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[2009] ZAGPPHC 58
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Value Logistics Limited v Van Zyl and Another (13235/2009) [2009] ZAGPPHC 58 (15 May 2009)
IN THE HIGH COURT OF
SOUTH AFRICA
(NORTH AND SOUTH
GAUTENG HIGH COURT, PRETORIA)
DATE: 15/05/2009
CASE NO: 13235/2009
UNREPORTABLE
In
the matter between:
VALUE
LOGISTICS LIMITED APPLICANT
And
GERHARD
VAN ZYL 1
ST
RESPONDENT
SAPPHIRE
DAWN TRADING 109 CC
T/A
DYNAMIC TRUCK RENTAL 2
ND
RESPONDENT
JUDGMENT
RAULINGA, J
This application was
called before this court as a matter of urgency to enforce a covenant
in restraint of trade contained in an
employment agreement between
the applicant as employer and the first respondent as an employee.
The first respondent had
been employed by the applicant for approximately four years (from
23 September 2004 to 26 August 2008)
when his
employment was terminated after an apparent contradiction of the
covenant in restraint. The relevant clauses of the agreement
which
are annexed as “FA2”
inter
alia
read as follows, clause 13.2: ”
During
your employment and for a period of 2 years after the termination of
your employment for any reason:
Clause 13.2.1; ‘you
will not knowingly be directly employed, have an interest or be
engaged within a radius of 75 kilometres
of any of the company’s
business premises with any company, firm or business which competes
with the business of the company
anywhere in South Africa.’
Clause 13.2.2; ‘you
will not solicit or tout any clients of the company or suppliers or
any other connections of the company,
nor shall you seek to solicit,
tout for or entice away any of the staff for the time being of the
company or any of the company’s
clients.
”
The existence of this
agreement is not disputed by the respondents.
The first respondent had
been employed as a sales representative, in the applicant’s
truck rental division, in its Pretoria
branch. At the time he was
recruited the first respondent had no experience in the truck
business.
It is not in dispute
that until recently the first respondent held 50% member’s
interest in the second respondent. However,
he asserts that he did
so because his father had an adverse credit reference. He took up a
50% member’s interest in the
second respondent with his mother
holding the other 50% interest.
The first respondent
does not dispute that the second respondent is a truck rental
business. His contention is that the applicant
is involved in a wide
range of other businesses and it is only in this insignificant aspect
of the truck rental that the second
respondent is in competition –
the second respondent according to him only competes in small
businesses.
It is also common fact
that the first respondent is involved in the business of the second
respondent and that he earns remuneration
from that involvement. The
applicant confirmed the involvement of the first respondent in the
business of the second respondent
by sending two of its employees who
observed the first respondent in the early hours of the morning
walking outside the business
premises of the second respondent. The
first respondent concedes that he does some business from the second
respondent’s
business premises. He further concedes that he
assists the second respondent on a part time basis. The first
respondent
also concedes that the second respondent does business
with four of the applicant’s clients – he, however, does
not
explain how he first came in contact with them. It is not in
dispute that the first respondent referred applicant’s
customers
to the second respondent. The website of Dynamic Truck
Rental for which the first respondent allegedly works reflects his
cellphone
number. He does not give a satisfactory explanation for
this.
It is apparent from the
first respondent’s affidavit that he concedes that the second
respondent obtained business from entities
by quoting rates which are
lower than those currently quoted by the applicant. Further that
this is due to the fact that there
is no difference in the nature of
the vehicles used by the applicant and the second respondent. The
first respondent complements
his argument by stating that he made
contact with the applicant’s customers when he referred them to
his father’s removal
business – therefore connection is
irrelevant.
It is further the
submission of the first respondent that the radius of 75 kilometres
in respect of only one branch in Pretoria
changes the restraint of
trade – therefore the restraint of trade is unreasonable. That
two years is contrary to public
policy – a lesser period would
have been reasonable. Applicant must show that the restraint is
reasonable – the
onus
is on the applicant.
It transpired when
submissions were made that the first respondent has since resigned
from the second respondent. As a result
the applicant abandoned the
relief sought under paragraphs 3 and 5.2 of the notice of motion.
As appears from the
first respondent’s answering affidavit, it is apparent that he
made a number of concessions on behalf
of himself and the second
respondent. There is no need to again refer to the undisputed facts
as they have been summarised hereinabove.
It is also apparent that
although the respondents raised a number of purported defences it
does not appear on the facts that the
covenant in restraint is
disputed. The focus can be devoted to finding out if the restraint
is reasonable or whether it has been
whittled down.
It is indeed true that
the applicant seeks final relief by way of motion. I have already
stated above that the respondents made
a number of concessions which
in my view do not advance their cause. I am of the view that the
decision in
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 3 SA 623
(A) 634E 635C and the
Plascon-Evans
test as described by HARMS JA in
National
Director of Public Prosecutors V. J. G. Zuma
(537/08) (2009) ZAC SA 1 (12 January 2009) at para (26)
does not come to the rescue of the respondents. Instead
it
strengthens the argument of the applicant.
One is therefore
convinced that the legal issues can be resolved on papers. The
dictum in
Wightman
t/a JT Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 3 SA 371
(SCA) at para 13 is apposite to this case.
The first respondent
resigned from the employment of the applicant on 25 August 2008.
At the time of the hearing of this
matter 6½ months had
already expired. He was employed by the applicant for four years
only. This factor together with
the argument that the first
respondent only serviced 20 (twenty) different clients within a
radius of 75 kilometres cannot counter
the covenant in restraint
which he signed without any objection.
It is also surprising
why the first respondent chose to take up 50% membership in the
second respondent instead of offering a loan
to his struggling father
so that he (the father) could hold the other 50% in the second
respondent. This argument does not hold
water.
The picture painted by
the first respondent that he is not an employee of the second
respondent is not convincing. There are no
good reasons why his
cellphone number would be reflected on the second respondent’s
website. There would be no business
for him to be seen on the second
respondent’s premises in the wee hours of the morning. It is
only a committed and dedicated
employee who would sacrifice his sleep
and rest in order to look after the interests of his employer’s
business.
The fact that the first
respondent has no post matric formal education and is still young, is
an indication that he learnt his
ropes at the applicant’s
business – the art of truck rental. It is also admitted by the
first respondent that he referred
certain customers of the applicant
to the second respondent. Common sense should prevail that within
the four years that the first
respondent spent in the employ of the
applicant he must have learnt the style of entertainment offered by
the applicant to its
customers and must also have obtained trade
secrets as protectable proprietary interests of the applicant. The
first respondent,
during that period must have fostered a close and
ongoing relationship with the customer connections and built up
extremely close
connections with the applicant’s customers.
The criteria applied in
deciding whether an employee has access to customers and is in a
position to build up a particular relationship
with customers so that
when he leaves the employer’s service he could easily induce
the customer to follow him to a new business
is essentially a
question of fact in each case –
Rawlings
and Another v Caravan Truck (Pty) Ltd
1993 1 SA 537
(A).
In casu
the first respondent conceded that he was servicing a number of
applicant’s customers four of whom were referred to the second
respondent. This is on his version, there could have been more.
The approach on a
covenant in restraint of trade was elucidated in
Magna
Alloys and Research SA (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 4 SA 874.
It is prudent to quote certain excerpts from the head
note of this case:
“…
The
position in our law is that each agreement should be examined with
regard to its own circumstances to ascertain whether the
enforcement
of the agreement would be contrary to public policy, in which case it
would be unreasonable. Although public policy
requires that
agreement freely entered into should be honoured, it also requires,
generally, that everyone should be free to seek
fulfilment in the
business and professional world. An unreasonable restriction of a
person’s freedom of trade would probably
also be contrary to
public policy, should it be enforced.
Acceptance of public
policy as the criterion means that, when a party alleges that he is
not bound by a restrictive condition to
which he had agreed, he bears
the onus of proving that the enforcement of the condition would be
contrary to public policy. The
court would have to have regard to
the circumstances obtaining at the time when it is asked to enforce
the restriction. In addition,
the court would not be limited to a
finding in regard to the agreement as a whole, but would be entitled
to declare the agreement
partially enforceable or unenforceable.
”
I would therefore agree
that the effect of this is that the person seeking to attack the
restraint bears the burden of establishing
on a balance of
probabilities that the restraint is unreasonable. The matter does
not end up there, because in a constitutional
democracy contractual
terms are now subject to constitutional rights. Public policy is
indeed informed by the Constitution –
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 5 SA 323
(CC) at para 28. In the same paragraph the court
emphasises that public policy has since been deeply rooted in our
Constitution
and the values that underlie it. However, one must be
mindful of the fact that the Bill of Rights as enshrined in the
Constitution
does not take away rights which arise from legitimate
agreements entered into by the parties. The case under consideration
is
a good example.
I consider the decision
in
Advtech
Resourcing (Pty) Ltd t/a Communicate Personel Group v Kulm and
Another
2008 2 SA 375
(1) per DAVIS J, to be quite enabling and exciting,
particularly in the Constitutional era in which we find ourselves. I
need
quote only paragraph 28:
“
Their cases
support the view that an employer must justify a limitation upon the
right to work, given the importance placed on the
dignity of work and
the concomitant limitation or eradication of that right when
restraint operates. Such a conclusion would entail
no radical
departure from our legal tradition. It would simply amount to a
reversion to the law which operated prior to 1994 and
cast a burden
on the employer to justify the reasonableness of the restraint.
”
In my view, this does not
take away the discretion created in
Magna
Alloys
supra-:
“
…
the Court would not be limited to a finding in regard to the
agreement as a whole, but would be entitled to declare that
agreement
partially enforceable or unenforceable.
”
In
Den
Braven SA (Pty) Ltd v Pillay and Another
2008
6 SA 229
(D) & (CLD) at 262G-H and 263A-C- the court per WALLIS
AJ (as he then was) held:
“…
I
confine my remarks to the question whether a restraint of trade
agreement that is too broad in its terms can on those grounds
be held
to be contrary to public policy and unenforceable in circumstances
where, within the four corners of the agreements, there
are
restraints clearly spelt out which are reasonable in nature and which
are the only restrains that the court is asked to enforce.
In my
judgment in that situation the court should in accordance with
binding precedent grant relief to the applicant. There is
no basis
in law for it refusing to do so by holding the entire agreement to be
unenforceable on the grounds of public policy.
Such a finding is in
my view contrary to the law as first articulated by Botha J in
National Chemsearch v Borrowand and Another
1979 (3) SA 1092
(T) and
endorsed by the Appellate Division (as it then was) in Magna Alloy
and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) and by the
Supreme Court of Appeal in a number of subsequent cases, of which
Reddy v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) is
the most recent. It is not appropriate in those circumstances to
seek to apply the principles of severability applicable
in other
contractual situations as laid down in cases such as Sasfin v Beukes
1989 (1) SA 1 (A).
”
I am of the view that the
restraint sought by way of the interdict is conduct that falls within
the terms of the restraint agreement
and from which the first
respondent agreed to abstain.
One cannot agree more
with WALLIS AJ (as he then was). I find value in his dictum
based on realistic constitutional deductive
reasoning. I am of the
opinion that two years as a term of restraint is too long. It
appears that there are only a few customers
involved. The commercial
damage to the applicant may not be too severe.
As already stated above
the applicant has since abandoned prayers 3 and 5.2. It is as a
consequence not necessary to make such
orders.
Accordingly the following
order is made:
1. The first respondent
is interdicted from:
1.1 utilising any
confidential information concerning the business or affairs of
applicant which may have come to his knowledge
during his employment
with applicant;
1.2 for a period of ten
months from 26 August 2008 from being directly or
indirectly employed by second respondent or
any entity carrying on
business in competition with the applicant’s truck rental
business within a 75 kilometre radius of
521 Church Street, Pretoria
West.
2. The first and second
respondents are interdicted and restrained for a period of ten months
from 26 August 2008, from
soliciting or touting business
from any clients, suppliers or other connections of applicant.
3. The respondents are
jointly and severally ordered to pay the costs, the one paying and
the other to be absolved.
T J RAULINGA
JUDGE OF THE NORTH
GAUTENG HIGH COURT
13235/2009/sg
Heard on
:
For
the Applicant
:
Adv
Instructed
by
:
Messrs
For
the Respondents
:
Adv
Instructed
by
:
Messrs
Date
of Judgment
: