About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2012
>>
[2012] ZAFSHC 94
|
|
Panzapix (Pty) Ltd v Van Niekerk and Others (483/2012) [2012] ZAFSHC 94 (10 May 2012)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 483/2012
In the matter between:-
PANZAPIX (PTY) LTD
…...........................................................
Applicant
and
SUSANNA ELIZABETH
VAN NIEKERK
….....................
1
st
Respondent
DAVID MüLLER
FERREIRA
…......................................
2
nd
Respondent
MATTHYS JOHANNES
JONKER
…...............................
3
rd
Respondent
MARIA SUSANNA
OPPERMAN
….................................
4
th
Respondent
NICOLETTE VORSTER
…...............................................
5
th
Respondent
CASPESTEP (PTY) LTD
….............................................
6
th
Respondent
_____________________________________________________
HEARD ON:
23 FEBRUARY 2012
_____________________________________________________
JUDGMENT BY:
EBRAHIM, J
_____________________________________________________
DELIVERED ON:
10 MAY 2012
_____________________________________________________
[1] This is an
application for final interdictory relief based on a covenant in
restraint of trade. The applicant is a limited liability
company duly
incorporated and registered and carrying on the principal business of
trading in grain. The first to fifth respondents
are all former
employees of the applicant, who are currently in the employ of the
sixth respondent, also a limited liability company
duly incorporated
and registered as such by the first respondent in order to carry on
business as a grain trading entity.
[2] The applicant, who is
represented in these proceedings by its sole director, Christiaan
Johannes Botha Barnard (hereinafter
referred to as “Barnard”),
seeks specific performance of a contractual arrangement between
applicant and the first
to fifth respondents, arising from the
following factual matrix.
2.1 At the beginning of
2011, Barnard and the first respondent had a discussion about the
possibility of setting up a grain trading
business. First respondent
indicated she had no starting capital although she had the expertise
to conduct such a business based
on her years of experience in the
industry. It was agreed between them that a company (the applicant)
would be incorporated and
registered to trade in grain, maize and
other arable crops. First respondent’s input would be her
know-how and expertise
and Barnard would furnish starting capital.
The exact amount of this capital is disputed on the papers but it is
common cause that
Barnard did pay into the business an amount of R150
000,00.
2.2 The business of the
applicant flourished to the extent that the annual turnover for the
first year of trading as evidenced from
its trial balance sheet
(annexure “CJB2” to the papers) reflected an amount of
approximately R36 million.
2.3 At the commencement
of the business, two agreements were signed by the first respondent.
On 20 August 2011, both she and Barnard
signed a Shareholder’s
Agreement as representatives of the contracting parties
viz
the trustees of the BTJJ Trust and the trustees of the J
& I Trust, the owners of the applicant. On 2 February 2011, the
first
respondent and the second, third, fourth and fifth respondents
(who were all employed by the applicant) each signed a
confidentiality
and restraint agreement in terms of which they
undertook not to trade in competition with the applicant in the Free
State, Northern
Cape and North West Provinces, during their term of
employment with the applicant and for a period of one year after
termination
of such employment. They also agreed not to disclose any
of the applicant’s confidential trade information. A similar
restraint
cause is contained in the Shareholder’s Agreement.
2.4 The restraint is
recorded in clause 3 of the Restraint Agreement as follows:
“
3.1 It is
recorded that –
In the course of his/her duties to
the Company, the employee will become intimately concerned with
the business and affairs
of the group;
By reason of his/her association
with the group, the employee will acquire considerable knowledge
and know-how relating to
the group and its business/es.
3.2 The employee acknowledges that if
he/she is not restricted from competing with the group as provided
for herein, the group will
potentially suffer considerable economic
prejudice including loss of custom and goodwill. Accordingly, the
Company considers it
essential, to protect the group’s
interests, that the employee agrees to a restraint of trade
undertaking in favour of the
group to ensure that the employees will
be precluded from carrying on certain activities which would be
harmful to the business
of the group.
3.3 The employee –
3.3.1 undertakes in favour of the
group, its successors-in-title and assigns that he/she will not,
during the restraint period,
directly or indirectly, and whether for
his/her own account, or as a principal, agent, partner,
representative, shareholder, director,
employee, consultant,
contractor, financier, assistant, administrator, (including any
employee of any member of the group), syndicate,
partnership, joint
venture, Company, Trust, business undertaking, concern or other
association of any nature –
3.3.1.1 anywhere in the prescribed
area be interested in, engaged in, concerned or associated with any
business which is directly
or indirectly competitive with the
business carried on by any member of the group at any time during the
restraint period (‘the
protected business’);
3.3.1.2 anywhere in the prescribed
area canvass, solicit or entice, or endeavour to entice, in respect
of any business which is
directly or indirectly competitive with the
protected business, any person who, is then, or was at the
termination date or during
a period of one year prior to the
termination date (‘pre-termination period’) a client,
customer, supplier or distributor
in respect of the protected
business or is then or was at the termination date accustomed to
dealing with any member of the group,
or a principal or agent
vis-a-vis
any agency, or licensor or licensee in respect of
any licence granted in respect of the protected business;
3.3.1.3 canvass, solicit or entice, or
endeavour to entice away from the group or employ, or appoint, or
procure the employment
or appointment of, in respect of any business
which is competitive with, or similar to the protected business, any
person who is
then an employee, officer or agent of the group;
3.3.1.4 persuade, induce, solicit,
encourage or procure any employee of any member of the group to
terminate his/her employment
with such member;
3.3.1.5 solicit the custom of or sell
to or attempt to sell to or deal with, in respect of the protected
business, any customer
from whom the employee, on behalf of any
member of the group, obtained or attempted to solicit business at any
time during the
continuance of the employee’s employment;
3.3.2 acknowledges and agrees that
each undertaking given by or restraint imposed upon him/her in terms
of clause 3.3.1-
3.3.2.1 is to be construed where
reference is made –
3.3.2.1.1 to any period, as applying
separately to each month failing wholly or partly within such period;
3.3.2.1.2 to any business, as applying
separately to each aspect thereof or activity failing wholly or
partly within such business;
3.3.2.1.3 to any type, class or
category of person, as applying separately to each person of such
type or class, or failing within
such category;
3.3.2.1.4 to any area, as applying to
each magisterial district (or the equivalent thereof) in such area;
3.3.2.2 is to be construed, whether in
relation to duration, area and scope of operation, or otherwise, as a
separate and independent
undertaking or restraint from each of the
others given by or imposed upon him/her pursuant thereto;
3.3.2.3 is reasonable in its duration,
area and scope of operation for the protection of the direct and
indirect proprietary interests
of the group, having regard,
inter
alia
, to the matters recorded in 3.1 and 3.2.
3.3.3 agrees that this undertaking is
a stipulation of the benefit of each member of the group and its
successors-in-title and assigns
capable of enforcement by each member
of the group and its successors-in-title and assigns on the basis
that the signature hereof
by the Company constitutes an acceptance of
such benefit by each member of the group and its successors-in-title
and assigns.
The failure by any member of the
group to –
3.4.1 exercise any of its rights in
terms of this clause 3 in consequence of any breach by the employee
of any of the provisions
of clause 3.3;
3.4.2 succeed in any proceedings
instituted by it to enforce any of its rights in terms of the
restraint given by the employee in
clause 3.3 as a result of the
finding of any court;
shall not preclude any member of the
group from exercising any such rights in consequence of any
subsequent breach by the employee
or of any subsequent findings of
any court, as the case may be.
If after the termination date and
prior to the expiry of the restraint period, the employee –
3.5.1 acts in breach of his/her
obligations in terms of clause 3.3; and
3.5.2 is ordered by a court of law to
abide by the undertakings made by him/her, in terms of clause 3.3,
then the restraint period will, at the
election of the Company, be deemed to commence running from the date
upon which the employee
ceases to act in breach of his/her said
obligations or the date of the employee’s last known act in
breach of his/her said
obligations.
The employee acknowledges that if he
should at any time dispute that any of the provisions of this
clause 3 are reasonable and/or
contend that they are unreasonable
then the onus of proving such unreasonableness will rest upon
him/her.
Without limiting the generality of
the foregoing, the employee will comply with, and the group will be
entitled to enforce,
the provisions of this clause 3
notwithstanding-
3.7.1 that the termination of the
employee’s employment or the termination of this agreement
results from -
3.7.1.1 a breach (material or
otherwise) of any of the provisions of this agreement by the
employee;
3.7.1.2 repudiation by either party of
this agreement (notwithstanding acceptance of such repudiation by the
other of them);
3.7.1.3 fair or unfair dismissal by
the employee;
3.7.1.4 notice of termination by
either party.
A breach of any of the restraints
stipulated in this clause 3 shall entitle any member of the group,
without prejudice to any
other rights available to it in law and
notwithstanding any other provision of this agreement, to apply to
any court of competent
jurisdiction for an appropriate interdict.”
In contravention of the
restraint agreement, the first, second, third, fourth and fifth
respondents, resigned with immediate
effect on 13 January 2012 and
commenced trading on 16 January 2012 under the auspices of the
sixth respondent in the same commodities
as the applicant.
The sole director and
shareholder of the sixth respondent is the first respondent. The
other respondents are its employees.
In the founding papers
in support of this application, Barnard alleges that the relief is
warranted because not only did the
first respondent commit theft by
stealing documents, computers and flash storing discs (containing
information relating to
the applicant’s business and its
clients, but she also wrote to the applicant’s clients to
entice them to do business
with the sixth respondent.
[3] Only the first
respondent has opposed the relief sought. In her opposing affidavit
she advances the defence that the restraint
agreement is
unreasonable, contrary to public policy and therefore unenforceable.
Her defence is based on five grounds.
The applicant has no
protectable interest as it ceased trading when the respondents
resigned on 13 January 2012.
Barnard made it
impossible for any of the respondents to continue in the service of
the applicant because of his mismanagement
of the finances of the
applicant.
Barnard’s conduct
was not reasonably foreseeable at the time the restraint agreements
were signed by the respondents.
Accordingly to hold them to the
covenant does violence to their rights in terms of section 22 of
the Constitution of the Republic
of South Africa, Act 108 of 1996
(Freedom of Trade, Occupation and Profession).
Barnard has an ulterior
motive in launching this application in that his sole intent is to
deny the respondents the right to
earn an income, particularly
where the first respondent is concerned, regard being had to the
threats Barnard made that he
would destroy the reputation of the
first respondent.
The sixth respondent
does not do business with the applicant’s clients.
[4] 4.1 It follows that
the determination of this application rests on the reasonableness of
the restraint. The common law position
on this issue is that
essentially each agreement should be examined with reference to its
own particular circumstances (i.e. on
the facts) to ascertain whether
the enforcement of the agreement would be contrary to public policy
and consequently unenforceable.
Pubic policy requires that agreements
freely entered into should be honoured, but it also requires that
persons should be free
to seek fulfilment in their choice of
profession, trade or occupation. See
MAGNA ALLOYS &
RESEARCH SA (PTY) LTD v ELLIS
[1984] ZASCA 116
;
1984 (4) SA 874
(A). This
common law freedom is underpinned by section 22 of the Bill of Rights
in the South African Constitution which provides
as follows:
“
22. Freedom
of trade, occupation and profession.
—
Every citizen has the right to choose their trade, occupation or
profession freely. The practice of a trade, occupation
or profession
may be regulated by law.”
Contractual autonomy is
part of the freedom informing the constitutional value of human
dignity. An unreasonable restriction of
a person’s freedom to
trade or pursue a chosen profession, trade or occupation, would thus
be contrary to public policy and
attract constitutional invalidity
should it be enforced.
4.2
The assessment of the reasonableness of the restraint requires a
value judgment and the incidence of the onus plays no part
in that
assessment. The value judgment required to be undertaken must be done
with full comprehension of the considerations referred
to in section
36(1) of the Constitution since it necessarily requires determining
whether the restraint was
“
reasonable and
justifiable in an open and democratic society based on human dignity,
equality and freedom”
. The two principal
policy considerations which have to be borne in mind when undertaking
the exercise is that the public interest
requires firstly that
contractual obligations be complied with and secondly, that all
persons should in the interest of society
be economically productive
by being permitted to engage in trade, commerce or the professions.
See
REDDY v SIEMENS TELECOMMUNICATIONS
(PTY) LTD
2007 (2) SA 486
(SCA).
[5] 5.1 In applying these
two principal considerations, the respective interests of the
applicant and the respondents must be examined,
bearing in mind that
a restraint is unreasonable and unenforceable if it prevents a party
from engaging in a trade, occupation
or profession after termination
of his or her employment with the other party without a corresponding
interest of the latter being
infringed and thus deserving of
protection. Such a restraint is not in the public interest.
In
BASSON v
CHILWAN AND OTHERS
[1993] ZASCA 61
;
1993 (3) SA 742
(AD) at 767 G – H
Nienaber JA identified four questions which should be asked when
considering the reasonableness of
the restraint.
Does the one party have
an interest that deserves protection after termination of the
agreements?
If so, is that interest
threatened by the other party?
Does such interest
weight qualitatively and quantitatively against the interest of the
other party not to be economically inactive
and unproductive?
Is there an aspect of
public policy having nothing to do with the relationship between the
parties, which requires that the restraint
be maintained or
rejected? Where the interest of the party sought to be restrained
outweighs the interest to be protected, the
restraint is
unreasonable and consequently unenforceable.
This common law
approach of balancing the competing interests or reconciling the
concurring interests of the parties, gives
effect to the precepts
of section 36(1) of the Constitution, which provides:
“
36. Limitation
of rights.
—(1) The
rights in the Bill of Rights may be limited only in terms of law of
general application to the extent
that the limitation is reasonable
and justifiable in an open and democratic society based on human
dignity, equality and freedom,
taking into account all relevant
factors, including—
(
a
) the nature of
the right;
(
b
) the importance
of the purpose of the limitation;
(
c
) the nature and
extent of the limitation;
(
d
) the relation
between the limitation and its purpose; and
(
e
) less
restrictive means to achieve the purpose.”
An agreement in restraint
of trade is concluded pursuant to a law of general application, the
law of contract which allows for contractual
freedom and the
conclusion of agreements giving effect thereto.
[6]
Consequently the value judgment postulated in
BASSON
and
REDDY
,
supra
, necessarily
requires determining whether the restraint is
“
reasonable
and justifiable in an open and democratic society based on human
dignity, equality and freedom”.
The enquiry into the
reasonableness of the restraint covers the value, extent and duration
of the restraint as well as the respective
bargaining powers and
interests of the parties and factors peculiar to them. To the extent
that any facts are in dispute, same
must be resolved in favour of the
respondents, these being motion proceedings for final relief. See
PLASCON-EVANS PAINTS LTD v VAN RIEBEECK PAINTS (PTY) LTD
[1984] ZASCA 51
;
1984 (3) SA 623
(A).
[7] In its founding
papers, the applicant relied exclusively on clause 3.3 of the
restraint agreement which prevents the first to
fifth respondents
from being employed by a competitor of the applicant in the Free
State, Northern Cape and North West Provinces
for a period of 12
months (one year) after termination of their employment with the
applicant. The restraint is aimed at the choice
of employer. The
first to fifth respondents are not restrained from being economically
active on the open market for the period
and in the areas covered by
the restraint. The applicant does not seek to inhibit each of the
respondents from engaging in employment
in any other field (other
than trading in the grain industry) in respect of which their skills
could be productively put to use.
It is consequently the nature and
extent of the limitation in respect of which the restraint is sought.
Whether such a restraint
is reasonable depends exclusively on the
question whether the sixth respondent is a competitor of the
applicant, in other words,
whether the applicant has a protectable
interest. It has not been argued that the limitation as to time is
unreasonable.
[8] It is common cause
that the relationship between Barnard and the first respondent had
soured during the applicant’s first
year of trading. It is also
common cause that each of the second, third, fourth and fifth
respondents had been trained and recruited
as employees of the
applicant by the first respondent, who together with them was in
charge of the day to day running of the applicant’s
business
whilst Barnard was in charge of the finances. On the respondents’
version, the reason for the deterioration in her
relationship with
Barnard was his indiscriminate dissipation of applicant’s funds
on expenses not connected to the trading
activities of the applicant.
The details of these expenses are irrelevant for the purposes of the
adjudication of these proceedings.
What is relevant is that the first
respondent believed that Barnard’s reckless spending was
financially sabotaging the applicant’s
business as the effect
thereof was that clients of the applicant could not be paid at all or
timeously. It was her concern that
clients would incur financial loss
which ultimately caused her to resign and take the second to fifth
respondents with her on 13
January 2012.
[9] As at the date of her
resignation, the first respondent concedes that the applicant had
done business with several business
entities throughout 2011 and in
her letter of resignation she undertook to “finalize all
outstanding contracts” with
the assistance of the applicant’s
accountant, one Christien Jonker (Jonker”). She was aware that
without her input,
knowledge and skill of the grain trading business
and the corresponding industry and skills of the second to fifth
respondents,
the applicant’s business would come to a
standstill because it possessed of no employee or trader with the
know-how to deal
with the grain trading business and perform the
contractual obligations, which had been undertaken by the first
respondent in respect
of the buying and selling of grain and whatever
other commodities it happened to trade in on its behalf. At the time
of her resignation
even Jonker resigned but reconsidered her decision
shortly thereafter.
[10] The first respondent
wrote to each and every client of the applicant informing them she
was no longer a director and employee
of the applicant. She undertook
to ensure personally that their contracts with the applicant were
performed so that they incurred
no damages as a result of a breach.
She and the second to fifth respondents then took their departure of
the applicant together
with the applicant’s computers
containing confidential information of its client data base and its
pricing structures and
documents pertaining to the business and
trading activities of the applicant with its existing and prospective
clients. According
to the first respondent this information was
required in order to assist her to finalise outstanding contracts
with clients whom
she had engaged for the applicant and with whom she
had been negotiating whilst trading on behalf of the applicant. As a
result
the applicant’s business came to a grinding halt and the
applicant successfully embarked on urgent motion proceedings in this
court to retrieve all its confidential information from the
possession of the first respondent.
[11] What all of the
aforegoing amounts to is merely that the first respondent over the
weekend of 13 January 2012 effectively commandeered
the entire
business portfolio of the applicant. It matters not, in my view, that
it was the first respondent who initially introduced
the clients and
their corresponding business to the applicant and that the customer
connection with the applicant was at her behest
in the first place.
But that is not all, the first respondent, simultaneously, registered
and incorporated a new company, the sixth
respondent, on 13 January
2012 and, whilst still in the applicant’s employ, concluded a
contract for the sale of white maize
with Unigrain, a client of the
applicant, on behalf of the sixth respondent, as seller. Clearly, not
only was the first respondent
in possession of confidential
information belonging to the applicant as at the date of her
resignation, but she was proactively
using same in order to solicit a
client of the applicant. The contract referred to forms annexure
“REP1” to the applicant’s
replying papers and was
not challenged by Mr. Reinders in oral argument. I have no doubt that
this was due to the respondents’
defence that the restraint
precludes each of them from earning a livelihood. Here there is no
risk of disclosure to a competitor.
There is, objectively assessed, a
factual disclosure of applicant’s confidential information to a
competitor (the sixth respondent)
and a factual transfer of the
business of a client of the applicant to the competitor (the sixth
respondent). In these circumstances
the first respondent will clearly
have no loyalty to the applicant in her dealings with any/all of the
applicant’s clients
whose contracts she professes she intends
seeing to finality. Her loyalty will be with the new company she has
formed which carries
on the same business as the applicant, her aim
being to trade in competition with the applicant, having taken with
her all of the
applicant’s clients. I might add, as a further
slap in the face to the applicant, the first respondent has given her
new
company, the sixth respondent, the same trading name as that of
the applicant
viz
Grain Commodities and Feeds. She has opened
a new bank account and written to each and every client of the
applicant, furnishing
them with the new banking details. Each of the
respondents occupies a position in the sixth respondent similar (if
not precisely
the same) to that which they occupied with the
applicant. Can one then say that in these circumstances, the
restraint which was
aimed at relieving this kind of competition and
disclosure is unreasonable, because the applicant has no protectable
interest,
its entire clientele and business having been removed by
the first respondent and her co-respondents due to Barnard’s
conduct
which made it impossible for them to work with him and
because they are entitled to exercise their constitutional right to
earn
a living?
[12] I am of the view
that in these circumstances the restraint is neither unreasonable nor
contrary to public policy nor constitutionally
impermissible. It
cannot be expected of the applicant that it adopt a passive role
rather than insist on enforcing the bargain
which it has exacted from
the five respondents in terms of the covenant with them. The words in
clause 2.2 of the Restraint Agreement
“
...
on termination of the employees’ employment in terms of this
agreement
for
any reason whatever
...”
indicate that the
restraint is to operate once there is no longer an employment
relationship between the applicant and the respondents
irrespective
of the circumstances in which that relationship comes to an end. The
underlying cause of the termination is thus irrelevant
to the
operation of the restraint. The respondents are each members of the
public who have been gainfully employed in one or other
field during
their adult life. From the evidence it is clear to me that each is
capable of obtaining some form of employment, unrelated
to the nature
of the applicant’s business for the remaining period of
restraint. None of the respondents have indicated an
inability to
engage in any other form of employment on the open market. In fact,
there is no indication whatsoever in the answering
affidavits of each
of the first to fifth respondents what their qualifications are, what
skills they possess and what options are
open to them on the open
market. This is noteworthy and indicative of a determination to
defeat the restraint by entering and remaining
in the service of a
trade competitor of the applicant, the sixth respondent.
[13] The public interest
requires contracts to be enforced. This is consistent with the
constitutional values of human dignity and
autonomy. The restraint is
not unreasonable and the respondents must honour it as they entered
into it voluntarily each in accordance
with his/her own freedom to
contract. Their employment with the sixth respondent must be
restricted as it is a breach of their
contractual undertaking with
the applicant. I cannot conceive of what less restrictive means could
achieve the same purpose.
[14] The application
succeeds. An order is granted in the following terms:
1. The first, second,
third, fourth and fifth respondents are interdicted and restrained –
for a period of one year calculated
from 13 January 2012 and within
the Free State, Northern Cape and North West Provinces – from
directly or indirectly, for
his or her own account, or as principal,
agent, partner, representative, shareholder, director, employee,
consultant, contractor,
financier, assistant, administrator, advisor,
officer, syndicate, partnership, joint venture, company, trust,
business undertaking,
any other association of any nature:
1.1 being interested,
engaged in, concerned or associated with any business which is
directly or indirectly competitive with the
business carried on by
the applicant;
1.2 canvassing,
soliciting or enticing or endeavouring to entice, in respect of any
business which is directly or indirectly competitive
with the
applicant’s protected business, any person who, is then or was
on 13 January 2012 or during a period of one year
prior to this date
a client, customer, supplier or distributor in respect of the
protected business of the applicant or is then
or was at 13 January
2012 accustomed to dealing with the applicant or a principal or agent
vis-à-vis
any agency or licensor or licensee in respect
of any license granted in respect of the applicant’s business;
1.3 persuading, inducing,
soliciting, encouraging or procuring any employee or any member of
the applicant to terminate his/her
employment with the applicant;
1.4 soliciting the custom
of or selling to or attempting to sell or deal with, in respect of
the protected business of the applicant,
any customer from whom the
respondents, on behalf of the applicant, obtained or attempted to
solicit business at any time during
the continuance of the
respondents’ employment with the applicant.
2. The first to fifth
respondents are ordered to immediately terminate their employment
with the sixth respondent.
3. The first respondent
is ordered to pay the costs of this application on the scale as
between attorney and own client.
_____________
S. EBRAHIM, J
On behalf of applicant:
Adv. S. Grobler Instructed by:
Honey Attorneys
BLOEMFONTEIN
On behalf of 1
st
to 5
th
respondents: Adv. S.J. Reinders
Instructed by:
Rossouws Attorneys
BLOEMFONTEIN
/sp