CASE
NUMBER: 50910/2016
Reportable:
No
Of
interest to other judges: No
Revised.
MPU
COPIERS (EDMS) BPK
and
CANON
BUSINESS CENTRE (NELSPRUIT) OPERATED
FIRST
RESPONDENT
BY
CBC BUSINESS CENTRE GAUTENG T/A CANON
LOWVELD
RSA
TECHNICAL SERVICES (PTY) LTD
SECOND RESPONDENT
IP
SOLUTIONS (PTY) LTD
THIRD RESPONDENT
WARREN
PATRICK MCLINTOCK
FOURTH RESPONDENT
STEPHANUS
FREDERIK STEYN
FIFTH RESPONDENT
JUDGMENT
TLHAPI
J
[1]
This is an urgent application in terms of
section 18
of the
Superior
Courts Act 10 of 2013
which seeks to enforce a Court Order of 22
July 2016. The Order interdicted the fifth respondent from seeking or
retaining
employment with the first to the fourth respondent for a
period of 12 months from 31 March 2016, and within a 100 km from any
office
of the applicant pending the finalization of the respondents
leave to appeal such Order. The offices of the applicant were
situated
in Mpumalanga, Limpopo and Gauteng. This order gave effect
to a restraint of trade agreement annexed as "F" to the
main
application.
[2]
Although the merits of the main application were not for
consideration in this application which relates to the fifth
respondent
only ( 2 of the order of 22 July 2016), it is important to
mention that all the respondents in the main application applied for
leave to appeal the Order of 22 July 2016. The said Order was in the
form of a
rule nisi
pending the finalization of an action to
be instituted by the applicant and, apart from the restraint placed
on the fifth respondent
it also interdicted the other respondents' as
summarized by Mr William's for the fifth respondent in his Heads of
Argument in this
application, where all respondents in the main
application in terms of prayers 2, 3 and 4 of the amended notice of
motion were:
" 11.1. ordered
to hand over to the applicant, all copies of applicant's client
database, financial statements, accounting
records, personnel
records, sales records of equipment, and records of applicant's
pending service contracts, that are in the respondents'
possession
11.2. interdicted from
using, spreading, or disclosing to any other person, any of the
information listed in subparagraph 11.1 supra;
11.3. interdicted from
approaching applicant's existing clients, and from interfering with
the contractual relationship between
applicant and its clients."
[3]
This application was preceded by communication which exchanged hands
between the applicant's and respondents' attorneys:
29
July 2016
"we are in the
process of preparing
summons........
Our instructions are
that your clients are indeed in possession of our client's
confidential information and therefore we enquire
whether your clients would be prepared to acknowledge
same
without prejudice, to return our client's
information and to undertake not to
use
such
information in order to avoid further legal action"
01
August 2016 after application for leave to appeal was launched;
"We urgently
enquire whether your client
is
prepared
to give an undertaking that it will abide the existing Order in all
respects pending the outcome of the Appeal. In particular
we receive
your unconditional undertaking that the Firth Respondent Mr Steyn
will refrain from entering the employment of
any
of the other Respondents pending the outcome of the appeal.
"
In
response to the above letters the respondents informed the applicant
that the respondents' could not abide the Order as given
for reasons
outlined in the leave to appeal and due to the fact that they were
not in possession of any confidential information
of the applicant.
[4]
The applicant averred that it was as a result of the above response
on the part of the fifth respondent that this application
was
launched. Mr F B Willemse the deponent to the founding affidavit was
the managing director and only shareholder of the applicant
who in
paragraphs 15, 16 and 17 sets out other reasons for the launch of
this application. He averred that the applicant would
suffer
irreparable harm if the fifth respondent was allowed to use its
confidential information relating to its client database.
The
information was unlawfully obtained and would result in the
undermining of its client base and reputation. The Fifth Respondent
had been the financial and general manager at the Nelspruit office
and had direct business dealings with one of the applicant's
largest
clients. He also had insight into the applicant's confidential
information in respect of its marketing strategies, financial
models
of all its outlets in Mpumalanga, Limpopo and Gauteng. Furthermore,
the applicant contended that the respondents' could,
despite
the existing
rule nisi
and with the help of the fifth
respondent 'change the pricing methods' in order to create the
impression to its client base that
the applicant was more expensive.
The applicant does not dispute the fact that its competitors and
itself have other means of generating
information on opposition
customer base, through the customers themselves in an effort to
negotiate better contracts and through
a database generated by sales
representatives in the business.
[5]
The fifth respondent averred that its appeal was based on grounds
that there was a dispute concerning the contract governing
the
relationship between the applicant and himself and that the Court
Order exceeded the geographical area of restraint that was
enforced.
The information sought to be protected was not protectable and he
denied having disclosed such information or of having
been in
possession thereof. The fifth respondent contended that the letter of
the 29 July 2016 was not relevant to this application.
[6]
The fifth respondent contended that the interim relief was final in
effect in that the envisaged action which was still to be
instituted
would take time before it was finalized which was well beyond April
2017 and that at that time the subject of the relief
sought regarding
his restraint would be academic. He faced financial ruin because the
restraint made it impossible for him to earn
an income. He earned a
nett salary of R42, 000.00 as compared with the R40, 000.00 earned
with the Applicant and between him and
his wife they earned an amount
of R72 000.00. Their joint monthly expenses amounted to R60 000.00
including mortgage bond motor
vehicle loans, medical aid, life
insurance and expenses relating to their baby. The applicant
had failed to tender security
in seeking to enforce the order pending
the outcome of the appeal.
[7]
Section 18 of the Act provides:
" Suspension of
decision pending appeal"
(1)
Subject
to subsections (2) and (3), and unless the court under exceptional
circumstances orders otherwise, the operation and the
execution of
a
decision which is the subject of an
application for leave to appeal or of an appeal, is suspended pending
decision of the application
or appeal;
(2)
Subject
to subsection (3), unless the court under exceptional circumstances
orders otherwise, the operation and execution of
a
decision that is an interlocutory order not
having the effect of
a
final
judgement, which is the subject of an application for leave to
appeal or of an appeal, is not suspended pending the
decision of the
application or appeal;
(3)
A
court may only order otherwise as contemplated in subsection (1) or
(2), if the party who applied to the court to order otherwise,
in
addition proves on
a
balance
of probabilities that he or she will suffer irreparable harm if the
court
does not
so
order and that the other party will not suffer
irreparable harm if the court
so
orders.
[8]
The three jurisdictional requirements to be proved are provided for
in section 18(1) and 18(3) and they are (i) exceptional
circumstances; and that the party who applies to court must prove
(ii) irreparable harm (iii) on a balance of probabilities. What
constitutes exceptional circumstances cannot be imported at random
from existing authorities. In
lncubeta Holdings (Pty) Ltd and
Another v Ellis and Another
2014 (3) SA 189
(GJ) from paragraphs
18 - 20 it was stated that the conclusion that exceptional
circumstances exist was not "a product of
a discretion, but a
finding of fact' and that the meaning, and enquiry into the existence
of such circumstances should be found
within the specific provision
of that specific statute and that it was important to determine the
'function it performs in that
specific context'. At paragraph 21 of
lncubeta
supra
the following is stated:
"The context
relevant to section 18 of SCRT is the set of considerations pertinent
to
a
threshold test to
deviate from
a
default
position; ie the appeal stays the operation and execution of the
order. The realm is that of procedural Jaws whose policy
objectives
are to prevent avoidable harm to litigants. The primary rationale for
the default position is that finality must wait
the last court's
decision, in case the last court decides differently, the reasonable
prospect of such outcome, being an essential
ingredient of the
decision to grant leave in the first place. Where the pending
happening is the application for leave itself,
the potential outcome
in that proceeding, although conceptually distinct from the position
after leave is granted, ought for policy
reasons, to rest on the
same
footing."
[9]
The Court is to establish whether there are exceptional circumstances
that justify a departure from the norm that an application
for leave
to appeal would have the effect of suspending the
rule nisi.
Exceptional circumstances would exist if the applicant would
suffer irreparable harm if the relief sought is not granted. The test
is whether the applicant for leave to appeal (the fifth respondent)
would suffer irreparable harm, if answered in the affirmative
the
order must remain stayed
' even if the stay will cause the victor
(the applicant) irreparable harm too. In addition, if the loser will
not suffer irreparable
harm, the victor must nevertheless show
irreparable harm to itself ;
lncubeta
supra,
paragraph
24.
[10]
The applicant contention is that if the relief sought is not granted
he would suffer irreparable harm due to the potential
that exists it
would lose clients and suffer damages in that the fifth respondent
would share information with its competitors
in the same business
being the other respondents. The concession by Counsel for the
applicant that the
rule nisi
exceeded the geographical area of
the restraint dilutes to a great extent the grounds upon which the
applicant maintains it will
suffer irreparable harm. It was submitted
by council for the fifth respondent that there was an inherent risk
in this competitive
market and in the business that confidential
information could be obtained by means other than the information
being sourced from
a former employee such as the fifth respondent.
The fact that in the business competitor information can be obtained
and used to
determine better pricing by means other than the fifth
respondent's employment by a competitor is indicative of the fact
that the
fifth respondent will not 'undermine applicant's
reputation' or cause it to suffer damages if the
rule nisi
is
stayed..
[11]
Counsel for the applicant argued that in view of the concession made
the
rule
nisi
could be applied only to the Nelspruit
Office. I am not in agreement with this submission because it is not
for this Court to amend
the application of the rule nisi. The merits
in the main application were fully ventilated and the rule is the
subject of an application
for leave to appeal. It was evident that
the
rule nisi
was granted on the assumption that the restraint
was applicable to Mpumalanga, Limpopo and Gauteng and within a 100 km
of such offices.
This application also is based on grounds that the
applicant would suffer irreparable harm in the areas already
mentioned in that
the fifth respondent would share confidential
information with competitors. The relaxation of the rule to be
applicable in Mpumalanga
alone brings to futility the reason for this
application. Furthermore, by making this concession the applicant
would still have
to show that it will suffer irreparable harm. As I
see, it no case in this regard has been made out on the papers.
[12]
As I see it this concession alone establishes that it is the fifth
respondent who will suffer irreparable harm if the relief
sought is
granted. The personal circumstances of the fifth respondent show that
up to now the restraint has restricted the fifth
respondent from
gainful employment not only in his hometown Nelspruit but in the
geographical areas exceeding the restraint agreement.
It is unlikely
that the appeal would be heard before 31 March 2017. I am not
inclined to deal with whether there are prospects
in the appeal. As
already indicated the concession alone greatly dilutes that which the
applicant wished to protect and I find
that the fifth respondent
would be prejudiced by the grant of the relief sought. The
application must therefore fail.
[13]
In the result the following order is given:
1.
The application is dismissed with costs.
_______________
TLHAPI
VV·
(JUDGE
OF THE HIGH COURT)
MATTER
HEARD ON
: 23
AUGUST 2016
JUDGMENT
RESERVED ON
: 23
AUGUST 2016
ATTORNEYS
FOR THE APPLICANTS
:
CHROST
SMITH PROKUREURS INGELYF
ATTORNEYS
FOR THE RESPONDENTS :
EAMON DAVID QUINN ATT