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[2015] ZAFSHC 100
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Carospan (Pty) Ltd t/a Nashua Free State And Northern Cape v Oelofse and Another (1932/2015) [2015] ZAFSHC 100 (28 May 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 1932 /2015
In
the matter between:
CAROSPAN
(PTY) LTD t/a NASHUA
FREE
Applicant
STATE
AND NORTHERN CAPE
and
I.D.
OELOFSE
1
st
Respondent
SAMSUNG
BUSINESS TELEPHONE SYSYTEMS
2
nd
Respondent
CORAM
:
BOONZAAIER, AJ
JUDGMENT
:
BOONZAAIER, AJ
HEARD
ON:
14 MAY 2015
DELIVERED
ON:
28 MAY 2015
JUDGMENT
[1]
The applicant seeks to enforce a contractual restraint of trade and
confidentiality undertakings given by first respondent in
favour of
the applicant. He seeks enforcement of the restraint until 30
st
January 2016 in the Bloemfontein/Kimberley/Welkom/Upington area.
[2]
The first respondent opposes the application. The basis of the
opposition and the essential point upon which the application
hinges,
is whether or not the first respondent is in fact presently employed
by the second respondent. First respondent contends:
2.1
that the applicant did not make out a proper case in it` s founding
affidavit and may not do so in the replying
affidavit;
2.2
that the applicant entered into the contract with first respondent
with unclean hands, therefor the contract
is illegal;
2.3
it is disputed whether first respondent in fact entered the service
of second respondent as from 5 January
2015 after he resigned from
the employment of applicant.
FACTUAL
BACKGROUND
[3]
This dispute arises from an initial contract of employment entered
into between the applicant and first respondent. There existed
an
agreement between applicant (hereafter refer to as Nashua) and 1
st
respondent (hereafter refer to as Oelofse) in terms of which the
latter was bound not to engage in any business activity (as defined)
in the prescribed area in competition with the applicant.
[4]
Nashua seeks to protect its existing clientele by interdicting
Oelofse to:
4.1
divulge or make available to any other person details of any of the
applicant`s confidential information,
or use it for his or any other
person`s benefit;
4.2
directly or indirectly:
4.2.1
carry on or otherwise be engaged or associated or concerned or
interested in or employed by;
4.2.2
solicit business for;
4.2.3
be a director, shareholder, member, employee or partner of or in;
4.2.4
act as a consultant, trustee, manager, agent, representative,
partner, advisor, officer or in any other
capacity to;
4.2.5
render any service (gratuitously or otherwise) to:
Any
entity directly or indirectly engaged or interested in any
competitive activity or business in competition with the applicant.
4.3
Solicit orders from the applicant`s prescribed customers, client or
suppliers for any of the prescribed goods
and/or prescribed services;
4.4
Canvass business in respect of the prescribed goods and/or the
prescribed services from prescribed customers,
clients or;
4.5
Sell or otherwise supply any of the prescribed goods to any
prescribed customer, client or suppliers;
4.6
Render any prescribed services to any prescribed customer, client or
supplier;
4.7
Purchase any prescribed goods from any prescribed customer, client or
supplier, or accept the rendering of
any prescribed services from any
prescribed customer, client or supplier.
4.8
Solicit appointments as a distributor, licensee, agent or
representative of any prescribed customer, client
or supplier in
respect of the prescribed goods and/or prescribed services;
4.9
Carry a competitive activity or any portion thereof.
[5]
Oelofse allegedly has taken up employment with 2
nd
respondent (hereafter refer to as Samsung) in direct violation of the
contractual arrangement.
[6]
The issues between the applicant and first respondent is firstly
whether Nashua approached the court with unclean/dirty hands.
This contention is primarily based upon the allegation that Samsung
had concluded a similar kind of restraint covenant with Oelofse
prior
to his employment with Nashua. Secondly if Oelofse is at present
employed by Samsung.
UNDISPUTED
FACTS
[7]
The contract of employment between Nashua and Oelofse was entered
into on 16
th
October 2012, the restraint of trade agreement was concluded 20
th
March 2013.
[8]
Oelofse worked for Samsung prior to his employment with Nashua.
[9]
Oelofse was headhunted by Nashua and brought with him an existing
client basis from Samsung for Nashua`s benefit.
[10]
Samsung did not enforce its contractual rights at any stage to stop
Oelofse’s employment with Nashua.
[11]
Oelofse was promoted and since 2014 he has been made privy to
all contractual information between Nashua and its
existing
clientele.
[12]
Oelofse resigned at Nashua on 5 January 2015 after he encountered
dissatisfaction about certain aspects of his employment.
[13]
The alleged restraint period started at the last day of employment
31
st
of January 2015.
[14]
The reasonableness of the contract as to period and ambit is not in
dispute.
NASHUA’S
CASE
[15]
At the time when Oelofse left the employment of Nashua he
indicated that he does not intend to join a competitor.
[16]
On the 14
th
April 2015 Nashua became aware that Oelofse has taken up employment
with Samsung from a date unbeknown. This was in direct
violation of this covenant.
[17]
Immediate steps were taken by the legal representatives of Nashua and
letters were addressed to both respondents to refrain
from any
unlawful conduct.
[18]
Oelofse phoned Me. Ferreira from Nashua to indicate his dismay with
the situation.
[19]
He never admitted or denied being employed by Samsung.
[20]
It was argued on behalf of Nashua that Oelofse was aware of the
restraint clause and he did not honour the agreement.
[19]
If regards is had to the definition in the contract it is clear that
Samsung is a direct competitor, specifically as far as
the selling,
installing and maintenance of telephone systems is concerned.
[20]
The office automation is a cutthroat industry in general and
therefore it is extremely competitive.
[21]
Because of the competitive nature of the industry, all office
automation companies in general and continuously devises to obtain
an
edge over a competitor. This is permissible, but the pricing
structures, strategies, financial information are confidential
information.
[22]
Nashua to prevent its employees (especially ex-employees) from
divulging such confidential information when they leave the
employ of
Nashua.
[23]
Oelofse is well known in the industry. He had an existing clientele
which he brought from Samsung when he joined Nashua.
Once he
became employed by Nashua these clients became Nashua clients.
[24]
Because of his intricate knowledge and intimate involvement in the
running of the business and the execution of the contracts
he also
gained specific and very influential relationship with the customers
of Nashua.
[25]
Oelofse is an extremely influential position to conjure customers
into following him to his new employer.
[26]
Counsel for applicant argued that although the evidence of the people
who conveyed the information of Oelofse’s employment
with
Samsung to Nashua is hearsay evidence, what followed subsequent to
that is important to take note of.
[27]
The attorney of applicant wrote letters to both the Respondents
addressed to Samsung`s offices in Parkwes, Bloemfontein.
Both
respondents received the above letters.
[28]
It was argued that Oelofse responded by saying that Ferreira had
threatened him “Ek ontken dat daar ‘n afleiding
gemaak
kan word dat ek vir Samsung werk.” No further explanation
was tendered where he is employed at present or any
denial that he
was employed by Samsung.
[29]
Neither did he explain how it came that he received correspondence at
Samsung’s offices nor what he was doing there.
[30]
Counsel for applicant further advanced that it is not correct to say
Nashua wants to stop competition because Nashua seeks
to secure
existing clientele or that Nashua wants to prohibit Oelofse from
earning a salary. Nashua only wants to secure its protectable
interests.
[31]
Further argument on behalf of Nashua was that if you want to raise a
bona
fide
defense,
then one needs to expose all the facts. One may not only say:
“I deny it” -
Wightman
v Headfour (Pty)
2008 ZASCA 6
[10 March 2008].
[32]
It is accepted and trite law that a real genuine and
bona
fide
dispute of fact can exist only where the court is satisfied that the
party who purported to raise the dispute had, in his affidavit,
seriously and unambiguously addressed the facts said to be disputed.
When the facts averred were such that the disputing
party necessarily
has knowledge of them and was able to provide an answer or
countervailing evidence if they not be true or accurate
but, instead
of doing so rested his case on a bare denial or ambiguous denial, the
court will generally have difficulty in finding
that the test was
satisfied
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
,
[1984] ZASCA 51
;
1984 (3) SA 623
(A).
[33]
From the above it is clear that Oelofse is employed by Samsung and
that Nashua’s argument ran.
FIRST
RESPONDENT `S DEFENCES
[34]
The 1
st
Respondent on the other hand contends that the relief sought by the
applicant is only for the remaining period of about 8 months.
[35]
He says that the applicant did not make out a proper case in its
founding affidavit. As to Oelofse’s alleged employment
with Samsung subsequent to 5th January 2015 the only allegations made
by the applicant in the founding affidavit are the following:
36.1
Mr. Oelofse has taken employment with Samsung on a date unknown to
the applicant. The applicant received
word on or about 14 April 2015
that this was the position.
36.2
This is hearsay evidence as no evidence was produced or supporting
affidavit attached as toreveal from whom
such “word” was
received.
36.3
On 14
th
April 2015 Mr Engelbrecht became aware that Oelofse has taken up
employment with Samsung. Mr Engelbrecht was also told that Mr
Oelofse
had professed that he intends focusing on Nashua’s business in
the Free State and Northern Cape.
36.4
The source of Me Engelbrecht,(employer of Nashua) about Oelofse’s
alleged employment with Samsung is
not identified. Such person has
not submitted an affidavit in support of these allegations. This
evidence therefor also amounts
to hearsay and is inadmissible.
[37]
According to Oelofse he was employed by Samsung during 2010.
[38]
It is disputed whether Oelose is or was in the service of Samsung as
from 5 January 2015 when he resigned from Nashua.
[39]
First Respondent further avers that it is trite that the primary
purpose of a replying affidavit is to put up evidence which
serves to
refute the case made out by the Respondent in the answering
affidavit. The Applicant may not make out its case
in the
replying affidavit.
[40]
According to Oelofse he was subject to a restraint of trade clause of
Samsung when he terminated his services with Samsung
in 2012.
[41]
Oelofse was however enticed by Nashua with an offer to take up
employment with Nashua whilst such restraint of trade conditions
were
still in existence, enforceable and known to Nashua.
[42]
Nashua undertook to assist Oelofse financially should Samsung enforce
the restraint of trade clause. Nashua`s conduct was improper.
ISSUES
TO BE CONSIDERED
43.1
Whether the applicant made out a case in his founding affidavit.
43.2
The legal effect of the restraint of trade clause.
43.3
The unclean or dirty hands principle.
43.4
Whether the 1
st
Respondent was in the employment of 2
nd
Respondent.
LEGAL
PRINCIPLES APPLICBLE TO AGREEMENTS IN RESTRAINT OF TRADE
[44]
The
locus
classicus
on this subject is
Magna
Alloys And Research (Sa) (Pty )Ltd v Ellis
1984(4) SA 874(A) at 897F - 898E, where Rabie JA summarized the legal
position
inter
alia
,
as follows:
“
44.1
There is nothing in our common law which states that a restraint of
trade agreement
is invalid or unenforceable;
44.2
It is a principle in our law that agreements which are contrary to
the public
interest are unenforceable if the circumstances of the
particular case are such, in the court`s view, as to render
enforcement
of the restraint prejudicial to the public interest;
44.3
It is in the public interest that agreements entered into freely
Should
be honoured and that everyone should, as far as
possible, be able to operate freely in the commercial and
professional world;
44.4
In our law the enforceability of a restraint should be determined by
asking
whether the enforcement will prejudice the public interest;
44.5
When someone alleges that he is not bound by a restraint to which he
had assented
in a contract, he bears the onus of proving that the
enforcement of the restraint is contrary to the public interest.”
[45]
The restraint clause is described in
The
Principles Of The Law of Contract
6
th
edition AJ Kerr, Butterworth 2002 as follows:
“
An
agreement, or a covenant in an agreement, is said to be in restraint
of trade if it restricts the liberty of one or both of the
parties to
engage in one or more specified commercial activities. Trading in a
restricted sense in competition with the other party,
or working for
a competitor, or making improper use of or confidential information
gained in the service of the other party, or
competing with other
party for the favour of his clients, patients or customers, are the
most common activities which are the subject
of restraints.”
[46]
In considering whether a restraint is unenforceable each case has to
be considered on its own facts as stated in
Berger
v Osher
1965 (1) SA 558(W)
at 559 H.
[47]
Restraint of trade clauses may seem to infringe upon a party`s right
to choose its trade, occupation or profession freely as
set out in
section 22 of the Constitution. However in
Knox
D`Arcy Ltd v Shaw
1996 (2) 651(W) Van Scalkwyk J indicated that
“
no
fixed rule could be stipulated regarding the constitutional
enforceability of all restraints; these would have to be dealt with
on an ad hoc basis and the question of whether or not a particular
restraint violated the provisions of …the constitution
determined in relation to the facts of each particular case….
As it stands the common law requires an examination of the
conflicting interests concerned in a case by case basis.
Unreasonableness is always a question which must be objectively
determined
with reference to the particular facts of the case.”
[48]
In casu
unreasonableness is not disputed and therefore the court only needs
to decide whether the restraint was against public interest.
[49]
Section 36(1) of the Constitution of 1996 provides that fundamental
rights may be limited in terms
of
law of general application to the extent that the limitation is
reasonable and justifiable in an open and democratic
society based on human dignity, equality and freedom. Insofar as our
law of contract therefore, allows restraint of trade clauses,
it can
be viewed a limitation on the affected rights as contemplated in
Sections 8 and 36 of the final Constitution.
[50]
With regards to the unclean hand principle, for a defense based on
unclean hands to succeed the court must be able to find
fraud
dishonesty or
mala
fides
on the part of the claimant.
[51]
The doctrine of unclean hands is mainly found in the field of
unlawful competition.
[52]
The principle relied upon by Oelofse, which is referred to in
trademark law as the ‘doctrine of unclean hands’
has been
considered in several cases in this country, most of which are
conveniently collected in the judgment of
Tullen
Industries Ltd v Da Sousa Costa (Pty) Ltd And Others
,
1976(4) SA 218 (T) it was made clear in that case that it is not
enough to disentitle as party to relief that the conduct whereby
he
acquired the requisite reputation was illegal: such illegality must
have taken the form of fraud or, at the very least dishonesty.
[53]
It must be considered
in
casu
if
Nashua was fraudulent or at least dishonest when the contract was
concluded with Oelofse.
[54]
In casu
a point was taken that there is no evidence to the effect that an
injury was committed or any harm caused by Oelofse.
[55]
In the case of
Reddy
v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) it was clearly stated
“
that
it is not necessary for the applicant to show actual harm. The
applicant is required to prove only that the former employee
is
potentially able to exploit its trade secrets or business connections
in new employment.”
[56]
It was also implied that Nashua tried to eliminate competition from
Samsung. In the case of
Automotive
Tooling Systems (Pty) Ltd v Wilken And Others
2007(2) SA 271 it was stated that:
“
A
restraint will be considered to be unreasonable, and thus contrary to
public policy, and therefore unenforceable, if it does not
protect
some legally recognizable interest of the employer but merely seeks
to exclude or eliminate competition."
[57]
It is interesting that Oelofse says if the court finds him to be
employed, he is of the contention that Nashua seeks relief
because
they want to exclude competition. It seems as if Oelofse is trying
every tactical option to be relieved from the restraint
clause.
If he is indeed not employed why should anything else matters, one
might wonder THE ONUS:
[58]
The covenantee/applicant seeking to enforce the restraint need do no
more than to invoke the provisions of the contract and
to prove the
breach. The covenantor/first respondent seeking to avert enforcement
is required to prove on a preponderance of probability
that in all
the circumstances of the particular case it will be unreasonable to
enforce the restraint if unreasonableness is whereon
he relies.
DISCUSSION
OF THE LAW
[59]
It is clear that if one enters into a contract with a restraint of
trade clause and one is aware of the restriction and the
restriction
is not unfair or unreasonable or against the public interest, that
one is bound by that restriction.
[60]
As described in the case of TULLEN INDUSTRIES supra, the conduct of
Nashua in concluding the contract with Oelofse, in my view,
cannot be
stigmatizhjed as fraudulent or even dishonest.
[61]
Samsung had its own contractual rights against Oelofse when he
resigned from its employment in 2012 to join Nashua. It was
Samsung`s
choice not to enforce the restraint of trade clause and that cannot
be held against Nashua.
[62]
Argument on behalf of Oelofse was advanced that Nashua tried to
eliminate Samsung as fair competition. In the case of
Basson
v Chilwan And Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) it was stated that
“
it
has long be accepted that the mere elimination of competition as such
is not the kind of interest which can be protected by a
restriction
of freedom of trade after the termination of a contract; that is,
that it does not weigh up against the prejudice which
the other party
will suffer if he cannot freely exercise his calling.”
[63]
I did not get the impression that this was indeed the situation in
this case.
CONCLUSION
[64]
Hearsy evidence can be taken in account in contexts with what
followed the events.
[65]
Since Oelofse had taken up employment with a rival company in a
position similar to the one he had occupied with Nashua, the
disclosure of confidential information presented an obvious risk to
Nashua.
[66]
This risk remains while Oelofse is in the employment of Samsung.
[67]
The unclean hands principle does not apply in this as argued by
counsel for Oelofse.
[68]
I am satisfied that the Nahua has discharged its onus of proving the
existence of the contract in restraint of trade, and that
Oelofse is
in breach of that in that he has taken up employment with a direct
competitor of Nashua, being Samsung.
COSTS
[69]
There is no reason why the costs should not follow the outcome of the
application.
ORDER
[71]
I make the following order:
71.1
prayers 2 and 3 as per Notice of Motion are granted.
71.2
First respondent is ordered to pay the applicant`s costs on a party
and party scale.
_________________
S.
BOONZAAIER, AJ
On
behalf of the applicant:
Adv. S. Grobler
Instructed by:
Kramer Weihman Attorneys
BLOEMFONTEIN
On
behalf of the respondent:
Adv. H. Cilliers
Instructed by:
JG Kriek & Cloete
Attorneys
BLOEMFONTEIN