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[2012] ZAECELLC 18
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Boomerang Trade CC t/a Border Sheet Metals v Groenewald and Another (EL 2300/10, ECD 1938/12) [2012] ZAECELLC 18 (18 September 2012)
27
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE DIVISION –
EAST LONDON
E L: 2300/10
ECD: 1938/12
Date Heard: 21/8/12
Date Delivered: 18/9/12
In the matter between:
BOOMERANG TRADE CC
t/a BORDER SHEET METALS
.........................................
APPLICANT
Versus
JASON
GROENEWALD
.........................................
1
ST
RESPONDENT
OMEGA HARDWARE
............................................
2
ND
RESPONDENT
JUDGMENT
SMITH J:
Introduction
[1] The Applicant brought urgent
motion proceedings against the Respondents for an order interdicting
and restraining the First
Respondent (“Groenewald”) from
conducting business, or taking up employment, in contravention of a
restraint of trade
agreement.
[2] The Applicant specialises in the
sale, warehousing and distribution of various rainwater products,
including rainwater tanks
and flashing for roofing, as well as
corrugated-iron field toilets. It operates throughout the Eastern
Cape and particularly in
the Fort Beaufort, Alice, Mt Frere,
Sterkspruit and surrounding areas.
[3] The Applicant conducts its
business in association with two other entities namely, Bitline SA
412 CC (trading as Metal Pro),
through which the plastic goods
necessary for Applicant’s business is purchased, and Notefull
1152 CC (trading as DBM Enterprises)
which manufactures and supplies
the goods to the Applicant. Billy Anthony Gerretsen (“Gerretson”),
who is the sole
member of the Applicant and who deposed to the
founding affidavit on behalf of the Applicant, is also a member of
Bitline SA 412
CC.
[4] Groenewald was employed by the
Applicant on 6 May 2008 and, according to the Applicant, signed an
employment contract which
incorporated a Standard Service Contract
containing a restraint of trade agreement. The Second Respondent is
the corporate entity
through which Groenewald is conducting the
impugned business operations.
[5] The application relates mainly
to the Respondents’ alleged manufacturing and distribution of
water tanks to the Applicant’s
existing customers in a manner
which, according to the Applicant, is in breach of the restraint of
trade agreement. The Applicant
alleges that the Respondents have used
knowledge acquired during Groenewald’s employment with it to
manufacture and distribute
water tanks of similar design and sizes as
those which it supplies, to its existing customers in contravention
of the restraint
of trade agreement.
Applicant’s version
[6] Groenewald was employed by the
Applicant on 6 May 2008 and had entered into an employment contract
in the form of a “Letter
of Appointment” which
incorporated a “Standard Service Contract”. The Letter of
Appointment states the following
in this regard:
“
Further
to this letter we refer you to the Standard Service Contract
condition (a copy of which is included for your records.)”
[7] The Letter of Appointment was
signed by Groenewald on 6 May 2008. The Service Contract, which he
had apparently not signed,
appears to have been designed as an
annexure to the Letter of Appointment. It states in terms that:
“
It
is agreed and accepted that the following will form the basis of all
employees/partners/directors/etc that enter into any form
of
employment contract with
Boomerang
Trade CC 99/68088/23
or any of its subsidiaries that may be formed from time to time.”
And furthermore that:
“
COMMENCEMENT
DATE AND VALIDITY OF THE CONTRACT
“
This
contract shall take effect on the time and date upon which the
‘letter of appointment’ is signed by both parties
and
will remain in force for an undetermined period as determined below:”
[8] Groenewald has admitted that he
had signed the Letter of Appointment but denies any knowledge of the
service contract and avers
that he had only seen a copy thereof when
it was provided to him by the Applicant’s attorneys during July
2012.
[9] The restraint of trade agreement
is contained in Clause 9.5 of the Service Contract and provides as
follows:
“
Trade
Restraint
Upon termination of
service all Employees will be bound to a ‘restraint of trade’
period of 5 (five) years.
The restraint of trade
specifically prohibits the employee from conducting any work of a
same or similar nature to the scope of
works as conducted by the
Employer from time to time, or to be employed by another employer
that conducts any work of a same or
similar nature to the scope of
works conducted by the Employer from time to time within the
geographical area of the Republic of
South Africa with particular
reference to deliveries within the Eastern Cape Area.
The restraint of trade
also extends to any division, branches, subsidiaries, partnerships
and relationships the Employer has with
its suppliers and include,
but not limited to the customer/client base and the products as
supplied to the customer from time to
time.
This restraint period
also extends to the knowledge the Employee may have gained during
his/her employment with respect to future
projects and products the
Employer wishes to include/add to there (sic) existing products base.
The restraint of trade
period is necessary to prohibit the employer from using the
information gained during the period of his/her
employment to compete
against the business of the Employer and conducting any business
which may be harmful to the Employer.
This trade restraint is
deemed necessary, but not limited to the protection of the customer
base and scope of products of the business
or the Employer in order
to sustain viability of the business of the Employer.
The restraint period
also extends to the confidentiality clause of this contract.”
[10] The Applicant has conceded that
the period of five years, referred to in the restraint of trade
clause, is unreasonable and
therefore seeks enforcement thereof only
for a period of two years from the date of the court order.
[11] It avers that Groenewald’s
contract was partly written and partly oral and, in addition to the
restraint of trade clause,
the material terms thereof were,
inter
alia,
that he would
:
(a) be the Applicant’s sales
representative;
(b) visit customers on a regular
basis in order to determine their requirements relating to the
Applicant’s products;
(c) assess customers’ credit
worthiness with a view to set further prices, and to ensure that
orders are only accepted from
customers who are not in default; and
(d) agree pricing of products with
Gerretsen.
[12] The rainwater tanks sold by the
Applicant are also manufactured and sold by a number of its
competitors. The tanks are all
manufactured using the same
“roto-moulding” technique. The tanks are made from raw
materials of which linear low density
polyetherline, which is
manufactured and supplied locally by Sasol Polymers, is the major
component.
[13] The Applicant avers that there
is only one method of roto- moulding, namely the process through
which the raw material are
placed into a mould which is placed in an
oven and turned on a bi-axle rotation mechanism. There are however
different styles of
roto-moulding machines; one of which is the so
called “
rock and roll”
type which is being used by
the Respondents.
[14] The fact that the water tanks
are all manufactured by the same method have resulted in their
volumes and sizes becoming standardised,
and the competitive edge
between the various competitors in this market therefore largely
depends on the pricing of their products.
The Applicant extends
thirty days’ credit to its customers, and pricing of the goods
varies according to the credit worthiness
of the customers. Those who
have good credit records are given greater discounts.
[15] The Applicant claims that
Groenewald has been able to build up intimate knowledge of its
customers and pricing structures over
the years. He has, during the
course of his employment, visited customers on a regular basis and
has thus acquired intimate knowledge
of the nature of their
businesses, the products they sold and their credit worthiness. He
has also saved this information on his
computer. Groenewald has also
acquired knowledge of the manufacturing method used by the Applicant,
the prices at which the raw
materials are purchased, and from whom
they were sourced.
[16] It appears that Groenewald had
excelled at his duties; to the extent that his remuneration package
was revised during October
2009, and his duties reorganised to enable
him to learn more about the manufacturing of the rainwater tanks. At
some stage he was
also offered five percent equity in the business.
[17] Groenewald terminated his
employment with the Applicant during May 2011. Gerretsen states that
he had noticed at the time that
Groenewald had saved the details of
customers on his work cellular phone, including the contact details
and payment terms which
had been negotiated with them.
[18] At the time when he terminated
his employment, Groenewald indicated that he would open a business
for the sale of timber doors.
However about six weeks after his
resignation, Gerretsen discovered that Groenewald was selling field
toilets to Applicant’s
customers. These toilets were however of
a different specification to those supplied by the Applicant, and it
was therefore of
the view that Groenewald’s conduct did not
contravene the terms of the restraint of trade agreement.
[19] Again during September 2011
Gerretsen discovered that Groenewald had established a business for
the manufacture and sale of
roto-moulded water tanks. Although the
method of manufacturing was identical to that of the Applicant and
its associated close
corporations, the tanks were not of the same
sizes and specifications as those marketed by the Applicant. It
therefore also did
not regard this conduct as being in breach of the
restraint of trade agreement.
[20] Gerretsen claims that he had
however recently discovered that Groenewald is now manufacturing and
selling tanks which are identical
to those marketed by the Applicant
to Applicant’s customers. Gerretsen has relied for his
assertion in this regard on information
provided to him by
Groenewald’s successor, namely Jarryd Greyvenstein.
[21] Greyvenstein has averred in his
confirmatory affidavit that he had, through personal visits and
telephone calls to Applicant’s
customers, established that
Groenewald had approached them with a view of selling rainwater tanks
which are identical in all respects
to those manufactured and sold by
the Applicant and its business associates. He annexed a list of
customers and had marked those
who Groenewald are alleged to have
contacted.
[22] Greyvenstein further states
that he has not been able to obtain confirmatory affidavits from
Applicant’s customers. The
Applicant has therefore applied for
these hearsay statements to be admitted in terms of s. 3 of the Law
of Evidence Amendment Act,
45 of 1988 (“the Act”).
[23] The Applicant claims that
Groenewald has been using his knowledge of: its customer base;
customers’ credit worthiness;
the prices of raw materials
(which have remained fairly constant); and manufacturing processes to
develop his own manufacturing
process, and to establish margins at
which he could manufacture and sell the tanks to Applicant’s
customers at a profit.
In addition, Groenewald’s knowledge of
customers’ credit worthiness will enable him to also establish
himself as the
Applicant’s competitor. This knowledge was
acquired by Groenewald during the course of his employment and
constitutes the
Applicant’s proprietal interests which are
protected by the restraint of trade agreement.
Respondents’ version
[24] Groenewald has effectively
admitted that he had established a business for the manufacturing and
sale of roto-moulded rainwater
tanks in the same areas in which the
Applicant operates. He has however denied that he had used any
information obtained during
the course of his employment with the
Applicant to manufacture and market the tanks, and denied that he had
approached any businesses
which had been customers of the Applicant
during the time of his employment.
[25] Groenewald has also averred
that there are vast numbers of different techniques through which the
rainwater tanks are manufactured.
He alleged in addition that the
various types of raw materials which are being used in the
manufacturing of the tanks are also
fundamentally different.
[26] He asserts that the Second
Respondent conducts its business strictly on a “cash on
delivery” basis. The Second
Respondent is a small family-run
business and can therefore not afford to extend credits to its
customers.
[27] He admits that he had a list of
customers on his computer and that he had customers’ names in
abbreviated form on his
cellular phones. He denies however that he
had any information regarding their credit worthiness.
[28] Groenewald also denies that he
had become aware of the manufacturing process through his employment
with the Applicant. He
claims that this information is in any event
not regarded as a trade secret as it is also available on the
internet and “other
sources”.
[29] He claims that the method for
the manufacturing of the tanks used by the Second Respondent was
developed by his father, and
is unique to the Second Respondent. His
father had devised the “rock and roll” oven used by the
Second Respondent through
a process of “trial and error”
.
[30] He also states that his primary
role, while in the employ of the Applicant, was that of sales
representative. He therefore
did not acquire any information
regarding the Applicant’s customer base or method of
manufacturing of the tanks during the
course of his employment. He
avers further that the information relating to credit worthiness of
Applicant’s customers has
no bearing on his business, because
the Second Respondent operates on a “cash on delivery”
basis only. The information
relating to the Applicant’s
customers cannot be a trade secret because one can easily source
information relating to potential
customers from hardware stores.
[31] Groenewald has blown hot and
cold in his answering affidavit regarding the issue of whether or not
the Second Respondent is
trading in competition with the Applicant.
His affidavit is replete with ambivalent statements in this regard,
and one is left
with the clear impression that his denial is based on
the assertion that the Second Respondent is too small to compete with
the
Applicant. He,
inter alia
, states the following in this
regard:
“
The
Second Respondent is not a direct competitor of the Applicant because
it is substantially smaller than the Applicant.”
And also that:
“
I
respectfully submit that customers are notoriously fickle. They will
obtain stock from any supplier as long as it is at a favourable
price
to them.
The
Second Respondent supplies rain water tanks at a cost price in order
to make a profit based on its own running costs and expenses.”
Urgency
[32] The Applicant has brought the
proceedings on a semi-urgent basis. The application papers were
issued on 31 July 2012 and served
on the Respondents the following
day. The Notice of Motion stipulated truncated time periods, and the
Respondents were required
to file their notice to oppose and
answering papers by 7 August 2012.
[33] When an applicant has departed
from the normal time periods and has stipulated truncated time limits
in its notice of motion,
it must set out circumstances justifying the
extent of the departure from the normal time limits, and why it
claims that it could
not obtain substantial redress at a hearing in
due course. (
Luna Meubel Vervaardigers (EDMS) BPK v Makin and
another (t/a Makin’s Furniture Manufactures)
1977 (4) SA 135
(W)
at 137F-G).
[34] Mr
Brooks,
who appeared
for the Respondents, has submitted that the Applicant has failed to
set out facts in his founding papers which justify
the extent of its
departure from the normal time limits. He referred in particular to
the fact that it appears from Gerretsen’s
affidavit that the
Applicant had been aware, as early as September 2011, that Groenewald
had established a business for the manufacturing
and sale of
rainwater tanks. While it had at that stage decided not to take any
action, (because it was of the opinion that the
Respondent’s
conduct did not constitute a breach of the restraint of trade
agreement), Gerretsen has averred that he had
recently become aware
that Groenewald is now manufacturing and selling water tanks of the
same size and specification as those
supplied by the Applicant.
Gerretsen has however not stated when he had acquired this knowledge.
There is, according to Mr
Brooks,
therefore no explanation as
to the circumstances that rendered the matter so urgent that
affidavits could not be obtained from the
customers who the
Respondents had allegedly approached.
[35] Mr
Patterson,
who appeared for the
Applicant, on the other hand submitted that proceedings for the
enforcement of restraint of trade agreements
are inherently urgent.
[36] I agree with Mr
Paterson
that proceedings for the
enforcement of a restraint of trade agreement are usually, by their
very nature, urgent. They invariably
seek to interdict ongoing
unlawful action in respect of which an applicant continues to suffer
financial losses which are notoriously
difficult to quantify, or to
recover by way of action. (
Mozart
Ice Cream Franchises (Pty) Ltd v Davidoff and Another
2009 (3) SA 78
(C)
at
88J.
[37] Here the
Respondents have admitted that they are indeed manufacturing and
selling rainwater tanks in the same areas where the
Applicant is
conducting its business. If this conduct is indeed in contravention
of the restraint of trade clause, the Applicant
will continue to
suffer unquantifiable (and perhaps irrecoverable
)
financial
losses until such time as the impugned conduct is stopped.
[38] The
truncated time limits stipulated by the Applicant in its notice of
motion were therefore not unreasonable in my view. The
Respondents
were not unduly rushed into court, but were given reasonable notice,
and in my view, sufficient time to file answering
papers, having
regard to the exigency of the matter.
[39] I am
therefore of the view that the extent of the Applicant’s
departure from the normal time limits prescribed by the
rules, was
justified in the circumstances of this matter, and that the matter
has properly come before me on an urgent basis.
Application
to strike out
[40] The
Respondents have applied for the whole of Jarryd Greyvenstein’s
affidavit, as well as annexure J.G.1 thereto, to
be struck out as
inadmissible hearsay evidence.
[41] It is
indeed common cause that the allegations contained in Greyvenstein’s
affidavit are hearsay material as they have
not been confirmed by the
customers who the Respondents were alleged to have approached.
[42]
Inextricably linked to a determination of this application however,
is the Applicant’s request for the evidence to be
admitted in
terms of s. 3 of the Act. That section provides as follows:
“
Hearsay
evidence
(1)
Subject to the provisions of any other law, hearsay evidence shall
not be admitted as evidence at criminal or civil proceedings,
unless-
(a)...
(b)...
(c)
the court, having regard to –
(i)
the nature of the proceedings;
(ii)
the nature of the evidence;
(iii)
the purpose for which the evidence is tendered;
the
probative value of the evidence;
the
reason why the evidence is not given by the person upon whose
credibility the probative value of such evidence depends;
any
prejudice to a party which the admission of such evidence might
entail; and
any
other factor which would in the opinion of the court be taken into
account,
is
of the opinion that such evidence should be admitted in the interest
of justice.”
[43] In
Metedad
v National Employer's
General Insurance Co Ltd
1992 (1) SA 494
(WLD)
at
498I-J, Van Schalkwyk J concluded that:
“
This
section invests the court with a discretion, to be judicially
exercised in the interests of justice. It seems to me that the
purpose of the amendment was to permit hearsay evidence in certain
circumstances where the application of rigid and somewhat archaic
principles might frustrate the interests of justice. The exclusion of
the hearsay statement of an otherwise reliable person whose
testimony
cannot be obtained might be a far greater injustice than any
uncertainty which may result from its admission.”
[44] There are
in my view several reasons why it would be in the interests of
justice for the evidence to be admitted:
First,
regarding the nature of the proceedings; an important factor in
favour of the Applicant is the fact that the evidence had
been
tendered in urgent proceedings. It is well known that applicants in
urgent proceedings are often required to rely on hearsay
evidence
under circumstances where it would be difficult to obtain
confirmatory affidavits from the primary source, and where
the delay
necessitated by the obtaining of such affidavits could defeat the
purpose of the application. I am satisfied that in
this matter also
it would not have been feasible for the Applicant to wait until it
had been able to obtain confirmatory affidavits
from all, or a
substantial number of the customers. The delay occasioned by such a
process would have resulted in further irreparable
harm and
irrecoverable losses suffered by the Applicant.
Second,
regarding the nature and purpose of the evidence; the evidence
pertains to a number of customers and is relatively straight
forward
in its intended effect. The Applicant has alleged that the
Respondents had approached the customers against whose names
the
marks appear on annexure J.G.1. It was therefore open to Respondents
to put up a general denial.
Third,
regarding the probative value of the evidence; Gerretsen has stated
that he has no reason not to believe statements by
the customers,
and has provided proof in the replying papers of tanks supplied by
the Respondents to the Applicant’s customers.
In the event, as
I have stated earlier, it is not entirely clear that the Respondents
deny selling products to Applicant’s
clients. They seem to
take the view rather that they are a small family-run business and
therefore not able to compete with the
Applicant.
And finally,
there can in my view be no prejudice to the Respondents if the
hearsay evidence is admitted. As I have stated earlier,
the evidence
is fairly straight-forward in its intended effect, and it was open
to the Respondents to simply deny having made
contact with any of
Applicant’s customers.
[45] For these
reasons I am of the view that the evidence should be admitted in
terms of s. 3 of the Act, and that the application
to strike out must
therefore fail.
Existence
of the restraint of trade agreement
[46] As I have
stated earlier, Groenewald has denied any knowledge of the restraint
of trade agreement. Where there are bona fide
disputes of fact in
application proceedings the general rule is that they should be
decided on the facts stated by the respondent,
together with the
admitted facts in the applicant’s affidavit. Essentially then,
the disputes must be resolved on the basis
of the respondent’s
version. (
Plascon-Evans
Paints Ltd v Van Riebieck Paints
1984 (3) SA 632
(A)
at
623-5.
[47] A
respondent is however not allowed to shelter behind patently
implausible or bald denials. An uncreditworthy denial, or a
palpably
implausible version can be rejected out of hand, without recourse to
oral evidence. (
Fakie
N.O v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA).
See
also:
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA)).
[48]
Groenewald’s assertion that he has no knowledge of the service
contract which contains the restraint of trade clause,
is in my view
such a bald denial which can be rejected out of hand.
[49] The
Letter of Appointment, which Groenewald admits having signed, makes
clear reference to the Service Contract and specifically
incorporates
the terms thereof. It is similarly apparent from the contents of the
Service Contract that it was designed to be an
annexure to the Letter
of Appointment.
[50]
Groenewald must therefore have been aware of this fact when he signed
the Letter of Appointment. He simply denied having ever
seen or
signed the Service Contract. He does however not allege that he did
not read the contents of the Letter of Appointment,
but chose instead
to rely only on the fact that he had not signed it. As I have stated
previously, the Service Contract was drafted
in such a manner that it
would be an annexure or addendum to the main employment contract. It
would therefore not be surprising,
in most cases, that it would not
have been signed by employees. It would however nevertheless still be
of application and binding
on employees who have signed the Letter of
Appointment, by virtue of the terms and conditions contained therein.
[51] In the
circumstances I am of the view that Groenewald’s bald denial in
this regard cannot be upheld. I am therefore satisfied
that the
Applicant has proved the existence of the restraint of trade
agreement which is contained in clause 9.5 of the Service
Contract.
Breach
of the restraint of trade agreement
[52] On his
own version, Groenewald has been manufacturing and selling
roto-moulded rainwater tanks, through the Second Respondent,
in the
areas in which the Applicant conducts its business.
[53]
Groenewald’s attempt to distinguish the tanks by reference to
the manufacturing technique, which he claims is unique
to the Second
Respondent, is unconvincing and contrived. There can be no doubt that
the processes for the manufacturing of roto-moulded
tanks have become
fairly standardized, and while there may be different techniques
involved, they result in fundamentally the same
product.
[54] As I have
stated earlier, he has been rather coy in his affidavit regarding the
issue of whether or not he had approached the
Applicant’s
customers. In another of his seemingly deliberate ambivalent
statements he alleges that:
“
I
have at no stage approached the Applicant’s customers and
attempted to compete with the Applicant. I have most definitely
not
used any information obtained during the course of my employment with
the Applicant to gain an unfair advantage over the Applicant.”
[55] Mr
Patterson
has in
my view correctly submitted that Groenewald in effect therefore
admits that he had approached the Applicant’s customers;
albeit
that he denies that he did so in competition with the Applicant, or
that he had used the information which he had gained
during the
course of his employment to the disadvantage of the Applicant. He has
also admitted that he has a list of the Applicant’s
customers
on his computer.
[56] In my
view the inference is ineluctable that Groenewald appears to have
regarded Applicant’s customers as fair game as
long as he did
not use information obtained during the course of his employment.
This much is evident from the following statements
in his answering
affidavit:
“
The
Applicant’s customer base cannot be regarded as a trade secret
peculiar to my previous employment with the Applicant.
It is not
difficult to establish who supplies the various hardware stores in
the Eastern Cape.
One
merely has to ask the Hardware retailers who the suppliers are to
obtain this information and they willingly part with this
information
as well as the cost price of various products.”
And also that:
“
The
pricing of raw materials varies considerably depending on the
supplier and in all likelihood the quantities of raw materials
purchased by each manufacturer.
The
customer base of different hardware store (sic) is easily
ascertainable as well as the prices charged by the various suppliers
as customers who readily provide this information.”
[57] His
assertion that the credit records of Applicant’s customers are
of no value to the Second Respondent, because it operates
on a “cash
on delivery” basis only, is also misleading. It is evident from
annexure B.G.5 which of the customers paid
cash and which were on 30
days’ credit. This information would have been invaluable to
the Second Respondent in pursuance
of its stated strategy to market
only to customers who have the ability to pay cash on delivery.
[58] That the
Respondents are determined to continue marketing their products
throughout the Eastern Cape is evident from the following
statement
in Groenewald’s answering affidavit:
“
In
any event, the terms of the alleged restraint of trade are
unnecessarily restrictive. There is vast building expansion
throughout
the Eastern Cape. With this expansion comes an increased
demand for rain water tanks particularly in the rural areas where it
is
vital for clean water to be captured and stored.”
[59] I agree
with Mr
Patterson
that
the rationale for Groenewald’s assertion that the Second
Respondent is not competing with the Applicant in contravention
of
the restraint of trade clause is implied in his statement that
“
the
Second Respondent is not a direct competitor of the Applicant because
it is substantially smaller than the Applicant.”
This is
of course beside the point. If the Respondents are indeed
manufacturing and supplying the tanks in the same areas in which
the
Applicant trades, it would amount to a breach of the restraint of
trade agreement regardless of the size of the Second Respondent’s
business operations.
[60] I am
therefore of the view that the Applicant has been able to establish
that:
(a) The
Respondents are manufacturing and marketing roto-moulded water tanks
of the same sizes and specifications as those manufactured
and
distributed by the Applicant and its associated business enterprises;
(b) The
Respondents are operating in the same areas where Applicant is
conducting its business;
(c) At the
time of the termination of his contract of employment with the
Applicant, Groenewald had information regarding the Applicant’s
customer base on his computer and cellular phone;
(d) The
Respondents are in fact marketing their products to the Applicant’s
customers, albeit that they seem to assert that
they in doing so they
are not using information obtained by Groenewald during the course of
his employment, but rather through
information obtained from various
hardware stores; and
(e) That
during his employment with the Applicant Groenewald had gained
knowledge regarding the Applicant’s customer base,
their credit
worthiness, how to access raw materials and the method for the
manufacturing of the rainwater tanks used by the Applicants.
Enforcement
of the restraint of trade agreement
[61] In our
law restraint of trade agreements are enforceable where the
applicant’s protectable interests are infringed by
the unlawful
conduct, unless they are against public policy. The onus to prove
that the enforcement of the restrictive condition
would be against
public policy lies with the party who asserts that fact. Each
agreement must be considered in the light of its
own circumstances to
determine whether its enforcement would offend public policy.
(Magna
Alloys and Research SA (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A))
[62] With
regard to the partial enforcement of a restrictive clause that would
otherwise be unreasonable, Rabie CJ said the following
in
Magna
Alloys and Research (supra)
at page
898C-D:
(7)
Aanvaarding van die sienswyse in (6) hierbo genoem, bring sekere
gevolge mee, onder andere dat wanneer iemand beweer dat hy
nie
gebonde is aan ’n beperkende bepaling waartoe hy in ’n
ooreenkoms toegestem het nie-
(a)
...
(b)
...
(c)
die Hof nie daartoe beperk is om te bevind dat ’n beperkende
bepaling in sy geheel afdwingbaar onafdwingbaar is nie, maar
ook by
magte is om te beslis dat ’n gedeelte van so ’n bepaling
afdwingbaar of onafdwingbaar is”
(See also
Aranda
Textile Mills (Pty) Ltd v Hurn
[2000] 4 All SA 183
(E).
[63] Knowledge
of a customer base and pricing structures are proprietal information
which can be protected by a restraint of trade
clause. (
U-drive
Franchise System (Pty) Ltd v Drive Yourself (Pty) Ltd
1976 (1) SA
136(D).
[64] In my
view there can be no doubt that the information relating to the
Applicant’s customer base, its pricing structures
and the
method of manufacturing were proprietal interests which the Applicant
was entitled to protect through a restraint of trade
agreement. In
Rawlins
and another v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541D-F
Nestadt
J held 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. (Joubert:
General
Principles of the Law
of
Contract at 149). Heyden:
The
Restraint of Trade Doctrine
(1971)
at 108, quoting an American case, says that the ‘customer
contract’ doctrine depends on the notion that
‘
the
employee, by contract with the customer, gets the customer so
strongly attached to him that when the employee quits and joins
a
rival, he automatically carries a customer with him in his pocket’.
In
Morris
(
Herbet
)
Ltd v Saxelby
[1916]
1 AC 688
(HL) at 709 it was said that the relationship must be such
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 empl
o
yer’s
trade connection...”
Conclusion
[65] There can
be no doubt that Groenewald has, during the course of his employment
with the Applicant, acquired knowledge and customer
connections which
has put him in a position to take advantage of the Applicant’s
trade connections, and to trade in competition
with the Applicant.
[66] His
attempts to play down the importance of his role in the Applicant’s
business, his connection with, and knowledge
of the Applicant’s
customer base, are also unconvincing.
[67] In
Den
Braven SA (Pty) Ltd v Pillay and another
2008 (6) SA 229
(D)
at
237-238, Wallis AJ (as he then was), in dealing with a denial by a
sales representative that all the customer connections were
established due to his employment with the applicant (and had
asserted that in order for him to meet targets every month it was
necessary for him to canvass new customers on his own), stated that:
“
[T]his
is beside the point. His employment was as sales representative. Part
and parcel of his duties was to find customers for
the applicants’
products. The fact that he did so and enjoyed some success does not
enure to his advantage in seeking to
resist the enforcement of the
restraint undertaking. Customers that he procured by his efforts were
the customers of the applicant
and the trade connection established
in consequence of his efforts was a trade connection between the
applicant and the customers,
not one between himself and the
customers. Indeed, the fact that he was able of his volition to
identify new customers, approach
them and secure their custom for the
applicant is indicative of the existence of the type of trade
connection that is protectable.”
These remarks
are in my view apposite to the facts of this matter.
[68] The
Respondents have understandably not taken the point that the partial
enforcement of the restraint of trade agreement in
the terms sought
by the Applicant in its Notice of Motion is untenable in law, or
would amount to making a new contract for the
parties. In the event,
I am of the view that: first, the form of the order sought by the
Applicant is less restrictive than the
terms of the agreement;
second, that the order will not constitute a radical departure from
the agreement; and third, there is
no reason to believe that the
terms of the restraint agreement were calculated to be unduly
repressive towards the Respondents.
The partial enforcement of the
restraint of trade agreement sought by the Applicant would in my view
therefore not offend any legal
principles.
(Den Braven
SA (Pty) LTD v Pillay and Another(supra))
Order
[69] For these
reasons I am of the view that the Applicant has established that it
is entitled to partial enforcement of the restraint
of trade
agreement, and the following order shall therefore issue:
(a) The First
Respondent is interdicted and retrained from conducting any work of
the same or similar nature to the scope of work
as conducted by the
Applicant, or to be employed by another employer that conducts any
work of the same or similar nature to the
scope of work as conducted
by the Applicant, within the Eastern Cape, to the west of, and
including the areas of Fort Beaufort
and Alice, and for a period of
two years from the date of this order;
(b) The First
Respondent is interdicted and restrained from engaging in the
business of selling plastic water tanks to the customer
base of the
Applicant as set out in annexure B.G.3 to the founding affidavit;
(c) The First
Respondent is directed to withdraw all rainwater tanks similar to
those sold by Applicant from any hardware store
to which he may have
delivered same within the area designated in prayer (a) above;
(d) The First
Respondent is ordered to pay the costs of the application on the
party and party scale.
______________________
J.E SMITH
JUDGE OF
THE HIGH COURT
Appearances
Counsel
for the Applicant : Advocate Paterson, SC
Attorney
for the Applicant : Abdo and Abdo Attorneys
33
Tecoma Street
Berea
EAST
LONDON
Tel:
043 700 7900
Ref:
Mr G Berndt/ssBE2146
Counsel
for the Respondent : Advocate Brooks
Attorney
for the Respondent : Wylde and Runchman Inc.
Motorland
Bulding
Cnr
of Oxford and Fleet Street
EAST
LONDON
Ref:
Ms T Wylde/bs/G11660
Date
Heard : 21 August 2012
Date
Delivered : 18 September 2012