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[2013] ZANCHC 3
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Halstted & Co (Pty) Ltd v Viljoen and Another (1738/12) [2013] ZANCHC 3 (18 January 2013)
9
IN THE HIGH COURT OF SOUTH AFRICA
(NORTHERN CAPE HIGH COURT, KIMBERLEY)
CASE No: 1738/12
Date: 18 January 2013
HALSTTED & CO (PTY) LTD
......................................................
APPLICANT
AND
RUDI DAVID VILJOEN
.....................................................
1
ST
RESPONDENT
WORKWEAR DEPOT
......................................................
2
ND
RESPONDENT
JUDGMENT
[1]
The dispute in this case involves the putting
into operation of a restraint of trade agreement. The first
respondent was employed
by the applicant since 1997 after he
completed matric. His first position was that of a driver/general
assistant for eight months.
During the year 2000 he was appointed
Store Manager. During September 2001 he was appointed
SalesRepresentative, a position he
held until July 2006 when he was
appointed Branch Manager of Halsted, Kimberley. During 2010 the first
respondent was appointed
Area Manager, for the Northern Cape Province
and the Vryburg area. The applicant is conducting the business of
selling among others,
overhauls, protective clothing, chemicals,
hardware, cleaning equipment, brushware and toilet and paper
products.
[2]
On 01 April 2004 at Kimberley, first
respondent singed a document bearing the title “
Amendment of
Letter of Employment Application (Additional Clauses)”
which
is in effect a restraint of trade agreement.(‘Annexure A’).
According to the applicant the first respondent signed
an additional
document titled “
Confidentiality Agreement of Halsted and
Co. (Pty) Ltd.”
(“Annexure B”). The first
respondent denies that he signed Annexure B, an issue which also
requires determination.
[3]
It is common cause that on 27 March 2012 the
first respondent resigned from his employment with the applicant. His
last working
day was 26 April 2012. He took up employment with the
second respondent and is presently holding the position of Area
Manager and
is based in Kimberley. On 30 April 2012 and 5 May 2012
the applicant sent two letters to the first and second respondents
respectively,
warning the first respondent that it would not hesitate
to enforce the restraint of trade and the confidentiality agreements
in
the event of the first respondent breaching their terms. On 07 May
2012 first respondent’s attorney of record responded to
the
letter addressed to his client and indicated that first respondent
acknowledged that he had signed a confidentiality clause
and
undertook to abide by the contents thereof and furtherthat he shall
not reveal any information regarding the business methods
of the
applicant.
[4]
On 22 May 2012 second respondent’s
attorneys also wrote a letter to the applicant stating that second
respondent did not
intend to request confidential information from
first respondent and further placed on record that it disputed that
the documents
in issue constituted enforceable and consequently
binding restraints of trade.
[5]
On 10 October 2012 the applicant launched
these proceedings against the respondents on urgent basis seeking an
order
inter alia,
on the following terms:
(a) That first respondent be called upon on 23 November
2012 at 10h00 to advance reasons why the following order should not
be granted:
(i) that the first respondent be interdicted and
prohibited for a period of 36 months from 27 April 2012 and within
the Northern
Cape Province, to accept any employment with any person,
firm, group, partnership or association whatsoever, which directly or
indirectly competes with the business of the applicant and/or carries
on a business similar to that of the applicant.
(ii) that the first respondent be interdicted and
prohibited from directly or indirectly disclosing any confidential
information
or other facts with respect to the business of the
applicant, to any other person or business;
(iii) that the first respondent be ordered to pay the
costs of the application;
(iv) that the second respondent be ordered to pay the
costs hereof, jointly and severally with the first respondent, only
in the
event of the second respondent opposing this application.
(b) that the above orders serve as an interim order with
immediate effect pending the finalisation of this application.
[6]
On 12 October 2012 the
matter was placed on the urgent roll before
Phatshoane
J.
The matter became opposed andwiththe
consent of the parties it was postponed to 02 November 2012 without
an interim order being
made. The determination of costs of that day
was reserved. The respondents filed their opposing affidavits
subsequent to the postponement.
The applicant also filed its
replication. During argument counsel for the respondents referred me
to an unreported decision of
the Witwatersrand Division of the High
Court
1
and undertook to provide me with a copy thereof a few
days after the hearing of the matter. My decision on the application
was consequently
reserved.
2
[7]
The respondents have challenged the urgency
with which this matter was brought. They contended that the matter
was not urgent,
alternatively, that if there was any urgency, same
was self-created. The respondents contended that the applicant (on
its own version)
became aware alreadyat the beginning of May 2012
that the first respondent was, in breach of the restraint of trade
agreement by
beingemployed by the second respondentand that he was
already having contact with its clients in the Northern Cape
Province. However,goes
the contention, the applicant chose to bring
this application on extremely urgent basis after five months of it
having been aware
of the first respondent’s engagement with the
second respondent. Furthermore, even if it could be accepted that the
applicant
only became aware of the first respondent’s breach of
the agreement it waited a further two weeks before it brought this
application. It was therefore contended that the matter should not be
entertained as urgent and should either be dismissed or struck
off
the roll on that basis.
[8]
The applicant’s response to the
respondents contention on urgency is simply that it was initially
under the impression that
the first respondent was employed as Branch
Manager of the second respondent’s Welkom branch and/or as
Regional Manager in
the Free State, in which event the applicant
would in all probability not have brought an application to enforce
the restraint
of trade agreement since the first respondent would not
have been in breach thereof. The applicant would have been satisfied
with
the respondent’s undertaking not to breach the
confidentiality agreement.
[9]
According to the applicant itonly became
aware that the first respondent was employed in Kimberley when the
first respondent’s
motor vehicle was seen by Shane Ivan Davis
(the Managing Director of the applicant and deponent to the founding
affidavit) parked
in front of the second respondent’s “
depot”
in Kimberley. Davis took photographs of the motor vehicle as proof of
what he observed. There were also rumours at the time that
the second
respondent was opening a branch of its business in Kimberley.
[10]
I am not persuaded by
the submission that the applicant delayed in instituting these
proceedings. The restraint agreement is restricted
to the Northern
Cape province and there is no evidence suggesting that the applicant
was aware or ought to have been aware that
the first respondent was
employed within this province. Therefore, taking up employment
outside the area specified in the restraint
agreement is not a
contravention. It is also not a contravention of the restraint
agreement for the first respondent to honour
unelicited orders
received from inside the restricted area.
3
[11]
Even if it were to be
found that the urgency was self-created, the applicant was not
granted an interim order on the day the matter
was first placed on
the roll. The respondents were granted an opportunity to file
opposing papers and they took advantage of the
opportunity. This
explains why they were fully prepared to present their cases on the
day the matter was heard. None of the parties
can legitimately claim
that they were prejudiced in presenting their cases. I therefore
proceed to consider the merits of the application
which were fully
argued before me.
[12]
Since the applicant
wants a final order, where there are disputes of facts same would be
considered on the basis of the approach
adopted in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
4
that
where there are disputes of facts a final order can be granted only
if the facts averred in the applicant’s affidavits,
which have
been admitted by the respondent, together with the facts alleged by
the respondent justify such order.
[13]
The restraint agreement that is the subject
matter of this application reads:
“
Amendment of Letter of Employment
Application(Additional Clauses). On termination of your employment
with Halsted and Company (PTY)
Ltd, you will immediately return to
Halsted and Company (PTY) Ltd all documentation and other property of
Halsted and company (PTY)
Ltd, which may be in your possession,
including list of customers, clients or written information regarding
the business of Halsted
and Company (PTY) Ltd, and you undertake not
to retain or make any copies thereof for any purpose.
You will not, either before, during or after termination of your
employment with Halsted and Company (PTY) Ltd, use for your own
benefit or that of any person, firm or company, any confidential
information relating to the affairs of Halsted and Company (PTY)
Ltd,
which may have come into your possession, or which you were or become
aware of whilst in the employ of Halsted and Company
(PTY)Ltd.
As an employee of Halsted and Company (PTY)Ltd, by reason of
association and service, you will acquire knowledge of Halsted and
Company(PTY)Ltd trade secrets, sources of supply, patents of trade,
business methods, suppliers and clientele. Such knowledge could
be
advantageous to the competitors of Halsted and Company (PTY) Ltd.
You therefore undertake:
Not to directly or indirectly, either as principal, agent,
partner, representative, shareholder, director or employee be
associated
with, interested in, (which expression includes, inter
alia, the loan or advancements of money to you), interest yourself
in
any firm, company, person or group carrying on business in
competition with that of Halsted and Company (PTY)Ltd and/or any
company
or firm or undertaking which it may now in the future
control or with which it may become associated; and
Not to knowingly solicit, in competition with Halted and
Company(PTY)Ltd, a customer or any person who, as at the date of
termination
of your employment, is or was a customer of Halsted and
Company(PTY)Ltd; and
Not to commence business on your own account, enter into any
partnerships, accept a position as director of any group, accept any
employment with any person, firm, group, partnership or association
whatsoever, which directly or indirectly competes with business
of
Halsted and company (PTY)Ltd and/or carries on a business similar to
that of Halsted and Company (PTY)Ltd.
The restraint shall endure for a period of 36 months from date of
termination of your employment. This restraint is extended to
the
Northern Cape.
You, in acknowledging the receipt of the amendments, agree that
the above restraints are reasonable in all respects.”
[14]
As a general rule a
provision which attempts to restrain an employee after termination of
the contract of employment from taking
up new employment is in
conflict with public policy if the effect of the restraint would be
unreasonable
5
.
The test for determining the reasonableness or otherwise of a
restraint is based on the broad interests of the community on the
one
hand, and the interests of the contracting parties themselves on the
other hand. The broad interests of the community entail
that
agreements should be abided and at the same time unproductivity
should be discouraged. In as far as the interests of the contracting
parties themselves are concerned, two issues arise. The first is that
it is unreasonable to prevent one party, after the termination
of
his/her contractual relationship with another, from participating
freely in the commercial and professional community
6
.
Secondly, it should be unreasonable not to protect a protectable
interest of a contracting party against the other, where such
protection would not offend public policy.
[15]
In determining the
reasonableness or otherwise of a restraint provision the following
four questions are relevant
7
:
(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 indeed so, does such
interest weigh up quantitavely and qualitativelyagainst the interest
of the other party that the latter should not be economically
inactive and unproductive? (d) is there another fact 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. The fifth question could be: does the restriction go
further than is necessary to protect the particular interest?
8
[16]
The principles that may
be discerned from the authorities dealing with the legal position
regarding the enforcement of restraint
of trade agreements relevant
to the facts of this case for trade secrets and connectionsmay be
tabulated as follows:
9
(a) The need of an employer to protect his/her trade
connections arises where the employee has access to customers of the
employer
and is in a position to build up a particular relationship
with the said customers so that when he/she leaves the employer’s
service he/she should easily induce the said customers to follow the
employee to the new business where he/she is involved either
as owner
or employee;
(b) The relationship must be such that the employee
acquires such personal knowledge of and influence over the customers
of his/her
employer as would enable him/her if the competition were
allowed, to take advantage of his/her employer’s trade
connection.
(c) Whether the criteria referred to in (a) and (b)
above are satisfied is essentially a matter of fact in each case, and
in many,
one of degree.
(d) Factors relevant to be considered in answer to (c)
above are: the duties of the employee, his/her personality; the
frequency
and duration of contact between the employee and the
customers; the place where such contact takes place; what knowledge
he/she
has gained of the customers’ requirements and business;
the general nature of the relationship, whether an attachment is
formed between them, the extent to which customers rely on the
employee and how personal their association is, how competitive the
rival businesses are; the type of product being sold; whether there
is evidence that customers were contacted after the employee
left.
10
The list is not exhaustive and it will depend on the
circumstances of the case under consideration.
(e) The mere fact that the employee had contact with
customers does not on its own bring about a protectable interest in
the form
of customer connections, but that the connection is such
that it will probably enable the former employee to induce the
customers
to follow the employee to a new business.
11
(f) A covenant of restraint is against public policy if
it did not protect a proprietary interest but sought merely to
exclude competition.
Elimination of competitionis not a kind of
interest which can be protected by a restriction of freedom of trade
after the termination
of a contract of employment. It would not weigh
up against the prejudice which the other party will suffer if he/she
cannot freely
exercise his/her trade or calling.
(g) The parties’ own view reflected in the
agreement as to the reasonableness of the terms of the restraint
agreement can
never be decisive. The content of the agreement cannot
itself be the exclusive measure of what is reasonable because that
would
result in the propriety of the agreement being tested against
itself.
12
(h) The reasonableness of the restraint is judged at the
time of the adjudication of the dispute. There could be factors
present
at the time of adjudication which might not have been within
the contemplation or present to the minds of the parties at the time
of the conclusion of the agreement.
13
[17]
It is important to note
that agreements in restraint of trade are prima facie enforceable and
an
onus
rests on the
party seeking to avoid the restraint clause to prove that its
enforceability would be contrary to the public interest.
14
Similarly,
the
onus
of proving
unreasonableness is upon the party seeking to avoid the enforcement
of the restraint.
15
[18]
The applicant’s
case in support of the orders it is seeking is premised on the
following: That the first respondent signed
both Annexure A& B
whilst employed by it. The first respondent is now employed by the
second respondent in Kimberley, a direct
competitor of the applicant
in the Northern Cape. The first respondent is employed as Regional
Manager in the Northern Cape in
direct competition with the
applicant. First respondent is utilising confidential information
that he obtained during and as a
result of his employment with the
applicant to further the interests of the second respondent,
including client lists, client’s
requirements, client required
quantities and stock levels, the applicant’s stock levels and
supply base trends. It is further
the applicant’s case that the
first respondent is actively promoting sales to the very same clients
of the applicant that
he met and got to know during his employment
with the applicant and that the first respondent has failed to
indicate to customers
of the applicant that he is no longer employed
by the applicant and instead when approached by them merely furnished
them with
quotations from the second respondent.
[19]
The first respondent’s
response to the applicant’s case is as follows. He admits that
he indeed signed Annexure A but
that he signed it under duress. He
did not sign it freely and voluntarily as he was forced by the
Managing Director of the applicant(Davis)
to append his signature. He
states that prior 01 April 2004, a day on which he signed Annexure A,
he did not have a written employment
agreement with the applicant. He
only received an appointment letter. AnnexureA was presented to him
by Davis who did not request
him to sign the document but
“
instructed”
him
to sign it. He was not pleased to bind himself as stipulated in the
document because the business of the applicant is the line
of
business that he understood very well and which he had extensive
experience on. He would therefore not have voluntarily
“
locked
himself”
out of the employment market
in that field and bind himself to work for the applicant only. First
respondent avers further that
he had no choice but to sign the
document as he believed that Davis would make his working environment
intolerable such that he
would be left with no other option but to
resign. He therefore had no option but to sign and bind himself as
such.
[20]
With regard to Annexure
B the first respondents defence is that he did not sign the document
and that the signature that appears
therein is not his. He states
that he was required by e-mail to sign the document and he refused to
do so. The request was made
shortly before his resignation. He
further noticed that the document states that it was signed in
Rustenburg and on that day he
was in Kimberley and not in Rustenburg.
He avers that his signature has been forged.
[21]
The first respondent further contends that
if it is found that there is indeed a valid restraint of trade
agreement which is, on
the face of it enforceable, the applicant has
not established a protectable interest which is in the public
interest and reasonable.
Furthermore, if it is found that the
applicant does have a protectable interest, it has not been shown
that the interest has been
threatened by the first respondent or that
it would not be threatened in the future. In the alternative, if it
is found that the
applicant’s protectable interest has been
threatened or likely to be threatened, the first respondent contends
that the period
of three years (36 months) for the protection of the
applicant’s rights is hopelessly unreasonable and should be
limited
to a period of nine months.
[22]
The issues to be decided
are whether (a) the first respondent signed Annexure A under duress;
(b) whether the first respondent signed
Annexure B; (c)If it is found
that first respondent did not sign under duress whether his signature
of Annexure A gave rise to
a valid restraint of trade agreement. (i)
whether the applicant has established a protectable interest which is
in the public interest
and reasonable; (ii) whether the applicant’s
interest has been threatened by the first respondent or that it is
likely to
be threatened in the future, and (iii) whether a period of
three years(36 months) for the protection of the applicant’s
rights
is reasonable.
[23]
I first deal with the
issue relating to duress(
metus
).
It is accepted in our law that a party who seeks to resist the
enforcement of a contract on the ground of duress based on fear
bears
the
onus
of showing
that he/she was induced thereby to conclude the agreement. He/she
would not have concluded the agreement had it not been
for the
duress. The essential elements that must be established by such a
party are that:
16
(a) A reasonable fear that the threat might eventuate.
(b) The fear was caused by the threat of some
considerable evil to the person concerned or his/her family.
(c) The threat was of an imminent or inevitable evil.
(d) The threat or intimidation was unlawful or
contra
bonos mores
.
(e) The moral pressure exerted by the threat had caused
damage.
[24]
As pointed out, the first respondent admits
having signed the agreement but contends that it was placed before
him by Davis and
who did not request him to sign it but specifically
ordered (“beveel”) him to sign it. That he was not
satisfied to
bind himself as such but he had no other choice but to
sign the document. He feared that his refusal would have led to a
situation
where Davis would make his working conditions difficult to
the extent that he would have to resign.
[25]
In response to these allegations, Davis
denies that he ordered, forced or coerced the first defendant to sign
Annexure A. He stated
further that Annexure A was signed by the
majority of the applicant’s senior personnel throughout the
applicant’s group
who were privy to confidential information
regarding the applicant’s business.
[26]
The issue whether the first respondent
signed Annexure A under duress rises a dispute of fact. I have not
been requested to refer
the issue to oral evidence or trial for
determination by the parties. Both parties are of the view that it is
a matter that can
be decided on the papers bearing in mind the
relevant applicable legal principles. I agree and accordingly proceed
to consider
the issue, bearing in mind the party bearing the onus and
the approach to be adopted where there are disputes of facts in
motion
proceedings where final relief is sought.
[27]
The only pressure that was exerted on the
first respondent (on his own version), is an order or instruction
that he sign the agreement.
There is no other evidence that he
enquired from Davis what would happen should he not sign the
document. He,on his own,harboured
a threat that his employment
conditions would be made difficult should he not sign. In my view, a
person in the position of the
first respondent who is the Area
Manager and who has served the appellant for such a lengthy period of
time, would not be intimidated
into signing a contract that is
against his rights by merely being ordered to sign without being told
what the consequences would
be should he refuse to sign. I find such
fear,if it indeed occurred, to be unreasonable under the
circumstances.
[28]
Furthermore, the first respondent being a
manager himself, should or ought to have been aware of his rights
should the working conditions
be made intolerable for him. In
addition the threatin issue is in my view not enough to coerce a
person in his positionto sign
an agreement which is against his
rights. It is noteworthy that the first respondent could refuse to
sign Annexure B but agree
to sign Annexure A. On both occasions it
was only an instruction used to pressurise him and nothing more. It
must be accepted that
the first respondent had the opportunity to
read the document and knew what its contents and consequences
where.He however did
nothing to contest the document until these
proceedings were instituted by the applicant. Furthermore, a letter
from his attorney
of 7 May 2012 confirmed to the applicant that he
regarded the document binding on himself and would abide by its
contents. His
defence of duress seems to be an afterthought.
[29]
Even if it is accepted that he did fear that
his working conditions would be made difficult because of his
non-compliance with
the instruction, such fear, in my view, was so
unreasonable that it does not satisfy the requirement of fear or the
anticipation
of harm required to enable him to avoid the enforcement
of the restraint agreement.The first respondent’s allegations
in
this regard are so far-fetched that rejecting them merely on the
papers is justified. I therefore find that the first respondent
has
failed to establish that he was forced or coerced to sign Annexure A,
or that he did so under duress.
[30]
It is opportune at this stage to deal with
Annexure B. The first respondent denies having signed Annexure B and
states that he
was not in Rustenburg where it is alleged that the
document was signed. By this denial, the applicant carried the
onus
to prove that the first respondent did sign Annexure B. In reply, the
applicant denies the allegations made by the first respondent
and
reiterate that the first respondent did sign the document. An attempt
was made by the applicant to rely on a letter written
to the
applicant’s Attorneys to support the averment that first
respondent signed Annexure B which is inadmissible as evidence.
Davis
does not state that he was present when the first respondent
allegedly signed the agreement. He does not set out the circumstances
in which the document was signed by the first respondent. Since the
applicant bears the
onus
to prove that the first respondent
signed the document, it has not succeeded in doing so and as such
Annexure B cannot be relied
upon by the applicant.The first
respondent has explained that his initial admission that he signed
the document was mistaken and
has since ascertained that he made a
mistake. He can therefore not be held to his mistaken view in light
of his reasonable explanation.
[31]
The protectable interest that the applicant
is claiming and that require protection is that as a result of the
first respondent’s
employment with the applicant, the former
obtained knowledge of the applicant’s stock levels, the
applicant’s mark-up,
profit, sales figures and markets, and
particulars of various clients in the Northern Cape province. He also
obtained information
relating to the circumstances, requirements,
products and quantities required by such clients, to which the
applicant delivers
supplies. The applicant contends that the
aforesaid information is confidential information regarding the
applicant and constitutes
protectable interest.
[32]
In response to the above averments the first
respondent states that after his appointment as area manager, he
built up the applicant’s
business as a result of his
personality, and the manner in which he conducted himself how he
personally related with people. He
also introduced retail outlets
where clients could walk in and purchase whatever they wanted as
opposed to a warehousing business
as it was the case before. He
stated further that when he took over, the turnover of the
applicant’s business was in the
region of R10,5 million per
year and when he left the annual turnover had risen to R45million for
the Kimberley branch alone. He
also as the branch manager extended
the applicant’s business to Kathu and Vryburg and also opened
an agency in De Aar. He
admits that he learnt some of the aspects of
the business from Davis but that in the main the growth of the
business was as a result
of his personality and own initiative.
[33]
First respondent avers
further that the applicant’s business is not a unique business
as the applicant claims because it consist
of sale of work wear,
chemicals, cleaning material, toilet and paper products in the mine,
agricultural and industrial sector.
These activities are also
undertaken by other entities in Kimberley such as Agricultural &
Mining Distributors, Safety Sam,
Ryamic, and Ntlo, as well as Reidera
and Upington Industrial in Augrabis and Upington. Other entities
selling some of the products
are North Safety in Kathu, Built-it, GWK
and Buco in Kimberley and Crag Trading in Kathu. These entities also
supply JonssonWorkwear
and have been doing so in the NorthernCape
province even before first respondent took up employment with second
respondent.
[34]
The first respondent
contended further that the applicant’s business is not unique
because as it is the case with all other
businesses they buy the
products from the suppliers, add up a markup for profit and sell to
the prospective customers. He admits
that he gained knowledge of the
applicant’s stocklevels, profit margins and sales figures but
alleges that such information
is not unique to the extent that it may
help a competitor to unfairly impact on the applicant’s sales.
Furthermore, the customers
that exist do not solely purchase the
items they require from the applicant. Finally, first respondent
contends that the applicant
is not the sole supplier of the
JonssonWorkwear in the Northern Cape Province.
[35]
The applicant is also
relying on the fact that the first respondent has acknowledged, or
that the restraint agreement makes provision
that the first
respondents by being employed by the applicant would have access to
confidential information and trade secrets of
the applicant. A mere
acknowledgment in the agreement that a particular information is
confidential or would be considered as such
and therefore protectable
does not necessarily make such information confidential. It is
incumbent upon the applicant to place
facts before court from which
it may be inferred that the information alleged to be secret is
indeed secret. Therefore where there
is nothing unique about a way
the applicant is doing business or nothing unique about its sales
methods, and its methods are those
generally adopted in the
particular trade or industry, such methods cannot be considered
confidential and therefore protectable
by a restraint agreement. For
the information to be confidential it must have the necessary quality
of confidentiality about it
and it must not be something which is
public property or public knowledge.
17
[36]
In my view, it is not
sufficient to allege that the first respondent has access to the
applicant’s trade connections and customer
lists. The important
element that must be established is that the first respondent’s
connection with the customers is such
that he has a personal
influence with the applicant’s customers such that when he
leaves or has left, is in a position to
induce them to divert their
business to the new employer. Mere knowledge of who the customers are
is not sufficient.
[37]
It is common cause that the first respondent
served a resignation letter on the applicant on 27 March 2012 in
which he gave 30 days
notice. His last working day was 26 April 2012.
Prior his departure he requested Mr TRL Honiball, an employee of the
first respondent
to clean his computer notebook. According to the
first respondent he did so in order to return the said computer to
the applicant
when he left and had a lot of personal information that
he wanted removed. He denies that he requested Honiball to erase his
windows
profile as he did not even know what that is, him being
layman when it comes to computers. According to the applicant
attempts
were made after the first respondent’s departure to
retrieve the information deleted by Honiball to establish “
what
information was passed on to specifically the second [respondent],
but without any success.”
[38]
It would be far-fetched to conclude that the
first respondent passed any information from his computer belonging
to the applicant
to the second respondent solely on the applicant’s
suspicion. However, it would be difficult if not impossible for the
applicant
to prove that the first respondent passed over information
to the second respondent. These would be matters that would naturally
take place in the applicant’s absence. The overall
circumstances of the case must be considered in determining this
aspect.
[39]
The applicant alleges further that prior to
his resignation, the first respondent ordered large quantities of
JonssonWorkwear stock,
increasing the applicant’s stock levels
by approximately 150% and thereby artificially increasing the
applicant’s sales
figures in order to inflate the figure that
he supplied to the second respondent. In response to this allegation,
the first respondent
denies that he ordered large quantities of
Jonssonworkwear on behalf of the applicant as alleged. He states that
orders were in
the course of business made by Charlene Zondagh who
was the new branch manager of the applicant in Kimberly. The latter
used his
discretion and did not request the second respondent’s
approval for the orders. The first respondent further denies that he
was required to furnish any sales figures to the second respondent as
doing so would have been immoral. He challenged the applicant
to
support all these allegations with particulars.
[40]
In response to the applicantsnotes the
averments that Charlene Zondagh is the person who did the orders on
his own discretion without
seeking the approval of the first
respondent. The applicant then denies the rest of the response made
by the first respondent.
Whether this aspect is relevant will depend
on the fundamental issue to be decided in this case. However, I am
unable to find,
on the basis of what the applicant alleges that the
first respondent indeed ordered large quantities of trading stock for
the applicant
in order to artificially increase the applicant’s
sales figures.
[41]
The other aspect relate to the order placed
by Golden Falls Mining (Pty) Ltd, a client of the applicant during
May 2012. The allegations
are that Mr Brown phoned the first
respondent to obtain a quotation for materials on 15 May 2012 and the
latter informed him that
he was not in office and would return his
call. The first respondent later phoned Mr Brown and obtained
information regarding the
desired quotation from him. The following
day on 16 May 2012 a quotation was sent to Mr Brown from the second
respondent’s
Welkom Depot. Ms du Toit phoned Davis to enquire
whether the applicant had changed its name when she saw the
information on the
quotation.
[42]
In
casu
, the following factors are
important. The first respondent has been in the employ of the
applicant since 1997 after he completed
matric. He worked his way up
in the applicant’s business until he became the Area Manager
for Northern Cape Province and
Vryburg in 2010. He became Store
Manager in 2000 and from September 2001 he became a Sales
Representative. From July 2006 to the
year 2010 he worked as Branch
Manager. In all these positions the first respondent was playing an
important role in the business
of the applicant particularly in the
sale of the applicant’s merchandise.
[43]
During this period the first respondent must
have obtained knowledge of the applicant’s stock levels,
mark-up, profit marging,
sales figures and markets and clients. The
first respondent admits that he gained knowledge of these aspects of
the applicant’s
business. His involvement in the business
contributed meaningfully to the growth of the business to extent that
when he left it
was making a yearly turnover of R45 million for the
Kimberley branch alone. The knowledge and expertise in this kind of
business
was obtained whilst working for the applicant. His
personality may also have played a factor, however, it required to be
tested
and sharpened in a business setup, which in this case, was the
applicant’s business. By virtue of his positions he had contact
and was responsible to service the applicant’s customers.
Through this contact and service he must have acquired some influence
on the applicant’s customers.
[44]
During the first respondent’s
employment at the applicant he must have acquired some form of
training and exposure in the
use and marketing of the merchandise
sold by the applicant. This can only explain why he was such a
successful salesman and area
manager of the applicant. On the facts
before me the first respondent had not worked at any place before
being employed by the
applicant. He was employed by the applicant
when he was fresh from school with no experience in business. The
applicant had been
his only employer until employed by the second
respondent. He was able to generate profits despite the fact that
there were other
competitors selling the same products. For him to
generate profits, he would have developed a close relationship with
the customers
of the applicant for them to continue buying from the
applicantand not from the competitor. He was in a somewhat
influential position
to them, such that he could induce them to
follow him to his new employment. It is therefore not surprising that
he could still
be contacted telephonically after he had left the
applicant’s business for orders. The first respondent’s
employment
with the applicant gave him the opportunity to have access
to customers and built arapport with them which he would not have had
the opportunity to build if he was not employed by the applicant.
[45]
There is no doubt that the first respondent
is now employed by the applicant’s competitor in virtually the
same position he
occupied at the applicant. He is employed in the
Northern Cape and based in Kimberley which is the restricted area in
terms of
the restraint agreement. First respondent’s knowledge
of the applicant’s client lists, client requirements, client’s
required quantities and stock levels, applicant’s stock levels
and supply base trends, places him in a position that if such
knowledge together with his connections with the applicant’s
customers is used in his new employment with second respondent,
would
be beneficial to the second respondent’s business and
detrimental to the applicant’s business. The second
respondent’s
denial that it has received any confidential
information from first respondent about the applicant’s
business, or the assertion
that it does not need such information to
conduct its business is unreasonable and illogical. The second
respondent is not a charitable
organisation and should be conducting
its business to make profit. It would not make sense for it to employ
the first respondent
who is known to it that he has worked for a
competitor in the area, and not take advantage of his experience and
knowledge of the
dynamics of the business in the area. In all
probabilities first respondent is utilising the said confidential
information alternatively
is in a position to utilise such
information to the unfair advantage of the second respondent. The
restraint agreement was intended
for that purpose. It is ironic that
the second respondent denies that it needs the applicant’s
trade secrets and confidential
information whereas a sample of its
employment agreement attached by the applicant to its replying
affidavit as an Annexure recognises
that it has trade secrets and
incorporates restraint clauses against the disclosure and use of such
information by its employees
to the benefit of other persons and
entities.
[46]
In so far as the respondents rely on the
decision in the
Yanasak
case, the following remarks by
Leach
J
are in my view apposite:
“
The argument advanced on
behalf of the respondent is a fairly persuasive one, supported as it
is by the judgment of Leveson J and
the various authorities cited
therein. However every case must be determined by its own particular
facts and circumstances and,
persuasive as the argument may be, there
is one material feature in the present case which was seemingly not
pertinent in the Yanasak
case. During the course of his employment,
and because of it, a salesman may form an attachment with and acquire
an influence over
his employer’s customers, creating or
enhancing, to adopt the phraseology of Nestadt JA in Rawlins and
Another v Caravantruck
(Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A), ‘customer
goodwill’ which is at least in part an asset of the employer
and becomes a trade connection of the employer
capable of protection
by way of a restraint of trade covenant- see Rawlins’case supra
at 542. Where an employee has access
to customers and is in a
position to build up a particular relationship with customers so that
when he leaves his employment’s
service he could easily
influence them to follow him to his new business, there does not seem
to me to be any reason why, in principle,
a restraint should not be
enforced to protect the employer’s trade connections- see
Recycling Industries (Pty) Ltd v Mohamed
and Another
1981 (3) SA 250
(SE) at 258 and Rawlins’s case supra at 541 and the cases there
cited.”
18
[47]
I am of the view therefore, that the first
respondent had access to the applicant’s confidential trade
information and had
contact with its customers. He most probably
build up a particular relationship with these customers such that he
is in a position
to easily induce them to trade with the second
respondent. The relationship he build constitutes a trade connection
of the applicant
capable of protection. The respondent have in my
view, failed to discharge the
onus
of proving the
unreasonableness of the restraint.
[48]
I am in agreement that the duration of the
interdict to protect the applicant’s interests is unreasonably
long. This Court
has a discretion to determine a period that would be
reasonable under the circumstances. Given the circumstances of this
case and
the delay occasioned on behalf of the respondents, a period
of 15 months calculated from 26 April 2012 would be reasonable. I
know
of no reason why costs should not follow the result. The same
should apply to the second respondent who opposed the application.
In the result the following order is made:
The First Respondent is interdicted and prohibited
for a period of fifteen(15) months from 26 April 2012 and within the
Northern
Cape Province, to accept any employment with any person,
firm, group, partnership or association what so ever, which directly
or indirectly competes with the business of the Applicant and/or
carries on a business similar to that of the Applicant.
The First Respondent is interdicted and prohibited
from directly or indirectly disclosing any confidential information
or other
facts with respect to the business of the Applicant, to any
other person or business.
The First and Second Respondents are ordered to pay
the costs of thisapplication, jointly and severally, the one paying,
the other
to be absolved.
___________________
TLALETSI, J
NORTHEN CAPE HIGH COURT, KIMBERLEY
Appearances:
For the appellant: Adv Van Tonder
Instructed by: Duncan & Rothman
Attorneys
For the respondents: Adv J Van Niekerk
SC
Instructed by: Engelsman&Magabane
Attorneys
1
Paragon
Business Forms (Pty) Ltd v Yanasak: Case no: 20317/92
2
Unfortunately,
after waiting for a few weeks I have not been provided with a copy
of the judgment counsel referred me to. It appears
that the
respondents have encountered some difficulties in obtaining a copy
of the judgment. However, the facts and the reasoning
of Leveson J
in arriving at his decision in that case have been adequately
summarised by Leach J in Paragon Business Forms (Pty)
Ltd v Du Preez
1994(1) SA 434 (SE) at 442 I-444D.
3
Ekock&
Co v Ekock
1928 WLD 121
; Wolmer v Rees
1935 TPD 319
4
1984(3)
SA 623 (AD); See also National Director of Public Prosecutions v
Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) at para[20].
5
Magna
Alloys and Research(SA)(Pty) Ltd v Ellis 1984(4)SA 874 (A) at 898
A-B; Basson v Chilwan 1993(3) SA 742 (A) 762 B-H.
6
Econoflex
(Pty)Ltd v Delport
[2005] JOL 14434(T)
7
Basson
v Chilwan (supra) at 767 F-h.
8
KwikKopy
(SA) (Pty) Ltd v Van Haarlem 1999 (1) SA 472(W) 484 B-E.
9
Den
BravenSA(Pty) Ltd v Pillay and Another
2008 (6) SA 229
(D&CLD)
at 235F-236E (para[6]); Walter McNaughtan (Pty) Ltd v Schwartz and
Others 2004(3) SA 381 (C) at 390 C-D.
10
Rawlins
v Caravantruck (Pty) Ltd 1993(1) SA 537(A) at 541 G-I.
11
Walter
McNaughtan (Pty)Ltd v Swartz and others (supra) at 390C.
12
Magna
Alloys and Research SA (Pty)Ltd v Ellis (supra) 905B. Bonnet v
Schofied 1989 (2) SA 156 (D) 160 B-C.
13
Magna
Alloys & Research SA (Pty) Ltd v Ellis (supra) 894 C-D;
Alum-Phos (Propretory) limited v Spatz [1997]1 All SA 616 (W)
626b-c.
14
Magna
Alloys and Research (supra); Same; “Agreements in Restraint of
Trade in South Africa Law” Butterworths: 6-11
(issue 11).
15
Reeves
v Marfield Insurance Brokers CC 1996(3) SA 766(A) at 776 A-C.
16
See:
Arend and Another v Astra Furnishers (Pty) Ltd
1974 (1) SA 298
(C)
at 3058 and 306B, Paragon Business Forms (Pty) Ltd v Du Preez
1994
(1) SA 434
(SE) at 439; National Scrap Metal (Cape Town)(Pty) v
Murray & Roberts Ltd 2012(5) SA 300 (SCA) at para[21].
17
Telefund
Raisers CC v Isaacs
1998 (1) SA 521
(c) 528; Petre&Madco (Pty)
Ltd t/a T-Chem v Sanderson-KaSner 1984 (3) SA 850(W) 858 G-H
18
Paragon
Business Forms (Pty) Ltd v Du Preez.(supra) at 443I-444D.