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[2013] ZAGPPHC 180
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North Safety Products (Africa) (Pty) Ltd v Clarke and Another (31878/2013) [2013] ZAGPPHC 180 (1 July 2013)
NOT
REPORTABLE
THE
NORTH GAUTENG HIGH COURT-PRETORIA
(REPUBLIC
OH SOUTH AFRICA)
DATE:01/07/
2013
CASE
NO: 31878/2013
In
the matter between:,
NORTH
SAFETY PRODUCTS (AFRICA) (PTY) LTD
................................
APPLICANT
and
MADELEINE
CLARKE
..................................................................................
1st
RESPONDENT
RONDO
INDUSTRO (PTY)
LTD
.....................................................................
2nd
RESPONDENT
JUDGMENT
N
V KHUMALO AJ
INTRODUCTION
[1]
Applicant seeks in this Application final relief to enforce on an
urgent basis by way of an interdict, a restraint of trade
and
confidentiality agreement against First Respondent, an erstwhile
employee and her alleged current employer.
[2]
Applicant, as it is evident from the documents filed of record, is
one of the largest retailers and a manufacturer of personal
protective and equipment clothing in South Africa and Africa and has
been conducting the business since 1956 with branches around
Gauteng,
Kwazulu Natal, Western Cape and Port Elizabeth.
[3]
In Gauteng its Isando branch services also the African operations
that extends throughout the continent spread across nine countries
that includes Namibia, Malawi, Ghana, Kenya, Zimbabwe, Congo,
Botswana, DRC and Madagascar.
[4]
First Respondent was for a period of 4 and half years employed at its
Isando branch, first as an internal sales administrator
and from 1
June 2010 as an Export Supervisor, servicing the export business
until she terminated her employment on 28 March 2013.
[5]
Second Respondent is similarly a retailer, manufacturer and a
supplier of Personal protective Clothing and Equipment with an
export
division as well that services clients in Africa which operations it
is presently expanding to include countries serviced
by the
Applicant.
HISTORICAL BACKGROUND
[6]
On 22 August 2008 when First Respondent took up employment with
Applicant as an internal sales administrator she concluded a
contract
of employment that incorporated a restraint of trade and
confidentiality agreement.
[7]
In terms of some of the relevant provisions of the agreement, First
Respondent agreed that she would not for a period of twelve
months
after the termination date of her employment:-
[7.1]
be concerned in any business which is carried on in the relevant area
and which is competitive with any business in which
the First
Respondent was actively involved during the course of her employment
and which is carried on by the Applicant on termination
date. And
would be considered concerned in the business if:
[7.1.1]
she carried business as a principal or agent; or
[7.1.2]
she was a partner, director, employee, secondee, consultant or agent
in, of or to any person who carries on the business,
or
[7.1.3]
she had a direct or indirect financial interest (as shareholder or
otherwise) in any person who carries on the business;
or
[7.1.4]
she is a partner, director, employee, secondee, consultant or agent
in of or to any person who had a direct or indirect
financial
interest (as shareholder or otherwise) in any person who carries on
the business. (Clause 10.3)
[7.2]
directly or indirectly on her own account or on behalf of or in
conjunction with any person, except on behalf of the Applicant,
canvass solicit business or custom for goods and services of a
similar type to those being manufactured and or provided by the
Applicant at the termination date, and with which goods or services
the First Respondent was actively involved in the course of
her
employment during the relevant period, from any person who has been
any time during the relevant period a customer of the Applicant
with
whom the First Respondent was actively involved during the course of
her employment during the relevant period. (Clause 10.3.2)
[7.3]
directly or indirectly on her own account or on behalf of or in
conjunction with any person induce or attempt to induce any
supplier
of the Applicant's products with whom the First Respondent was
actively involved in the course of her employment during
the relevant
period to cease to supply, or restrict or vary the terms of supply to
the Applicant or to cease to distribute any
of the Applicant's
products or restrict or vary the terms of the distributorship or
otherwise interfere with the relationship between
the supplier or
distributor and the Applicant. (Clause 10.3.3)
[7.4]
be entitled to make use of or divulge to any person, and would be
obliged to use her best endeavors to prevent the use; publication
or
disclosure of any information of a confidential or secret nature:
[7.4.1]
concerning the business of the Applicant and which came to the First
Respondent's knowledge during the course of or in connection
with her
employment or her holding any office within the Applicant from any
source within the Applicant.
[7.4.2]
concerning the business with any person having dealings with the
Applicant which is obtained directly or indirectly in circumstances
in which the Applicant is subject to a duty of confidentiality in
relation to that information.
[7.4.3]
The obligations continue to apply after the termination of her
employment contract without limit of time, ex lege.
[8]
First Respondent acknowledged that her position with the Applicant
gave her access to and the benefit of confidential information
vital
to the continuing business of the Applicant and influence over and in
connection with the Applicant's customers, suppliers,
distributors,
agents and employees in or with which the First Respondent was
engaged or in contact with and acknowledged and agreed
that the
provisions of clause 10 were reasonable in their application to her
and necessary but no more than sufficient to protect
the interests of
the Applicant (clause 10.3.6)
[9]
The relevant area to which the restraint was applicable was defined
in the agreement as the geographic boundaries within which
the First
Respondent was working and could extend from territory at branch
level to national boundaries (clause 10.2.2)
[10]
On 1 June 2010, she was promoted to Export Supervisor with the terms
and conditions of her employment including the restraint
of trade and
confidentiality agreement remaining in force. She then serviced
Applicant's export clients under the management of,
John Whitfield
('Whitfield"), the branch manager assisted by Theresa Veal.
[11]
In terms of the revised conditions of her employment, her job
entailed maintaining weekly personal contacts, via telephone
and
e-mail with her existing clients and dealing with all customer
queries and export documentation. Following up on and dealing
with
walk in clients, processing or soliciting new business by way of
dealing with queries for quotes. Preparing detailed monthly
sales
reports, customer
movement
reports, all status, daily status and weekly total backorder reports.
Following up on all new accounts in respect of the
export operations
as well as accordingly maintain and service the Applicant's existing
client.
[12]
She tendered her resignation on 11 March 2013, terminating her
employment with effect from 5 April 2013 and stated in her exit
interview document that she completed on 28 March 2013, her last
working day, that the part of the job she
.....
enjoyed most was "winning the customers trust over the past 4.5
years of
employment."
Attempts by Applicant to retain her were unsuccessful.
[13]
On 8 April 2013, one Wido Bartsch, a managing director of Safe Wear
Namibia, one of the five export clients that First Respondent
serviced during her employment with Applicant that was being supplied
with PPE products by Applicant without a service level agreement
for
its performance of one of its contracts with Rossing, sent an e- mail
to First Respondent's previous e-mail address at Applicant.
In the
e-mail Bartsch confirmed that he is comparing prices as provided by
the First Respondent and the Applicant.
[14]
Subsequently, Safe Wear Namibia placed a hold on the order for the
protective shoes it had placed with Applicant through First
Respondent for the month of April 2013. On 12 April 2013, Bartsch
cancelled the remainder of its monthly order for April.
APPLICATION
[15]
Applicant alleges that First Respondent has, in breach of the terms
of the restraint of trade and confidentiality agreement,
[15.1]
taken up employment with the Second Respondent on 8 April 2013 as
Export Manager.
[15.2]
during the course of such employment exploited her relationship with
a client of the Applicant by persuading the client to
trade out
commodity items for items that a competitor, the Second Respondent
could supply at a reduced price, having developed
a very close
friendship with the clients during her employment with Applicant in
particular the buyers with which she was the Applicant's
point of
contact with such clients. Specifically that she was able, because of
the relationship she had with Safety Wear Namibia
to ascertain on
enquiry the tender price of the items supplied to Rossing in order to
provide a competitor, that is, Second Respondent
with a competitive
advantage over the Applicant.
[15.3]
utilised and disclosed confidential information obtained during her
employment with Applicant relating to the product baskets
sold to the
specification of a client, Safe Wear Namibia and information on the
sale of its
Hazmat
Combination Canister, the client that buys it and the price list, as
proven by the e-mail.
[16]
Applicant further alleges that Second Respondent
[16.1]
was by letter on 11 April 2013 and a telephone call to its managing
director on 16 April 2013 made aware of the restraint
against First
Respondent's employment, as a result its continuing to facilitate the
continued breach by First Respondent constitutes
unlawful and or
unfair competition.
[16.2]
is unfairly competing with Applicant by utilising confidential
information obtained by First Respondent during her employment
with
Applicant to canvass Applicant's most valuable customers, to wit Safe
Wear and exploiting customer connections which the First
Respondent
enjoys with Applicant's customers in circumstances where Applicant
has a proprietary interest that it sought to protect
by way of a
restraint of trade agreement concluded with First Respondent.
[17]
As a result Applicant submits that it fears that First Respondent, in
the employ of Second Respondent will severely affect
its business as
indicated by the hold placed by Safe Wear Namibia on their order and
enquiries made to the supplier on the Hazmat
canisters. Consequently
Applicant seeks a relief:
[17.1]
restraining and interdicting First Respondent for a period of twelve
months commencing on 5 April 2013 from acting in breach
of the
relevant provisions of the restraint of trade and confidentiality
agreement, to applicable in the area of Gauteng Province,
Malawi,
Zimbabwe, Botswana, DRC, Madagascar, Kenya, Congo and Ghana including
any particular area forming part thereof.
[17.2]
interdicting and restraining Second Respondent from unlawfully and or
unfairly competing with the Applicant by inter alia:
[17.2.1]
facilitating and or procuring the breach by the First Respondent of
her contract of employment with the Applicant and in
particular the
agreement in restraint of trade and confidentiality undertakings
contained therein.
[17.2.2]
utilising and or divulging the Applicant's confidential information,
including but not limited to:
[17.2.2.1]
the identity of the Applicant's export clients and on-site
operations;
[17.2.2.2]
details of the products supplied to the Applicant's clients;
[17.2.2.3]
cost price paid by the Applicant for goods sold and manufactured by
it;
[17.2.2.4]
sales price charged by the Applicant to clients for goods sold and
manufactured by it;
[17.2.2.5]
details of the contact person dealt with by the - - Applicant at its
clients, including the names and
contact
particulars of any buyers and or safety officers employed by the
Applicant's clients;
[17.2.2.6]
details of Applicant's foreign suppliers and specification of goods
purchased by the Applicant for supply to its various
clients (local
and international).
[18]
Respondents deny urgency (dealt with hereafter) and further oppose
the Application on the basis that:
[18.1]
First Respondent is not employed by Second Respondent but by a
company called Evrigard (Pty) Ltd ("Evrigard") with
a
contract of employment signed on 2 April 2013, also a competitor of
the Applicant, likewise supplying general PPE to South Africa
and
African countries including Zambia Congo, Tanzania, Mozambique,
Namibia, Zimbabwe, Mauritius, Swaziland, Nigeria and Ghana.
The
managing director of the Applicant, deponent to the founding
affidavit, was informed on 20 March 2013 that First Respondent
was
joining a competitor and the name of the company disclosed to
Whitfield on 28 March 2013. Since then Applicant was aware that
First
Respondent's employment was with Evrigard. Accordingly, Second
Respondent has got no interest in the matter.
[18.2]
On 16 April 2013, Myron from Second Respondent contacted Applicant to
discuss another employee's employment who at the time
had left the
employ of Applicant to take up employment with Second Respondent and
in respect of whom Second Respondent had received
a letter of demand
from Applicant, First Respondent was never mentioned.
[18.3]
First Respondent was not exposed or privy to confidential information
during her employment with Applicant nor did she establish
any
customer connections with any of the Applicant's clients so as to
enable her to exploit any such information to attract business
elsewhere or had personal knowledge of or influence over the
customers to take advantage of the Applicant's trade connections.
The
five clients that she dealt with when she joined the export
department were existing clients that had already established
relationships with the Applicant. First Respondent therefore did not
enhance Applicant's relationship with any of these clients
such that
they might follow her to a new employer.
[18.4]
She was not involved in establishing the identity of potential
clients in Africa or procuring new business in Africa but
the
manager, Whitfield, was primarily seized with developing that
customer base.
[18.5]
There was no product basket or a specific PPE product which was
supplied to any clients of the Applicant on a regular basis,
as all
products were supplied on a demand basis. She was not privy to the
product needs and requirements of any of the Applicant's
clients that
she dealt with. She recalled some products supplied to Safe Wear by
Applicant and pricing on a select few but cannot
recall the product
basket supplied for the Rossing contract.
[18.6]
she was never responsible for sourcing any products for the Applicant
from any suppliers, and therefore has no knowledge
of the actual cost
prices as per suppliers' invoices to the Applicant. Although she had
access to Applicant's price lists which
would reflect the Applicant's
purported cost price and recommended selling prices, she was not in
possession of Applicant's price
lists. So she does not have any
knowledge on the Hazmat canister pricing and admits being aware of a
notice of price increase effective
from 1 April 2013 that was sent to
the purchasing department with the extent of the increase not
mentioned, so nothing is confidential
in that regard.
[18.7]
she was never involved in any tender processes nor was any tender
awarded to the export department during her employment
nor was she
involved in any processing of orders and delivery of stock pursuant
to a tender process.
[18.8]
what is stated in the exit document was not an acknowledgement of
close relationships established with Applicant's clients
but that it
gave her the most job satisfaction that the customers could rely on
her for fast efficient service delivery. pl53
[18.9]
Bartsch contacted First Respondent on 5 April 2013 and enquired if
she knew of any suppliers as he wanted to cancel Safe
Wear Namibia's
order for supply of safety boots that First Respondent handled during
March 2013 whilst still employed by the Applicant,
due to the delay
by Applicant to deliver and informed her that Safe Wear Namibia
received a non-compliance certificate from Rossing.
Applicant did not
have the shoes in stock. Bartsch advised her that he was procuring
the boots from Protekta another PPE supplier
and looking for other
suppliers and asked for a price list, whereby she requested him to
furnish her with a list of what he required.
That is how she got to
send Bartsch a price list.
[18.10]
in the work that she was meant to do as per her job description she
was not required to follow up on walk in clients, prepare
or consider
monthly sales reports, movement reports and status or daily status
reports but such reports were prepared by Veal,
the assistance. The
most contact with clients was through e-mails and in few instances by
telephone.
[19]
First Respondent avers that Applicant's Application must fail as
there is neither a proprietary interest nor confidential information
that warrants the enforcement of a restraint of trade and
confidentiality agreement and the area that it seeks enforcement is
grossly unreasonable. She alleges that as Applicant has no
protectable interest, the enforcement of the restraint will be
unreasonable
and contrary to public policy serving only to prevent
competition and preclude her from being employed and earning a
living. She
is an unmarried mother with 2 small children to support,
so the prejudice that she will suffer if the relief sought is granted
far outweighs any prejudice which Applicant complains of if relief is
not granted.
REPLY
[20]
Notwithstanding that the issues were at this stage narrowed down to
specific contentions and that Applicant approached this
court for a
speedy resolution of the matter, it filed in response, a replying
affidavit consisting of 76 pages with 89 paragraphs
excluding
annexures, exceeding the number of pages of the Founding and
Answering Affidavits that together totalled 68. Most of
the issues
were argued and reargued long-windedly some speculatively and new
matters raised.
[21]
As a result the Respondents have called upon the court to ignore the
new matters raised in the Replying Affidavit. As there
was no basis
set out for such new matters or an explanation for the rehashing of
some of the issues in the voluminous affidavit,
in concurrence with
Respondent's Counsel I set out to consider the Replying Affidavit
ignoring the new matters and objectionable
averments.
[22]
Briefly, Applicants make the following vital allegations in response:
[22.1]
That if First and Second Respondent's version is ultimately accepted
that First Respondent is working for Evrigard the Second
Respondent
must be mulcted with Applicant's costs for having to institute
proceedings against it in that it failed despite the
receipt of the
letter of demand per telefax to inform Applicant that in fact the
First Respondent was employed by an associated
Evrigard.
[22.2]
That First Respondent has failed to demonstrate that there is no
customer connection or the confidential information of the
ilk
alleged by the Applicant in that:
[22.2.1]
First Respondent was the only point of contact for her five clients
including Soft Wear Namibia who contacted her on her
private mobile
phone that Applicant never paid for the First Respondent to use for
work purposes, and the only individual tasked
to deal with and
responsible to manage Bartsch and did so. The relationship was such
that Bartsch immediately contacted First Respondent
for assistance
instead of continuing to wait for the backorder and dealt with her
not only on the outstanding order but other safety
boots and then the
entire list of safety products. Therefore First respondent cannot
contend that there was no relationship.
[22.2.2]
Whitfield identified export clients and sought to secure them for
Applicant and once secured handed the clients over to
the Second
Respondent. In the case of the five largest export clients/ First
Respondent handled the clients from that point onwards
developing a
relationship with the clients. She was tasked with fostering a
relationship with the clients. She would therefore
be privy to the
identity of potential export clients.
[22.2.3]
Applicant is concerned with the customer connections that First
Respondent forged with Applicant's clients as the five
export clients
are responsible for the 70% of the Applicant's turnover. The
Applicant has already suffered a blow as a result of
First
Respondent's conduct with Bartsch having entered into negotiations
with the First Respondent for the provision of products
which
Applicant has hitherto supplied to Safe Wear Namibia.
[22.2.4]
First Respondent alleges not to precisely remember the product basket
supplied to Safe Wear for the Rossing contract or
all the prices
charged. However clients serviced by First Respondent were supplied
with a set of array of core products on a monthly
basis, quantum
might have changed but the core products supplied on a monthly basis
did not.
[22.2.5]
Through access to Applicant's Syspro accounting system that First
Respondent admitted to have, she would have been able
to view the
Applicant's cost price and recommended selling price, showing
Applicant's margins including those of the five clients
that she
serviced. Despite any fluctuations in the prices at which Applicant
or any competitor could source the products, the first
Respondent
would be aware of the margin charged and accordingly the selling
price to the Applicant's client. She was aware of the
margin charged
in respect of the Rossing contract by Applicant and what the cost
price was for the items charged by the Applicant,
despite any
fluctuations in the price at which Applicant or any competitor could
source the products.
[22.2.6]
First Respondent had therefore access to confidential information
that she can exploit for the benefit of the new employer,
even though
she contends the information to be available on enquiry, a competitor
is spared the trouble and expense to make the
necessary enquiries by
virtue of First
Respondent's
employment and the disclosure of the information to provide a
springboard to Evrigard which is prohibited competition
and a
legitimate basis for enforcement of a restraint of trade.
[22.2.7]
The work that First Respondent did was not purely administrative,
processing sales, but she was responsible for
---
sales on a daily basis, soliciting and receiving business.'
Contents
of the reports supplied by Veal were discussed with First
Respondents.
[22.2.8]
Accordingly Applicant has a protectable interest in the form of
customer connections but also of confidential information
that Second
Respondent is affecting through her employment with Evrigard and is
entitled to the relief sought.
[23]
At the start of proceedings Respondent moved for the Application to
be struck off the roll, mainly on the basis that on 24
April 2013
Applicant set the matter down on the urgent roll without affording
the Respondents a time frame within which to file
its opposing papers
and in a wrong format. It was prepared on that date to postpone the
matter to a period of over a month without
moving for a rule nisi or
interim relief notwithstanding the alleged urgency. Its Replying
Affidavit was also filed out of time,
in spite of the soundness of
the arguments advanced by the Respondents and due to the inherent
urgency of the issues that are addressed
by the Application I ruled
the Application, urgent.
[24]
As Applicant's seeks a relief of a final nature in an instance where
there are disputes of fact, the Plascon-Evans approach
is applicable,
as a result the final relief will only be granted if the facts as
averred by the Applicant and admitted by the Respondent
together with
the facts alleged by the Respondent justify such an order. See
Plascon- Evans Paints Limited v Van Riebeeck Paints
(Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634H-635C.
[25]
The question that arises is whether Applicant, under these
circumstances, has a protectable proprietary interest warranting the
enforcement of the restraint of trade and confidentiality agreement
against the Respondents?
APPLICABLE LAW
[26]
It is common law that contracts are valid and enforceable unless
contrary to good morals (contra bones mores) or against public
policy
and interest. Consequently a restraint of trade agreement (which is a
restriction on a person's freedom to trade) is in
principle legal and
enforceable and will only be unenforceable if it is contrary to
public policy or public interest, as affirmed
in Magna Alloys &
Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 791. Prove of
a greater public interest will nullify the agreement.
[27]
It would be contrary to public policy if the restraint sought to be
enforced imposes unreasonable restriction on a person's
freedom to
trade. Reasonableness therefore plays a vital role as one of the
factors that determine if restraint is enforceable
from the
perspective of the circumstances that existed when the parties
entered into the agreement and the situation prevailing
when
enforcement is sought. See J Louw & Co (Pty) Ltd v Richter and
Others
1987 (2) SA 237
(n) at 243B-D
[28]
A party that seeks to evade the enforcement of the restraint bears
the onus to prove that enforcement of the restraint will
be or is
contrary to public interest; See Magna Alloys and Basson v Chilwan
and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 776H-J to 777A-B where it is
provided that:
"the
convenantor seeking to avert the 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
the court is unable to make up its mind on the point,
the restraint
will be enforced. The covenantor is burdened with the onus because
public policy requires that people should be bound
by their
contractual undertakings. The convenantor is however not so bound if
the restraint is unreasonable, because public policy
discountenances
unreasonable restrictions on people's freedom of trade."
[29]
On the other hand the restraining party has got to satisfy only two
requirements.
[i]
Invoke the provisions of the restraint agreement (establish
protectable interest)
[ii]
prove its breach (prejudice of the interest)
So,
he only has got to show what interest that affect his business needs
protection and why he needs protection.
[30]
Wherefore the relevant questions that has got to be answered, in
determining the unreasonableness of the restraint sought to
be
enforced, according to Basson at 767G-H is:
[30.1]
whether there is a proprietary interest that might be legitimately
protected by the enforcement of the restraint? and
[30.2]
if such interest is being prejudiced by the other party?
[30.3]
If so, does such interest weigh up qualitatively and quantitatively
against the interest of the other party that they should
not be
economically inactive and unproductive?
[30.4]
Is there another facet of public policy that has got nothing to do
with the relationship
between
the parties but which requires that the restraint should either be
maintained or rejected?
[31]
The restraint would be regarded as unreasonable and consequently
unenforceable according to Malan AJA in Reddy v Siemens
Telecommunications
(Pty) Ltd
2007 (2) SA 486
(SCA) at 497E-F,
"if
the interest of the party sought to be restrained weighs more than
the interest to be protected. The enquiry which is undertaken
at the
time of enforcement covers a
widefietd
and includes the nature, extent and duration of the restraint and
factors
peculiarto
the parties and their respective bargaining powers and interest."
And
at 498D-F he adds a fifth question to Basson’s four questions
stating that:
"whether
the restraint goes further than necessary to protect the interest,
correspond with s 36 (1) (e) requiring a consideration
of less
restrictive measures to achieve the purpose of the limitation. The
value judgement required in Basson necessarily requires
the
determining whether the restraint or limitation is reasonable and
justifiable in an open democratic society based on human
dignity,
equality and freedom."
PROPRIETARY INTEREST
[32]
For the enforcement of the restraint agreement Applicant relies on
the customer connections that it alleges First Respondent
had
developed through relationships with Applicant's customers and the
access she had to confidential information relating to the
Applicant's business and customers, buyers and suppliers that it
alleges First Respondent and Second Respondent are exploiting
for the
benefit of the Second Respondent.
[33]
As pronounced in Sibex Engineering Serives (Pty) Ltd v Van Wyk AND
Another
1991 (20 SA 482
(T) at 502D-F those are the two kinds of
proprietary interest that can be protected by a restraint of trade
agreement. Sibex explains
the two as follows:
[33.1]
The first kind consists of the relationships with customers,
potential customers, suppliers and others that go to make up
what is
compendiously referred to as the "trade connection" of the
business, being an important aspect of its incorporeal
property known
as goodwill.
[33.2]
The second kind consists of all confidential matter which is useful
for the carrying on of the business and which could therefore
be used
by a competitor, if disclosed to him, to gain a relative competitive
advantage. Such confidential material is sometimes
compendiously
referred to as "trade secrets".
[34]
Nestadt JA in Rawlings and Another v Caravan Truck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1)
SA 537
(A) at 541C-D explains an employee's relationship with
customers with reference to Heydon's "The Restraint of Trade
Doctrine"
(1971), and states that:
"the
need of an employer to protect his trade connections arises where the
employee has access to customers and is in a position
to build up a
particular relationship with the customers so that when he leaves the
employer's service, he could easily induce
the customers to follow
him to a new business."
Heydon
continues to state that "customer contract" doctrine is
depended on the notion that:
"the-employee,-by--contact with
the customer, gets the customer so strongly
attached
to him that when the employee quits and joins a rival he
automatically carries the customer with him in his pocket."
Nestadt
then proceeds to quote with approval Morris (Herbert) Limited v
Saxelby
[1916] 1 AC 688
(HL) at 709 where it was said that the
employee acquires:
"such
personal knowledge of and influence over the customers of his
employer as would enable him (the servant or apprentice),
if
competition were allowed, to take advantage of his employer's trade
connection..."
[35]
With regard to information that is confidential, it must be of a kind
that is relevant to the trade or industry, useful and
not of public
knowledge and property, known only to a restricted number of persons
or a close circle and be of economic value to
the person seeking to
protect it (see Townsend Productions (Pty) Ltd v Leech and Others
2001 (4) SA 33v
(C) at 53J-54B). Whether information constitutes a
trade secret is a factual issue. The Applicant only need to show that
there
is secret information to which the Respondent had access, and
which, in theory, the Respondent could transmit to the new employer
should he desire to do so.
[36]
The onus is upon the First Respondent to indicate that, the
information is not confidential either for being in the public
domain
or easily accessible to the public and obtained not within the
context of a confidential sphere or of no economic value
to the
Applicant's
business
[37]
It is not contended that the First Respondent was the point of
contact for at least, the five major customers of the Applicant
that
she serviced as Export Supervisor. Her contract of employment
required her to have a weekly contact with these clients
telephonically
or by e-mail. Evidence confirms that there was
interaction somewhat daily with some of these customers either by
e-mail or telephone
as set out in her job description, which
interaction Applicant submits created the customer connection and a
relationship it alleges
to have become very close and thus exploited.
First Respondent rejects the submission saying she only serviced
these customers
by processing their orders telephonically and making
sure that delivery of the orders as placed takes places in time,
alleging
that there was little or no personal contact with the
clients and her job was more administrative than managerial and deny
as well
that her job included soliciting new business or identifying
potential or securing export clients. She puts that and the
maintaining
of the relationship with clients on her manager
Whitfield's responsibility.
[38]
Whitfield accepts that he was responsible to secure clients and but
for one client, they were all on being secured passed on
to be
serviced by First Respondent. He
admits
to have been tasked with identifying potential export clients. He
goes further to indicate that in the case of one client
in
particular, Safe Wear Namibia, First respondent was to deal directly
with its managing director Bartsch, exclusively. He then
states that
the customer connection that was created was close and confirmed by
Bartsch's conduct of immediately contacting First
Respondent 4 days
after she left, seeking to do business with her new employer.
Applicant cannot take the matter any further than
that. No other
manner of interaction with clients could be proven beyond what was
claimed by First Respondent. In view of the fact
that the export
clients were foreign based, it is unlikely that regular personal
contacts would have taken place. Hence its logical
that it was not
part of First Respondent's job description. It therefore also makes
sense that Whitfield, as the manager confirms
that he was tasked with
securing export clients. Whitfield also conceded that even the
reports that were alleged in the Founding
Affidavit to be prepared by
First Respondent were in fact prepared by the assistant Veal.
[39]
I therefore do find merit in First Respondent's contention that
without the personal contact, the interaction with the export
customers as alleged by e-mail and telephone call on the orders and
supplies to be delivered did not on its own create the "customer
trade" envisaged by Hayden, of serious attachment that could
lead to First Respondent inducing these customers to follow her
at
her current employer.
[40]
Applicant then argued that First Respondent's statement in the exit
document that "winning the customers trust over the
past 4.5
years of employment" is the part of the job she enjoyed most is
an indication of the closeness of the relationship
she has developed
with the customers. The comment can relate to a lot of things, maybe
personal skills related, reflecting on how
First Respondent measured
her success or performance in the job or can be customer related as
indicated by First Respondent, 'to
be trusted that she can do her
job', but cannot with certainty be said to be a measure of how close
or advanced her relationship
with the customers has developed to
assume attachment to the extent that they will follow her to her new
employment.
[41]
The issue of Bartsch, one of the export clients is raised as proof
of the relationship developing to that kind of customer
connection
and also that First Respondent had used the relationship and
information held in confidence to solicit information and
business
from Safe Wear Namibia. Although Applicant does not require proof,
when seeking to enforce a restraint agreement it is
sufficient to
show that First Respondent had access to secret information which he
could give to the new employer. See HR South
Africa BV (Incorporated
in the Netherlands) t/a Institute for International Research v Tarita
and Others
2004 (4) SA 156
(W) at 1661 to 167C. The First Respondent
should have gained knowledge of the information during the time of
her employ with Applicant.
[42]
Prior to addressing the issue of the whether or not First respondent
had confidential information or customer connection that
she used as
alleged, the circumstances under which First Respondent was contacted
by Bartsch become critical. Both parties agree
that Bartsch had an
order that was outstanding that was handled by
First
Respondent during her final month in Applicant's employment. Bartsch
was in constant contact with the First Respondent enquiring
upon the
order as it was delayed. There was no commitment from Applicant on
the date of delivery of the outstanding order and Safe
Wear Namibia
was in receipt of a non-compliance notice from its major client
Rossing. Applicant's Whitfield does not dispute these
allegations as
well as First Respondent's assertion that Applicant did not have the
order in stock for some time but argue instead
that notwithstanding
the delay Bartsch should have waited. Bartsch's contact of First
Respondent must be appraised ' in that factual
context, mainly that
he was following up on an overdue delivery that First Respondent was
handling, and thereafter saw an opportunity
to get assistance from
First Respondent to salvage Safe Wear' contract with Rossing.
Therefore the contact was not as a result
of an attachment the
customer had to the First Respondent nor was he induced by the First
Respondent.
[43]
Now what is still to be answered is whether First respondent had
information that was confidential about Safe Wear and others,
gained
during her employment with the Applicant that she could use to give
her current employer an advantage against Applicant,
taking into
consideration that this is a factual issue.
[44]
First Respondent has claimed that she was not privy to the product
needs and requirements of any of the Applicant's clients
that she
dealt with. She was not responsible for sourcing any products for the
Applicant from any suppliers as a result did not
have knowledge of
the actual cost prices and the margins of the Applicant. She however
confirmed that to be able to view the Applicant's
purported cost
price and recommended selling price, showing Applicant's margins
including those of the five clients she serviced,
she would have had
to access the information through Applicant's Syspro accounting
system. She states that she recalled some products
supplied to Safe
Wear by Applicant and pricing on a select few but cannot recall the
basket products supplied for the Rossing contract.
She personally did
not have the actual cost pricing in her possession and did not know
the pricing on Hazmat's canister however
argued that such information
was readily available to the public as it can be supplied on request
and in that instance can hardly
be regarded as confidential.
Respondent's Counsel argued that in the context of the thousands of
different products that are supplied
by the Applicant it is
understandable if First Respondent would not recall the cost of some
of Applicant's products supplied even
to the five clients,
especially, as admitted by Applicant, that prices do fluctuate.
[45]
Applicant argues, based on the mere admission by First Respondent
that she could have had a view to its cost pricing by accessing
its
Ssypro system, that First Respondent had information about its
pricing and of the product baskets requirement of each client
because
except for the change in quantity, the core products supplied that
customers ordered regularly, remained the same. It is
hard to defend
that argument when it is considered against First Respondent's
Counsel's argument on the list of products available
and the
background of Bartsch's e-mail. The e-mail refers to the list of
products Safe Wear required immediately and the list of
the total
items that was pending to be sent to First Respondent. Bartsch
already had in the e-mail Applicant's prices for the items
he
required. That is the information, that is according to Applicant,
confidential which First Respondent could use to the advantage
of her
current employer. I disagree, Bartsch's e-mail, in fact confirms that
the information on pricing is already in the public
domain and known
to the customers against whom Applicant fears First Respondent would
use to benefit her current employer. Also
by the fact that it is
available on Applicant's Syspro system means it can be made available
to the public on enquiry. The fact
that First Respondent was to be
sent a list of what Safe Wear Namibia's requirements confirms also
First Respondent's allegation
that she was not privy and could not
recall what were the product needs or product basket supplied to Safe
Wear or each of the
export clients including prices. If First
Respondent had knowledge of the product basket supplied to Safe Wear
to fulfil its Rossing
contract, she could have just utilised that
knowledge and disclosed it to her current employer, instead of
awaiting a list. The
cost price to Rossing is also included by the
customer as a reminder not a reply to a request by First Respondent.
Therefore Applicant's
allegation that First Respondent took advantage
of the relationship to get such information is not substantiated.
Bartsch indicates
that he is comparing the prices, which is healthy
competition. The purpose of a restraint of trade should not be to
stifle lawful
competition or be oppressive to third parties by
playing the hands of the customers, limiting their choices to a
business that
is failing to deliver. See Humphreys v Laser Transport
Holdings Ltd and Another
1994 (4) SA 388
(C).
[46]
Under the circumstances there is no confidential information privy to
First Respondent useful for the carrying on of the Applicant's
business that if disclosed, could be used by current employer, to
gain a relative competitive advantage. The interaction by e-mail
was
not through First Respondent taking advantage of a developed
friendship or confidential information known to Applicant but
distinctively as a result of Applicant's failure to deliver on its
services. The 'trade connection' in accordance with Sibex has
not
been established.
[47]
First Respondent's Counsel also argued that notwithstanding that
there is no protectable interest, the First Respondent was
based in
Isando working with only 5 clients based in Africa, seeking to
enforce the geographical extent of the restraint that goes
beyond
national boundaries that is effectively stopping her from being
employed in South Africa for a period of 12 months, particularly
in
Gauteng where she lives is senseless. She is also a single mother
with 2 small children. The enforcement of the restraint of
trade
would be grossly unfair and contrary to public policy and the
prejudice to the First Respondent far outweighs the alleged
interest
sought to be protected. Which was met by Applicant's counter-argument
that the injury it will suffer is also enormous
as a result of the
fact that the export clients that First Respondent serviced that
Applicant might lose if restraint not enforced
were responsible for
70 % revenue of the business. Since the Applicant failed to establish
a clear right in a proprietary interest
to be protected I deemed it
unnecessary to further consider the contentions herein as there is no
reason for the enforcement of
the restraint.
[48]
The Applicant has therefore failed to establish a proprietary
interest deserving to be protected by the enforcement of the
restraint of trade. The First Respondent has
discharged
the onus to prove on a balance of probabilities that under the
circumstances it would be unreasonable and contrary to
public policy
to enforce a restraint where there is no protectable interest.
[49]
Applicant has prayed for a relief against Second Respondent as the
employer of the First Respondent and for costs against it
lest I find
it not to be the employer. First Respondent does not carry the onus
to prove the locus standi in judicio of the Second
Respondent but has
attached an offer of permanent employment by Evrigard that First
Respondent signed in acceptance. He who alleges
must prove. The onus
therefore rests with the Applicant to prove that Second Respondent is
the correct party to be sued. Applicant
instead refers to First
Respondent's conduct of replying to a letter it alleges to have sent
to the Second Respondent's fax number,
even though the letter was
also sent by e-mail to First Respondent's, as proof that First
Respondent employed by Second Respondent.
It also filed a
confirmatory affidavit by one of its employees who alleges that she
phoned Second Respondent's business and was
put through to First
Respondent and it was indicated to her that First Respondent works
there. The employee does not allege speaking
to First Respondent nor
does she divulge the name of the person she spoke to. Such mere
assertions are not sufficient to discharge
the onus. See Southern
Pride Foods (Pty) Ltd V Mohidien
1982 (3) SA 1068
(C). The Second
Respondent was also not required to reveal its defence to the
Applicant before litigation. I therefore find that
Applicant failed
to discharge the onus upon him to establish if the Second Respondent
is the right party to be sued. As a result
the costs must follow the
event in accordance with the general rule.
[50]
For these reasons therefore;
[50.1]
The Application is dismissed with costs;
[50.2]
The Applicant is ordered to pay the wasted costs occasioned by the
postponement on 24th April 2013.
N
V KHUMALO
JUDGE
OF THE HIGH COURT NORTH GAUTENG
Counsel
for Applicant:
Instructed
by: MacGregor Erasmus Attorneys
013
201 8955 (t)C/O Mothle Jooma Sabdia Inc
Counsel
for Respondent:
Instructed
by: Jeff Afriat Incorporated
Oil
784-2496 (t)
C/O:Helen
Karsa Attorney