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[2015] ZAGPPHC 548
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Actom (Pty) Ltd v Coetzer and Another (A269/2015) [2015] ZAGPPHC 548 (31 July 2015)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: A269/2015
DATE:
31 JULY 2015
In
the matter between:
GERHARDUS
STEPHANUS
COETZER
.....................................................................
First
Appellant
ERB
TECHNOLOGIES
..............................................................................................
Second
Appellant
And
ACTOM
(PTY)
LTD
..............................................................................................................
Respondent
APPEAL
JUDGMENT
MURPHY
J
1.
The respondent (Actom) successfully applied as a matter of urgency on
17 December 2014 for an order enforcing certain restraint
of trade
undertakings. The order granted by Hughes J on 23 December 2014
interdicted and restrained the first appellant (Coetzer)
for a period
of 12 months from 1 November 2014 and in South Africa from
inter
alia
competing with the signalling
business of Actom or from being interested in any business which
trades in any field of activity similar
to the signalling business of
Actom. He was likewise restrained and interdicted from being employed
by any entity which carried
on such similar business, and was
specifically interdicted from being employed by the second appellant,
(ERB Technologies). Furthermore,
ERB Technologies was interdicted
from employing Coetzer for a period of 12 months from 1 November
2014.
2.
In her written judgment, the learned judge held that Coetzer was in
breach of a restraint of trade agreement he had concluded
as an
employee of Actom, inter alia on the grounds that he had sought and
obtained employment with ERB Technologies, a competitor
of Actom,
shortly after he resigned. The learned judge further held that the
restraint of trade was reasonable and enforceable
with the result
that Actom was entitled to the interdictory relief it sought.
3.
Coetzer and ERB Technologies applied for leave to appeal the order.
Hughes J granted leave to appeal to the Supreme Court of
Appeal on 2
March 2015.
4.
Consequent upon the application for leave to appeal being filed,
Actom brought an application in terms of Rule 49(11) and Section
18(1) and (3) of the Superior Courts Act 10 of 2013 (“the Act”)
for an order granting Actom leave to execute the order
of Hughes J,
that is to say an order to the effect that the operation of the order
of Hughes J would not be suspended by the filing
of the application
for leave to appeal or the granting of such an order.
5.
The application for leave to put the order into operation pending the
appeal process was heard by Raulinga J who granted the
application
and ordered that the costs of the application would be costs in the
appeal against the order of Hughes J. Although
the learned judge’s
reasoning is in parts sparse, he accepted that Actom would suffer
irreparable harm if the order was not
granted and that Coetzer would
have an appropriate remedy and thus would not suffer irreparable harm
if the order were granted
and he were to prevail on appeal. He made
no explicit finding with regard to any harm that ERB Technologies
might suffer. He furthermore
agreed with the line of reasoning of
Sutherland J in
Incubeta
Holdings v Ellis
[1]
that in the context of restraint of trade litigation, given the
limited duration of such agreements, the time delays in any
appeal
process, as well as the danger of the order of the court of first
instance being rendered a vacuous gesture, constitute
exceptional
circumstances justifying non-suspension of the order by the noting of
an appeal.
6.
The appeal before us is the appeal against the order of Raulinga J.
7.
Section 18 of the Act reads:
“
Suspension
of decision pending appeal
(1)
Subject to subsections (2) and (3), and unless the court under
exceptional circumstances orders otherwise, the operation and
execution of a decision which is the subject of an application for
leave to appeal or of an appeal, is suspended pending the
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 judgment, 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.
(4)
If a court orders otherwise, as contemplated in subsection (1) -
(i)
the court must immediately record its reasons for doing so;
(ii)
the aggrieved party has an automatic right of appeal to the next
highest court;
(iii)
the court hearing such an appeal must deal with it as a matter of
extreme urgency; and
(iv)
such order will be automatically suspended, pending the outcome of
such appeal.
(5)
For the purposes of subsections (1) and (2), a decision becomes the
subject of an application for leave to appeal or of an appeal,
as
soon as an application for leave to appeal or a notice of appeal is
lodged with the registrar in terms of the rules.”
8.
Section 18(4) of the Act makes it plain that applications and appeals
under the section should be dealt with expeditiously and
as matters
of extreme urgency. That has not happened in this case. The
application was filed in early February 2015, the order
was granted
in April and this appeal will likely be finalised in early August
2015, with the consequence that any order enforcing
the restraint
will lose much of its value by virtue of the restraint period
expiring in October 2015.
9.
Section 18 has been the subject of a deeply considered and lucid
analysis by Sutherland J in
Incubeta
Holdings v Ellis
[2]
.
There is no need to repeat his exposition other than to restate the
principles that now govern a determination of whether a proper
case
exists to grant leave to put an order into operation pending an
appeal process.
10.
At common law, and in terms of the now repealed Rule 49(11), the
court to which application for leave to execute is made has
a wide
general discretion to grant or refuse leave. In exercising the
discretion the court had to determine what is just and equitable
in
all the circumstances having regard to i) the potentiality of
irreparable harm being sustained by the loser in the court
a
quo
if leave to execute were to be granted; ii) the potentiality of
irreparable harm being sustained by the victor in the court
a
quo
if leave to execute is refused; iii) the prospects of success on
appeal, including whether the appeal may be a stratagem to gain
time;
and iv) in the case of equal potentiality of irreparable harm, the
balance of convenience.
[3]
11.
The discretion of the court was considered to be a discretion in the
wider sense and not one in a strict sense. In an appeal
against such
a decision, the appellate court is not bound to the conclusions of
the lower court and may depart from the lower court’s
order on
any grounds which it feels render this necessary. The appellate court
is not limited to an examination of the exercise
of the court’s
discretion on the limited basis applicable in a truly discretionary
situation, namely that it has exercised
its discretion capriciously
or upon a wrong principle, with bias or without substantial reasons.
The appellate court may depart
from the lower courts order when it
considers it to be wrong upon the law or the facts.
[4]
12.
As Sutherland J pointed out in
Incubeta
Holdings v Ellis
[5]
,
section 18 of the Act has introduced a new dimension to this scheme
by requiring first that the discretion may be exercised only
if the
conditions precedent of “exceptional circumstances” and
actual (more than a potentiality) irreparable harm to
one party and
no harm to the other are proven. Now it is incumbent upon the
applicant seeking leave to execute pending an appeal
to prove on a
balance of probabilities that it will suffer irreparable harm if
leave to execute is not granted,
and
that the other party will not suffer irreparable harm if the court so
orders. The onus of proof is on the applicant throughout.
The
requirement is no longer potentiality of irreparable harm and a
balancing of convenience by the court; rather the court must
be
satisfied factually that there will be irreparable harm to the victor
and no irreparable harm to the loser.
[6]
Once these jurisdictional facts are established, and the court is
satisfied that the circumstances are exceptional, it may exercise
its
wide discretion to grant leave to execute or not to grant leave.
13.
The requirement of exceptionality adds nothing new to the prior
practice or jurisprudence. An order granting leave to execute
pending
an appeal is a deviation from the norm that noting an appeal has a
suspensive effect. Deviation from the normal consequences
of noting
an appeal has always required justification in light of fact and
context specific exceptional circumstances.
[7]
However, section 18(3) of the Act introduces novelty in that the
balance of convenience will no longer be the principle of last
resort
where the potentiality or probability for irreparable harm to the
parties is equipoised. If the applicant despite showing
the
probability of irreparable harm to itself is unable to prove that the
other party will not suffer irreparable harm, the order
must remain
stayed and leave to execute be refused. But even more, it will not be
enough for the applicant to establish that the
other party will not
suffer irreparable harm, it must still in addition prove that it will
probably suffer irreparable harm itself
if leave to execute is not
granted.
14.
The facts in
Incubeta
Holdings v Ellis
[8]
are not dissimilar to the facts in the present case. There too the
applicant sought leave to execute on an interdict enforcing
a
restraint of trade that had been suspended by virtue of the noting of
an appeal. In concluding that exceptionality had been established,
Sutherland J considered most relevant the weighty consideration that
if the order was not put into operation, the relief would
be
forfeited by the applicant because the short duration of the
restraint would expire before exhaustion of the appeal process.
The
learned judge elucidated the position as follows:
“
In
my view the predicament of being left with no relief, regardless of
the outcome of an appeal, constitutes exceptional circumstances
which
warrant a consideration of putting the order into operation.
The forfeiture of substantive relief because of procedural
delays,
even if not protracted in bad faith by a litigant, ought to be
sufficient to cross the threshold of exceptional circumstances.
The
plight of the victor alone is probably all that is required to pass
muster. Nonetheless, I am not unconscious of the undesirable
outcome
that relief granted by the court becomes a vacuous gesture. A court
order ought not to be lightly allowed to evaporate,
a fate which,
seems to me, would tend to undermine the role of courts in the
ordering of social relations.”
[9]
15.
In his judgment in this matter, Raulinga J made it clear that he
agreed with these
dicta
of Sutherland J and that the limited duration of the restraint period
and the prospect of the order being rendered nugatory, and
the
contractual undertakings futile, were sufficient to constitute
exceptional circumstances, being the first condition precedent
to the
exercise of the discretion to grant leave to execute.
16.
On appeal before us, the appellants submitted that procedural delay
and the reducing of time under the restraint of trade are
not
sufficient to constitute exceptional circumstances. Mr Wagenaar SC,
counsel for the first appellant, contended that something
more than a
loss of remedy through procedural delay is required before there can
be exceptional circumstances; otherwise exceptionality
would arise
automatically in all restraint of trade cases and that this could not
have been the intention of the legislature. He
submitted that if the
legislature had wanted non-suspension to apply in the case of appeals
of all court orders enforcing restraints
of trade it would have
provided for such as it did with interlocutory orders in section
18(2) of the Act. That need not be so.
Not all restraints of trade
are for such short periods. Moreover, it is desirable from a policy
perspective, and in the interests
of the proper administration of
justice, that interlocutory orders should be appealed sparingly and
ought not to be allowed to
delay the adjudication of the main suit or
application. A final interdict enforcing a restraint of trade is
different, and there
is no reason why the normal rule of suspension
should not apply unless the victor can show exceptionality and meet
the requirements
of prejudice and non-prejudice. If restraint of
trade enforcement proceedings give rise to exceptionality in many
cases, then the
condition precedent for the exercise of the
discretion will exist in many cases. So be it. A high prevalence of
exceptional circumstances
in cases involving the enforcement of
restraints of trade cannot of itself be sufficient basis to regard
such circumstances otherwise.
17.
The reasons given by Sutherland J, and as agreed with by Raulinga J,
are of equal applicability and relevance in this case.
They are
compelling and logically persuasive. The Supreme Court of Appeal
(SCA) will not hear the appeal on the merits before the
expiry of the
restraint period on 31 October 2015. The effect of the appeal against
the judgment of Hughes J will be that even
without any consideration
of the merits of the appeal, Coetzer and ERB Technologies will have
achieved the rendering of the order
nugatory and the enforcement of
the restraint of trade undertakings futile. As both Raulinga J and
Sutherland J appreciated, damages
for breaches of a restraint of
trade are difficult to prove or collect, and will mostly not advance
the purpose of the contractual
undertaking. The party in whose favour
the restraint operates has contracted explicitly for a restraint as
the preferred effective
remedy. The loss of that remedy solely
because of the effluxion of time in litigation should be avoided
where possible. And, hence,
the finding by Raulinga J that such a
prospect constituted exceptional circumstances cannot be faulted.
18.
The remaining enquiry is whether Actom discharged its onus in
relation to the two distinct requirements of irreparable harm.
19.
The harm which Actom will suffer if leave to execute is not granted
is self-evident and derives from the exceptional nature
of the relief
sought by it. If leave to execute is refused, the contractual
undertaking and the interdict granted by Hughes J will
be worthless.
The nature of the harm overlaps and equates with what exceptionally
justifies deviating from the norm in the circumstances.
Actom will
suffer a loss of its contractual and delictual entitlements to
restrain Coetzer and ERB Technologies for the restraint
period. Actom
does not seek or even want damages. It wants to hold Coetzer to a
contractual undertaking not to obtain employment
or to have any
association with a competitor in South Africa for a limited duration
of 12 months. Its protectable interest is the
right to prevent the
association with a competitor. It saw obvious advantages in having
such an entitlement and paid consideration
to Coetzer for the benefit
of it. Coetzer allegedly received a
quid
pro quo
in the form of shares in
exchange for agreeing to the restraint. On the assumptions that there
is a protectable interest and the
restraint of trade is reasonable
and enforceable, as Hughes J found, the loss of any such entitlement
by Actom means that it will
suffer harm in the form of that loss. The
question arising is whether that harm is irreparable. Can the harm
suffered by the loss
of entitlement to restrain be repaired in any
way? The only possible reparation will be damages which may well
prove illusory.
20.
Raulinga J understood as much. He again accepted the line of
reasoning of Sutherland J in
Incubeta
Holdings
that the only value in the
relief of a restraint interdict is to stop the breach and protect
legitimate interests during the period
of the restraint. Damages are
not an appropriate alternative remedy precisely because the relief
sought aims to compensate for
the ineffectiveness of damages as a
remedy in such circumstances. The protectable interest consists of
the right to prevent an
association between a former employee and a
competitor in the immediate aftermath of a resignation from
employment for a reasonable
but limited period of time. In the
premises, the loss of the entitlement to restrain is indeed
irreparable and consequently the
finding of Raulinga J that Actom
would suffer irreparable harm if leave to execute against both
appellants were not granted is
sustainable and correct.
21.
That leaves only the issue of whether the appellants would suffer
irreparable harm if the leave to execute were granted. The
harm
Coetzer and ERB Technologies will suffer is that they will be denied
the opportunity to be in an employment relationship for
the next
three months. Coetzer has set out in some detail the financial
difficulties he finds himself in as a result of his divorce
which was
finalised round about the same time as he resigned from Actom. He
claims he resigned from Actom because he wanted to
retire but then
faced the devastating consequences of his divorce from his spouse and
sought and obtained employment with ERB Technologies,
an acknowledged
competitor of Actom, within days of his resignation. He does not
explain why he did not endeavour to ameliorate
his position by
seeking re-employment with Actom, who had accepted his resignation
with reluctance. His explanation for taking
employment with ERB
Technologies is thus open to question. But there is no need to
resolve this issue of credibility. The fact
of the matter is that any
harm that Coetzer may suffer by being out of employment for a few
months can be mitigated and withstood.
He is a man of some means,
owns immovable property and other assets. He had planned to retire at
the age of 63 and thus no doubt
made provision for at least 15 years
of pensioned unemployment. His affidavit does not disclose the nature
and full extent of all
his assets. That he may have been divested of
a substantial portion of them by divorce does not mean that he has
been rendered
destitute. Nevertheless, he will certainly suffer harm
in that if the order is executed he will lose his employment with ERB
Technologies,
and perhaps may not regain it. Is that harm
irreparable?
22.
Should Coetzer prevail on appeal he will be able to successfully sue
Actom for any lost earnings resulting from the termination
of his
contract of employment with ERB Technologies. The quantum will be
easy to compute. He will have a delictual cause of action
against
Actom for the losses incurred by him as a result of its wrongful
interference in his contract of employment with ERB Technologies.
Mr
Wagenaar SC contended the right is hollow because Actom in such a
suit will be able to rely on the order to execute as a defence
to
wrongfulness and that Coetzer ultimately would be non-suited. I doubt
that is correct. If Actom has negligently asserted a claim
which it
does not lawfully have and thereby causes damage to Coetzer it cannot
avoid the charge of wrongfulness solely on the ground
that it was
able to execute a court order in terms of section 18 of the Act. The
adjudication of the application for leave to execute
does not involve
the adjudication of the lawfulness of the restraint of trade. That is
now a matter for the SCA. No
res
judicata
or issue estoppel arises and
the order granting leave to execute is unlikely to serve as a
sufficient defence to the issue of wrongfulness
in any delictual
claim which Coetzer may acquire.
23.
Actom further argued that Coetzer’s harm is in any event not
irreparable in that on the probabilities he could easily
find
alternative employment for the short duration of the restraint of
trade. In his answering affidavit, Coetzer stated that he
is in
effect unemployable, given his age, gender and race, and that he had
made efforts after the order handed down by Hughes J
to obtain
employment but was unsuccessful. In reply, Actom complained that the
allegations were bald and unsubstantiated. Coetzer,
in a duplicating
affidavit, mentioned the names of four companies which he had
approached, but did not substantiate the allegation
with details of
the reasons for his lack of success, nor did he file confirmatory
affidavits from them. Mr Hollander, counsel for
Actom, submitted
these allegations should have been made in the answering affidavits,
and hence must be disregarded or struck out.
I am persuaded that the
allegations made by Coetzer are in any event untenable. He has a
lengthy and successful record as a skilled
contracts manager in the
industry. His probable employability is amply demonstrated by the
fact that within days of his resignation
from Actom he was able to
obtain employment from ERB Technologies, who is prepared to put
itself at considerable financial risk
by joining this litigation in
order to retain his services. It is common cause that ERB
Technologies regard him as a valuable employee
and that they intend
to keep him. The allegation in its opposing affidavit that it is not
in a position to reserve his employment
until 31 October 2015, is
accordingly unconvincing.
24.
In the premises the court
a quo
was in the final analysis correct in its finding that any harm
suffered by Coetzer in the event of leave to execute being granted
was not irreparable.
25.
ERB Technologies in its opposing affidavit conceded that it would not
suffer actual harm but only inconvenience and possibly
potential harm
were it obliged to terminate Coetzer’s contract of employment.
That being so, it is common cause that ERB
Technologies will not
suffer actual irreparable harm if leave to execute is granted.
26.
In their heads of argument, counsel for the appellants laboured the
merits of the main application in the hope of persuading
us that the
appeal to the SCA had excellent prospects of success, and was thus a
compelling factor in favour of upholding the appeal
against the leave
for execution. Such an approach in effect would have us decide both
the appeal on execution and the appeal on
the merits pending before
the SCA. There is admittedly an element of logic in the submission
that if the merits of Actom’s
case are questionable, it
arguably should have an adverse effect on the application. By the
same token, it might be argued, were
we to disagree with Hughes J’s
finding that the appellants have reasonable prospects of success on
appeal before the SCA,
such should strengthen our resolve to dismiss
the appeal and to order execution. Be that all as it may, there are
sound reasons
why the merits of the main application should not come
into consideration. It would simply not be proper for this court to
pronounce
on the merits of issues that are pending before a higher
court of appeal. For that reason, counsel wisely did not press the
issue
in argument before us. Nonetheless, it is worth recalling what
Sutherland J stated in this regard in
Incubeta
Holdings v Ellis
:
[10]
“
I
have made no reference to the merits of the case which resulted in
the interdict. In my view they are not pertinent to this kind
of
enquiry. The considerations that are valuable presuppose a bona fide
application for leave to appeal or an actual appeal. No
second-guessing about the judgment per se comes into reckoning.”
27.
In the result I am persuaded that the respondent, Actom, proved on a
balance of probabilities that it would suffer irreparable
harm if the
order of Hughes J was not given immediate operation and execution and
that Coetzer and ERB Technologies would not suffer
irreparable harm
if leave to execute was granted. Moreover, the court
a
quo
’s finding that there were
exceptional circumstances justifying the non-suspension of the order
of Hughes J is correct and
hence there is no basis for interfering
with its order.
28.
The appeal must therefore fail and I would make an order that the
appeal be dismissed with costs.
JR
MURPHY
JUDGE
OF THE HIGH COURT
I
agree
LM
MOLOPA-SETHOSA
JUDGE
OF THE HIGH COURT
I
agree
VV
TLHAPI
JUDGE
OF THE HIGH COURT
Date
Heard: 29 July 2015
For
the First Appellant Adv SD Wagener SC
Instructed
By: Coetzer & Partners
For
the Second Appellant: Adv WF Pienaar
Instructed
By: Coetzer & Partners
For
the Respondent: Adv L Hollander
Instructed
By: Fluxmans Inc.
[1]
2014
(3) SA 189 (GJ)
[2]
Footnote
1 above
[3]
[3]
South
Cape Corporation (Pty) Ltd v Engineering Management Services (Pty)
Ltd
1977 (3) SA 534
(A) at 544-546
[4]
Ndlovu
v Ngcobo; Bekker v Jika
2003(1) SA 113 (SCA) at 124.
[5]
At
194C
[6]
Liviero
Wilge Joint Venture v Eskom Holdings Ltd
2014 JDR 1611 (GJ) paras 23-25
[7]
Incubeta
Holdings v Ellis
2014
(3) SA 189
(GJ) at 195G.
[8]
2014
(3) SA 189 (GJ)
[9]
At
1961-197A
[10]
2014
(3) SA 189
(GJ) at para 26