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[2011] ZAKZPHC 11
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Ralph Horst Katzwinkel t/a Summerveld Equine Hospital v Behrens and Another (7184/2010) [2011] ZAKZPHC 11 (14 February 2011)
CASE NO: 7184/2010
IN
THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC
OF SOUTH AFRICA
In the matter between:
RALPH HORST KATZWINKEL t/a
SUMMERVELD EQUINE HOSPITAL
…...........................
Applicant
and
KAREN BEHRENS
….................................
First
Respondent
CARLA LANGLEY t/a EQUIS
VETERINARY PRACTICE
…..........................
Second
Respondent
R E A S O N S F O R J U D G M
E N T
___________________________________________________________
[1] I discharged the rule
nisi
in this matter on the 14
th
February 2011, with costs, and
indicated that my reasons would follow.
[2] The applicant is a
veterinarian. His practice is known as the Summerveld Equine
Hospital. It is situated in Gillitts. He specialises
in the treatment
of horses, including race horses. The two respondents are also
veterinarians. Both of them were formerly employed
by the applicant.
The first respondent is now employed by the second respondent, whose
practice is known as Equis Veterinary Practice.
It is also situated
in Gillitts, some 800 metres from the applicant’s practice.
[4] The applicant seeks,
inter
alia
, an order restraining the first respondent from being
involved in a veterinary practice which carries on business within a
distance
of 25 kilometres from his practice, and an order restraining
the second respondent from employing the first respondent. The
duration
of the restraint which he seeks to enforce is two years,
calculated from 21 December 2009.
[5] The second respondent was
employed by the applicant and his former partners at the Summerveld
Equine Hospital and the Gillitts
Veterinary Hospital during the
period 2000 to 2003. Her employment contract, which is annexed to the
applicant’s founding
affidavit, contained a clause headed
“Confidentiality and Restraint Provisions”, which is in
the same terms as the
relevant clause in the first respondent’s
contract, save that the period of her restraint was one year and the
area pertaining
thereto 15 kilometres from the Gillitts and
Summerveld practices.
[6] During April 2008 the
applicant advertised locally and internationally for the services of
an equine veterinarian assistant.
One of the responses was from the
first respondent, a German national, who was then living and
practising in Sweden. On 17 April
2008 the applicant sent the first
respondent an e-mail to which he attached what he called “our
veterinary employment contract”.
He added: “This is the
contract provided by our vet association to be used in the employment
of vets in SA.” A copy
of the document is annexed to the
founding affidavit, from page 82 to 88. She was not meant to sign it,
and it was sent to her
as an indication of the contract which she
would be expected to sign. It provides for a two year restraint in
clause 10. It appears
from the papers that the applicant’s
statement that it was the contract provided by the “vet
association” was
not true. The contract provided by the “vet
association” was put up by the first respondent (page 242) and
provides,
in clause 13 thereof, for a much more limited restraint,
and only for a period of six months.
[7] The applicant says that
during June 2008 he sent the first respondent a parcel via
international courier in which he included
a contract of employment
which he had signed on behalf of Summerveld Equine Hospital. He says
the signed contract was vital to
enable her to secure a work visa
from the South African Embassy in Sweden. He annexed to his founding
affidavit what he said was
an unsigned copy of the contract which he
had dispatched to her. This document appears at page 144 to 150 of
the papers. It reflects
the first respondent’s name on the
first page thereof, in clause 14 and also in clause 10, which deals
with the restraint
provisions.
[8] The applicant explained that
when he sent the contract to the first respondent in June 2008 the
Summerveld Equine Hospital partnership
consisted of himself and Dr
Rohwer. By the time when she commenced her employment in August 2008
the partnership had been dissolved
and Rohwer had sold his interest
to the applicant.
[9] In the founding affidavit the
applicant endeavoured to prove that the first respondent had signed
the contract of employment,
because this had been put in issue in
correspondence, and indeed in her answering affidavit. In a
supplementary answering affidavit
she attached the signed contract,
which she said she had in the meantime obtained. She then accepted
that she had signed it. The
production of the signed contract makes
it clear that the document at page 144 of the papers is not the
contract which the applicant
had dispatched to her. The signed
contract refers to Summerville in clause 10. The document at page
144, which the applicant says
he signed and dispatched to the first
respondent, reflects her name in clause 10. It seems plain that
before the applicant annexed
this document to his founding affidavit
he changed it by substituting the first respondent’s name for
that of Summerville.
This may not be of any great moment as far as a
resolution of the issues is concerned, but it demonstrates how
dangerous it is
to tweak the facts in an attempt to strengthen one’s
case.
[10] The first respondent
commenced employment with the applicant in August 2008. The applicant
says the practice provides equine
medical services, such as
inoculations, vaccinations and orthopaedic and chiropractic
examinations and treatments, as well as hospital
services whenever
surgical procedures are required. They deal with racehorses as well
as non-racehorses (show jumpers, dressage
horses, polo horses and
those used for recreational riding). He says that the choice of an
equine veterinarian has become a very
personal one, similar to that
of choosing a family doctor, because of the special requirements of
horses and their riders, trainers
and owners, who are generally
passionate about their horses and the sport.
[11] The practice appears to be a
substantial one. The applicant says the practice has relationships
with approximately 25 racehorse
trainers (representing approximately
1200 horses) and approximately 800 to 1000 non-racing owners/horses.
In total the practice
regularly treats approximately 2200 horses. The
practice employs approximately 35 staff members in different
capacities, some in
clerical/administrative roles and others in the
direct treatment of horses.
[12] The applicant says he
employed the first respondent because she held a particularly
specialised qualification in equine medicine
and he needed her to
assist him in the more complicated medical procedures and treatments
and to maintain the practice’s
contact with its various
clients, which includes trainers and horse owners. He introduced the
first respondent to all of the practice’s
clients and the two
of them would travel, on a daily basis, between the main four racing
centres in the province, each performing
the more complicated medical
procedures and treatment and maintaining the practice’s
relationships with the various horse
trainers and owners who were
clients of the practice. He says the first respondent is a first
class equine veterinarian and was
very popular within the racing
fraternity and developed a close relationship with the various
trainers and owners she came into
contact with.
[13] On the 1
st
October 2009 the first respondent notified the applicant that she had
decided to resign and that she intended to go back to Europe
and do
some further courses there. Her resignation took effect on the 20
th
December 2009 and she returned to Sweden.
[14] The first respondent
returned to South Africa in July 2010 and took up employment with the
second respondent on the 1
st
August 2010.
[15] The applicant complains that
the first respondent has been soliciting work on behalf of the second
respondent from trainers
with whom she had been associated during the
course of her employment with him, and that she has attempted to
poach clients from
his practice so as to grow the second respondent’s
practice and expand it to the treatment of racehorses, in addition to
non-racing horses. He also complains that she has made use of his
confidential information and trade secrets.
[16] The order which the
applicant seeks is, in summary, the following:
(a) An order interdicting the
first respondent from using or divulging or disclosing to others any
of the applicant’s trade
secrets.
An order interdicting the first
respondent for a period of two years from the 21
st
December 2009 from:
being interested in or engaged
in any veterinary practice which carries on business within 25
kilometres from the applicant’s
practice;
(ii) soliciting or obtaining
business from any person who was a client of the applicant during the
term of her employment;
(iii) employing or offering to
employ any person who was employed by the applicant during the
currency of the first respondent’s
employment with the
applicant;
inducing or attempting to induce
any person employed by the applicant during the currency of the
first respondent’s employment
with him to leave the
applicant’s service;
causing or assisting any other
person to employ or offer to employ any person employed by the
applicant during the currency of
the first respondent’s
employment with him;
causing or assisting any other
person to induce or attempt to induce any person employed by the
applicant during the currency
of the first respondent’s
employment with him, to leave his services.
Interdicting the second
respondent from using or divulging or disclosing to others any of
the applicant’s trade secrets
that may have been revealed to
her by the first respondent.
Interdicting the second
respondent for a period of two years commencing on 21 December 2009
from engaging or employing the first
respondent in any veterinary
practice which carries on business within 25 kilometres from the
applicant’s practice.
[16] The first respondent
confirms in her answering affidavit that she is employed by the
second respondent, but says she has no
shares or other financial
interest in her business. She denies that there was a written
contract of employment between her and
the applicant. She says the
applicant asked her for a copy of the signed contract but she was not
prepared to give him one because
she had grave reservations about the
restraint of trade clause. She annexes to her answering affidavit a
copy of the contract which
the applicant had sent to her by courier,
and which she had signed and used to obtain a work visa.
[17] I do not accept that the
first respondent was not bound by the terms of this contract. She
signed it without objection and
notified the applicant that she had
done so. It was on this basis that he employed her. At worst for the
applicant the first respondent
is estopped from denying that she was
bound by the agreement. With regard to clause 10 of the contract and
the reference therein
to Summerville instead of the first respondent,
it seems plain to me that the first respondent must have realised
that the clause
was intended to refer to her and mistakenly reflected
the name of a former employee. The agreement is in my view subject to
rectification
by the substitution of the first respondent’s
name in clause 10 for that of Summerville.
[18] The first respondent says
the second respondent’s practice is not that of an equine
hospital. It is a veterinary consultancy,
which is very different
from the applicant’s equine hospital. She concedes that during
the course of her employment with
the applicant she became familiar
with the names of clients, but says she had no specific access to
client lists or their specific
requirements. She denies that there
were any trade secrets or confidential information. She says the
names of racehorse trainers,
show jumping trainers, race horse owners
and the like are readily ascertainable through the Gold Circle, the
Turf Directory and
the KwaZulu-Natal Horse Society. She says she was
a trained and experienced veterinarian long before she took up
employment with
the applicant. She says she learned little or nothing
from her employment with the applicant and if anything, the applicant
benefitted
from her expertise which she gained from years of working
overseas within the racehorse and show jumping industry. She says she
has no intention of soliciting clients or business away from the
applicant or of inducing employees of the applicant to work for
the
second respondent. She says the second respondent does not conduct a
racing practice and does not service the needs of the
racing
fraternity. She points to the fact that the applicant did not show
that one of his clients had left him in order to support
the second
respondent’s practice.
[19] In a supplementary answering
affidavit the first respondent referred to the National Horseracing
Authority website, which lists
the name of every racehorse registered
with that body. Also available on this website are the names of
trainers, stud farms, racehorses
and owners affiliated with the
various racing clubs.
[20] The first respondent says
that during the short period that she was employed with the applicant
she had little or no opportunity
of building bonds with customers
such that they would readily remove their business from the applicant
to the second respondent
or to her.
[21] The applicant’s
description of his trade secrets or confidential information is
limited and vague. In his heads of argument
applicant’s counsel
referred to the applicant’s trade secrets “
as defined
in the relevant restraint clause”
. The relevant clause is
number 10.1.2 and refers to “
the trade secrets and
confidential information of the practice including, inter alia, the
names of the practice’s clients
and prospective clients and
their requirements”
. In the founding affidavit the
applicant refers in this context to the close relationships which the
first respondent built with
the various trainers and owners, the
practice’s “
personal attitude and approach to equine
medicine”
and the contact and feel which she developed for
the horses, their various temperaments and natures and consequently
their needs.
[22] These are not trade secrets
or confidential information. In
Petre & Madco Ltd v
Sanderson-Kasner &
Others
1984 (3)
SA 850
WLD, Conradie AJ (as he then was) said at 858 F to H:
“
It
seems to me highly unlikely that the applicant had any proprietary
interest to protect by a restraint. There is a good deal of
talk in
the papers about unique product demonstrations, special sales
methods, confidential information and that sort of thing
but nothing
to show why or how these are secret or confidential. It is trite law
that one cannot make something secret by calling
it secret. Facts
must be proved from which it may be inferred that the matters alleged
to be secret are indeed secret. In the nature
of things it seems to
me that it is unlikely that the applicant will operate in a way that
is markedly different from the way in
which its numerous competitors
operate. There is nothing to show what is so unique about the product
demonstrations or what is
so special about the sales methods. Nor is
there anything to show why the information said to be confidential
can properly be regarded
as confidential.”
[23] In
Dickinson Holdings
(Group) (Pty) Ltd v Du
Plessis
2008 (4)
SA 214
NPD (a Full Bench decision) the Court referred with approval
to a statement by Kroon J in
Aranda Textile Mills (Pty) Ltd v
Hurn & Another
[2000] 4 AllSA 183
E at 33:
“
A
man’s skills and abilities are a part of himself and he cannot
ordinarily be precluded from making use of them by a contract
in
restraint of trade. An employer who has been to the trouble and
expense of training a workman in an established field of work,
and
who has thereby provided the workman with knowledge and skills in the
public domain, which the workman might not otherwise
have gained, has
an obvious interest in retaining the services of the workman. In the
eye of the law, however, such an interest
is not in the nature of
property in the hands of the employer. It affords the employer no
proprietary interest in the workman,
his know-how or skills. Such
know-how and skills in the public domain become attributes of the
workman himself, do not belong in
any way to the employer and the use
thereof cannot be subject to restriction by way of a restraint of
trade provision. Such a restriction,
impinging as it would on the
workman’s ability to compete freely and fairly in the
marketplace, is unreasonable and contrary
to public policy.”
[24] It seems to me that the
applicant’s real complaint relates to what is commonly known as
his trade or customer connection.
He endeavours to make the case that
in the course of her employment with him the first respondent
developed such a close relationship
with his clients and their horses
that when she left she could easily induce the clients to follow her
to a new practice. See
Rawlins & Another v CaravanTruck
(Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
AD where Nestadt JA said the
following at 541 D and further:
“
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). Heydon, The Restraint
of Trade Doctrine (1971)
at 108, quoting an American case, says that the ‘customer
contact’ doctrine depends on the
notion that ‘the
employee, by contact with the customer, gets the customer so strongly
attached to him that when the employee
quits and joins a rival he
automatically carries the customer with him in his pocket’. In
Morris
(Herbert) 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 employer’s trade connection …’.
This statement has been applied in our Courts (for example,
by
Eksteen J in
Recycling
Industries (Pty) Ltd v Mohammed & Another
1981 (3) SA 250
E at 256 C to F). Whether the criteria referred to
are satisfied is essentially a question of fact in each case, and in
many, one
of degree. Much will depend on the duties of the employee;
his personality; the frequency and duration of contact between him
and
the customers; where such contact takes place; what knowledge he
gains of their requirements and business; the general nature of
their
relationship (including 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; in
the case of a salesman, the type of product
being sold; and whether
there is evidence that customers were lost after the employee left.”
He pointed out at 541 J to 542 A
that where there are disputes on the papers the rule is to the broad
effect that an application
for final relief is generally decided on
the respondent’s version, even where the onus of proof is on
such respondent.
[25] Having regard to the first
respondent’s evidence with regard to the alleged customer
connection, the fact that after
she left the applicant’s
employment she went overseas for several months and the absence of
any evidence that he has lost
one client I am unpersuaded that he has
a protectable interest which justifies the enforcement of the
restraint.
[26] The period of the restraint
in any event seems to me to be too long. The first respondent left
the applicant’s employment
on the 21
st
December 2009
and returned to Europe. She returned the following year and commenced
employment with the second respondent in June
2010. The application
for the enforcement of the restraint was launched on 9 September 2010
and on 20 September 2010 Lopes J granted
a consent order which
regulated the interim position, which included an order that pending
the return date the respondents were
interdicted and restrained from
providing any veterinary services of whatsoever nature to any of the
racehorses referred to in
an agreed list. The only exception was that
the respondents were not precluded from rendering reproductive
veterinary services
to racehorses. By the time the matter was argued
before me on 14 February 2011 a period of nearly fourteen months had
lapsed since
the first respondent ceased to be employed by the
applicant.
[27] The period of the restraint
in the second respondent’s employment contract with the
applicant was one year. The period
of the restraint in the draft
agreement recommended by the Veterinary Association is six months.
[28] In
Den Braven SA (Pty)
Ltd v Pillay & Another
2008 (6) SA 229
D&CLD the
Court said at 263 D that two years is the outer limit in a case of
the type it was dealing with, which concerned
a sales person. At 263
D Wallis AJ (as he then was) said:
“
In
my view the period of the restraint should not be any longer than is
necessary to enable the applicant to place a new sales person
in the
field, enable them to become acquainted with the products and the
customers and to make it plain to the latter that they
are now the
person with whom to deal on behalf of the applicant.”
[29] Mr Stewart, for the
applicant, referred me to the decision in
Rogaly v Weingartz
1954 (3) SA 791
D in which a medical practitioner was restrained from
practicing in a certain part of Durban for a period of two years.
Holmes
J found that the period of two years was reasonable. One
should however see this in its proper context, which was that the
restraint
nevertheless left the respondent free to practice in all
the other suburbs of Durban and to have his surgery in town. Mr
Stewart
also referred me to the case of
Savage & Pugh v
Knox
1955 (3) SA 149
NPD where a Full Bench upheld a
restraint clause which prohibited the respondent from practicing as a
medical specialist within
a radius of sixty miles from the City Hall
in Durban for a period of three years. Brokensha J said that it had
not been contended
before them that the restraint was against public
interest. Most of the debate seemed to centre on what the agreement
meant. Nevertheless,
Brokensha J expressed the view in the judgment
that the period of three years seemed to him to be reasonable.
[30] It seems to me that our law
relating to restraints of trade has evolved somewhat over the last
two or three decades, and the
Courts have focused on the tension
between the sanctity of contracts, public policy and the need not to
prevent people unreasonably
from earning a living, and the values
embodied in our Constitution, which shape our public policy.
[31] I am not persuaded by the
Rogaly
and
Savage
cases (
supra
)
that the period of two years in the restraint clause before me is
reasonable and should be enforced. A period which was reasonable
five
decades ago is not necessarily reasonable today. My view is that the
period is excessive and that the restraint has operated
long enough.
It now imposes an unreasonable restriction on the first respondent’s
freedom to work and it will be against
public policy to enforce it.
[32] In the result I discharged
the rule
nisi
with costs, including those which had been
reserved.
9 March
2011
DATE OF HEARING :
14 FEBRUARY 2011
DATE OF JUDGMENT
:
14 FEBRUARY 2011
COUNSEL FOR
APPLICANT :
MR M. E. STEWART
INSTRUCTED BY :
FORSTER ATTORNEYS, GILLITTS
C/O STOWELL &
CO, PIETERMARITZBURG
COUNSEL FOR
RESPONDENT
: MR. I. PILLAY
INSTRUCTED BY :
MACREGOR ERASMUS ATTORNEYS, DURBAN
C/O TATHAM WILKES,
PIETERMARITZBURG