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[2014] ZAFSHC 36
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CBS- Bloemfontein Brake & Clutch BK v Britz and Another (4907/2013) [2014] ZAFSHC 36 (27 March 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No. : 4907/2013
In
the application between:-
CBS-
BLOEMFONTEIN BRAKE & CLUTCH
BK
...........................................................
Applicant
(Reg
No. 2010/150850/23)
and
WERNER
STEYN
BRITZ
...........................................................................................
1
st
Respondent
DICKY
BOTHMA
.......................................................................................................
2
nd
Respondent
JUDGMENT
BY
:
MOLOI, J
HEARD ON:
11 MARCH 2014
DELIVERED
ON
:
27 MARCH
2014
[1] In this
matter, the applicant seeks to enforce a trade restraint against the
former employees, the first and the second respondents.
The trade
restraint was contained in the employment contract signed by both the
respondents. The applicant is conducting the business
of repairing
brakes, clutches, brake drums and rebuilding brake shoes.
[2] It is
common cause that the two respondents resigned from the employ of the
applicant at the beginning of July 2013 as they
wanted to start their
own workshop. The first respondent was the sales manager of the
applicant and was second in command. The
first respondent
communicated and visited the applicant’s clients, dealt with
them and established relationships with them.
He was so to say “the
face” of the applicant. The second respondent was a specialist
technician with knowledge and
experience in repairing brakes,
clutches, brake drums and rebuilding brake shoes. He was also
supervisor of the other workers and
signed off their work.
[3] Later on
10 October 2013 the applicant discovered that the business called HBC
Centre was run by the two respondents and was
equipped with exactly
the same equipment it had and was conducting the same business as
itself despite the limitations contained
in the restraint clause
referred to above. The services rendered by the applicant in making
brakes and brake shoes is highly specialised
and requires specialised
equipment and expertise to ensure accuracy.
[4] After the
departure of the two respondents many of the applicant’s
clients no longer made use of the applicant’s
services without
giving reasons why. The applicant’s monthly gross income
dropped by 35% threatening retrenchment of some
workers because of
the slump in the business. The First respondent had excellent
business relationship with the applicant’s
clients and their
employees. Though the respondents deny enticing the applicant’s
clients to their business, some names appearing
on a list purporting
to be HBC Centre clients are, in fact, the applicant’s former
clients who have since ceased to do business
with the applicant.
[5] The
respondents contended that their business, HBC Centre, is an ordinary
workshop and do business with hydrolic brakes and
clutches for motor
vehicles and that the applicant’s business has nothing to do
with installation and manufacturing of hydrolic
brakes and clutches
for heavy vehicles. They further contended that HBC Centre is
different and is not in competition with the
applicant’s
business. The respondents deny the services rendered by the applicant
are specialised, deny that the slump in
the applicant’s
business is due to the business of the HBC Centre and deny that some
clients who are no longer the applicant’s
clients are now HBC
Centre clients. The respondents deny tauting the applicant’s
clients. The respondents contend further
that they resigned from the
applicant because the applicant’s business was doing badly to
an extent that their salaries were
cut. They deny further that HBC
Centre is their business and that Viday Y Arte Trading CC owns HBC
Centre and that the CC has the
first respondents’ wife as its
sole member.
[6] In our
law restraints of trade are valid if they are not contrary to public
policy and are reasonable;
Magna Alloys & Research (SA)
(Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A). In
J. Louw &
Co (Pty) Ltd v Richter
1987 (2) SA 237
(N) at 243 B – D
the court stated as follows:
“
Covenants
in restraint of trade are valid. Like all other contractual
stipulations, however, they are unenforceable when, and to
the extent
that their enforcement would be contrary to public policy. It is
against public policy to enforce a covenant which is
unreasonable,
one which only restricts the covenantor’s freedom to trade or
work. In so far as it has that effect,
the covenant will not
therefore be enforced. Whether it is indeed unreasonable must
be determined with reference to the circumstances
of the case.”
[7] The onus
of proving that a restraint of trade agreement is not enforceable
rests on the party seeking not to be bound thereby
i.e. the
covenantor, on the ground of being contrary to public policy.
Magna
Alloys & Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 897F - 898E. All the covenantee needs to prove to enforce the
restraint is the existence of the contract and that it is
being
breached:
Basson v Chilwan and Others
1993 (SA) 742 (A)
at 776H. A restraint of trade is enforceable unless it is
unreasonable and against public policy:
Magna Alloys
case,
supra
, at 898 A - B where the following was stated:
“
It is generally accepted that a restraint of
trade will be considered to be unreasonable, and thus contrary to
public police, and
therefore unenforceable if it does not protect
some legally recognizable interest of the employer but merely seeks
to exclude or
eliminate competition.”
In
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767 E - F the
following was stated:
“
Wat die partye self betref, is ‘n verbod
onredelik as dit die een party verhinder om hom, na beëindiging
van hul kontraktuele
verhouding, vryelik in die handels- en
beroepswêreld te laat geld, sonder dat ‘n
beskermingswaardige belang van die
ander party na behore daardeur
gedien word. So iets is op sigself strydig met die openbare beleid.”
In the same
case at 767 G – H the test set for determining the
reasonableness or otherwise of the restraint of trade provision
was
said to be:
(a)
Is there an interest of the one party which is deserving of
protection at the termination of the agreement?
(b)
Is such interest being prejudiced by the other party?
(c)
If so, does such interest so weigh up qualitatively and
quantitatively against the interest of the latter party that the
latter
should not be economically inactive and unproductive? and
(d)
Is there another facet of public policy having nothing to do with
the relationship between the parties, but which requires
that the
restraint should either be maintained or rejected.
(e)
The further requirement is whether the restraint goes further than is
necessary to protect the interest:
Kwik Kopy (SA) Pty) Ltd v
Van Haarlem and Another
[1998] 2 ALL SA 362
at 484 E.
If the interest in (c) is
greater than the interest in (a) the restraint will as a rule be
unreasonable and consequently unenforceable:
Basson v Chilwan
,
supra
, at 767 G - J.
[8] Our law
recognizes two categories of proprietary rights that the restraint of
trade may protect. Firstly, is that relating
to the
relationships one might have or develop with existing or potential
customers of a business, or its suppliers commonly referred
to as
“trade connections”. Secondly, is that relating to
confidential information useful for the well-being of
the business
commonly referred to as “trade secrets”.
Rawlins
and Another v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A);
Townsend Productions (Pty) Ltd v Leech and Others
2001
(4) SA 33
(C) and
Mossgas (Pty) Ltd v Sasol Technologies (Pty)
Ltd
[1999] 3 All SA 321
(W) at 333 f.
[9] In this
case the applicant’s case is that the first respondent was the
sales manager of the applicant. As such he
served the
applicant’s customers daily and developed personal
relationships with them; he knew the prices and was consulted
on
every aspect thereof as he knew the business of the applicant.
The first respondent was the “face” of applicant’s
business and the intimate relationships he developed with the
customers constitutes a proprietary interest worthy of protection.
The second respondent was a technician in the applicant’s
workshop and had expertise and experience with regard to the repair
of brakes, clutches, brake drums and re-building of brake shoes. To
can do all this one needed to use complicated and specialised
machines provided by the applicant and if not properly done could be
life threatening. The expertise and ‘know-how’
the second
respondent possessed is not public knowledge and is limited to a few
select people. The second respondent also knew
the business of the
applicant as well as its clients. HBC Centre had acquired specialised
equipment like the applicant’s
which would put HBC Centre in a
position to do similar services as the applicant. As a consequence it
was submitted that both the
first and second respondents were in a
position to jointly cause damage to the applicant’s business.
The general complaint
of the applicant is that the respondents
rendered the services similar to those of applicant and enticed,
directly or indirectly,
the existing customers of the applicant
leading to the slump in the applicant’s business which
necessarily negatively affected
the profits. The relationship the
respondents developed with the applicant’s clients made it
possible for them to entice
the applicant’s customers leading
to the infringement of the applicant’s proprietary interest.
[10] The
essence of the applicant’s case is that the respondents are
conducting business under the name and style of HBC Centre.
This is
not denied. The respondents deny the ownership of the business and
allege Viday Y Arte Trading CC is the owner of HBC Centre.
This
denial is of no consequence, however, since the respondents are doing
the business at HBC Centre contrary to the restraint
clause providing
in paragraph 21.4 that:
“
The employee further undertakes not to be
directly or indirectly interested in, or carry on, or to be engaged
in or concerned with,
any business, or to be interested in or
concerned with any company, firm, partnership or close corporation,
trust, undertaking
or concern, either as employee or in any other
capacity of whatsoever nature, which
carries on any business which
competes in anyway, either directly or indirectly, with the business
carried on by the employer
.” (My emphasis)
[11] The applicant, in its founding affidavit described
its business as follows at 11.1:
“
Dit
dien vermeld te word dat die Applikant se besigheid gemoeid is met
die verkoop en herstel van remme en koppelaars. Die Applikant
herbou
voorts ondermeer remskoene en sny en herstel remdromme. Ongeveer 70%
van die besigheid van die Applikant bestaan uit die
herbou van
remskoene.”
The
applicant’s sole member, Snyman, visited the premises of HBC
Centre and noticed that the business had exactly the same
equipment
as the applicant and it purports to do business “For all your
hydrolic brake and clutch requirements and fitment”.
He took
photographs of a business card having the same message and the
equipment. Snyman, however, did not say what products were
found to
be produced at HBC Centre nor what services were being rendered at
HBC Centre. The respondents deny they are rendering
the same services
as the applicant and categorically stated that:
“
Die
Applikant se besigheid is geensins bemoeid met die installasie en/of
vervaardiging van hidroliese remme en koppelaars en die
meegaande
dienste wat daarmee gepaard gaan nie. HBC installer spesifiek
hidroliese dienste van remme en koppelaars en spesifiek
ten aansien
van swaar voertuie. Ek bevestig en ek lê klem daarop dat die
besigheid van die Applikant en die van HBC wesenlik
verskil en
geensins in direkte kompetisie met mekaar is nie”.
It was only in replication
that the applicant alleged it also dealt with hydrolic brakes and
clutches. It is clear that the
applicant already knew what HBC
Centre advertised as its core business, namely the installation and
manufacture of hydrolic brakes
and clutches from the business card
and sign board placed outside the business premises before the
founding affidavit was drawn
up. In replication the applicant
goes at length to explain the difference between ordinary and
hydrolic brakes to display
its intense knowledge of the difference
between the two. Clearly there is a dispute of fact in this
regard and a final interdict
sought by the applicant would be granted
only if those facts averred by the applicant had been admitted by the
respondent together
with the facts alleged by the respondent.
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
1984 (3) 623 (A) at 634 F – H. The applicant knew the
difference between ordinary and hydrolic brakes and clutches
and he
knew that before Snyman made his founding affidavit but chose to talk
about hydrolic brakes only in replication.
[12] It is not mentioned
anywhere that the respondents sell and repair breaks and clutches;
that they rebuild brake shoes which
consists of 70 % of the
applicant’s business and repair brake drums. If any of
these activities were taking place at
HBC Centre, Snyman, during his
visit, could not have missed noticing it. It consequently cannot be
said that there is proprietary
interest to be protected by the
restraint. The respondents, on the other hand deny that the applicant
has a proprietary interest
deserving of the protection by a restraint
clause in the employment contract.
[13] In the restraint
clause itself as quoted above it is clear from the underlined phrase
that the applicant sought to protect
its business from competition
and not to protect its proprietary interest which, as I have pointed
above, cannot be said to be
under threat from the activities of the
respondents which are not what the applicant described as its main
business. The basis
of the respondent’s opposition is that
their business consists of installation and manufacture of hydrolic
brakes and clutches
for heavy motor vehicles whereas that of the
applicant is “verkoop en herstel van remme en koppelaars. Die
Applikant herbou
voorts ondermeer remskoene en sny en herstel
remdromme. Ongeveer 70 % van die besigheid van die Applikant bestaan
uit herbou van
remskoene.”
[14] Even if the applicant
succeeded to prove an infringement of its proprietary interest, how
would it fare when the test in
Basson v Chilway and Others
,
supra
at 767 G-H is applied to the set of facts? Public
policy requires that people engage in income-producing activities in
order
to sustain themselves and their families. Where one is
possessed of skills that he/she can deploy profitably and legally,
such
person may not be restricted from doing so. Even section 22 of
the Constitution of the Republic of South Africa Act 1996 guarantees
such right. If the applicant had a protectable right under the
contract of employment, that right is qualitatively and quantitavely
weighing less than the respondents interest in economic activity and
productivity. The skills the respondents have and the relationships
they are able to build are not acquired from their employment with
the applicant and it will be against public policy and consequently
unreasonable to restrain them from employing their skills to earn a
living:
Basson v Chilwan
at 767 G - J. The
underlined case in the restraint clause clearly indicates that the
applicant sought to curtail competition other
than protecting a
proprietary right.
[15] In the premises the
following order is made:
ORDER
The application is
dismissed with costs.
K. J MOLOI , J
On
behalf of the applicant: Adv. W Groenewald
Instructed by:
Hill Mchardy & Herbst
BLOEMFONTEIN
On
behalf of the first respondent: Adv. L le Roux
Instructed by:
Jordaan Rijkheer
BLOEMFONTEIN