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[2008] ZAWCHC 74
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Random Logic (Pty) Ltd t/a Nashua, Cape Town v Dempster (A419 / 2008) [2008] ZAWCHC 74; (2009) 30 ILJ 1762 (C) (12 December 2008)
REPORTABLE
Republic of South
Africa
IN THE HIGH COURT OF SOUTH
AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE NO: A419 / 2008
In
the matter between:
RANDOM
LOGIC (PTY) LTD
t/a
NASHUA, CAPE TOWN
Appellant
and
WESLEY DEMPSTER
Respondent
Counsel
for the Appellant:
Adv.
PJ Berthold
Instructing
Attorneys:
McGregor
Standford Kruger Inc
Ref.
OH Kruger
Counsel
for the Respondent:
Adv.
BC Wharton
Instructing
Attorneys:
Cohen Shevel
& Fourie
Ref.
TO Price
Dates
of hearing:
21 January
2008
Date
of judgement:
12
December 2008
THE REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
(CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
CASE NO: A419/2007
In
the matter between:
RANDOM
LOGIC (PTY) LTD
t/a
NASHUA, CAPE TOWN
Appellant
and
WESLEY
DEMPSTER
Respondent
JUDGMENT : 12 DECEMBER 2008
BOZALEK,
J
:
[1] Appellant, a company carrying on
business as a distributor of office automation and electronic
equipment, brought an application
against respondent, a former
employee, seeking to enforce certain restraint of trade provisions in
the employment agreement and
to prevent him divulging its trade
secrets and confidential information.
[2] The relief initially sought by
appellant on an urgent basis in October 2006 was cast in extremely
wide terms, namely, a
rule
nisi
whereby respondent
would be interdicted from using or disclosing appellants trade
secrets and confidential information and from
being employed by, or
having any interest in, any business competing with appellant. No
geographical limitation to the restraint
of trade relief was
envisaged. A rule
nisi
granting appellant certain interim relief was made whereafter the
matter came before Blignault J on the return day for the
determination
of final relief. He dismissed the application but
granted appellant leave to appeal to this court.
FACTUAL BACKGROUND
[3] Appellant is a Nashua franchisee
for a defined area in and around Cape Town including the central city
and the southern suburbs
but excluding the northern suburbs. One of
its directors, Greenwood, testified that he had acquired the
franchise for an amount
exceeding R25 million and that the franchisor
spent millions of rands each year on the
Nashua
brand name. It was uncontested that appellant sells office or
automation equipment to approximately 5 000 clients and its annual
turn-over exceeds R150 million.
[4] Respondent was employed by the
appellant as a sales representative for three years until his
resignation in August 2006. Upon
leaving he advised appellant that he
was going to work for a glass company but, within a matter of weeks,
was working as a sales
representative for
Gestetner
,
a competitor of appellant’s within its franchise area. However,
by the time the matter was argued before Blignault J, respondent
had
left
Gestetner’s
employ and was working as a sales representative for another business
known as
Smart Copy
,
also a competitor of appellant in the office automation market in the
larger Cape Town area.
[5] Respondent testified that when he
took up his position with
Gestetner
it was on the basis that he would work in the northern suburbs of
Cape Town which falls outside appellant’s exclusive franchise
area. Regarding appellant’s trade secrets and confidential
information, respondent disputed that the information which he
had
gained during his employment with appellant amounted to trade secrets
or confidential information which enjoyed protection
in law. He
stated that in any event he had little, if any, opportunity to
utilise such knowledge given that he was working outside
appellant’s
exclusive franchise area. Respondent testified, furthermore, that
when he took up his position with
Gestetner
he undertook contractually not to use any of the information he had
access to whilst employed by appellant nor to divulge such
information to
Gestetner
.
Similarly, he was contractually bound by his new employer not to
target any of appellant’s existing client base.
[6] Both
Gestetner’s
and
Smart
Copy’s
head office
were located in central Cape Town. When respondent commenced
employment with
Smart Copy
he concluded a employment agreement which, again, provided that he
would work as a sales person in the northern suburbs of Cape
Town
until September 2008 (when his restraint with
Nashua
would expire) whereafter he could be deployed elsewhere. Although not
directly dealt with in the affidavits, it seems clear that
the office
automation business, at least in the greater Cape Town area, is very
competitive. Furthermore, judging by the number
of similar
applications brought by appellant in the two years prior to the
present application, the phenomenon of employees leaving
to join
competitors or set up their own businesses is quite common-place.
THE INTERIM RELIEF OBTAINED
[7] The terms of the
rule
nisi
comprising the order
made in December 2006 called upon respondent to show cause on the
return day why he should not:
“
1.1 be
interdicted and restrained from directly or indirectly utilizing,
disclosing, divulging or making known the trade secrets
and
confidential information of the Applicant;
1.2 pending the
advent of 4
th
August 2008 be interdicted and restrained from:
1.2.1
approaching, advising or contacting in order to either directly or
indirectly solicit the custom of any person or entity
who was a
customer with whom or to whom either on behalf of the Applicant
negotiations, discussions or representations were entered
into or
made during the period of the Respondent’s employ with the
Applicant;
1.2.2. either
directly or indirectly being employed by or having an interest in
either as employee, principal, agent, worker director,
shareholder,
partner, consultant, financier or advisor in or in any other like
capacity in any concern or entity which carries
on the same business
or a business similar to or alike the business of the Applicant
within the exclusive area of the franchise
of the Applicant.”
[8] The latter prayer largely follows
the provisions of the key clauses of the restraint agreement. In
terms of the same order it
was stipulated that the provisions of
paragraphs 1.1 and 1.2.1 would operate as an interim interdict. At
the hearing of the matter
on the return date the parties’
arguments focused, however, on the relief sought in paragraph 1.2.2
of the
rule nisi
i.e.
the enforcement of the restraint of trade, with the result that, when
he found against appellant in respect of such relief,
Blignault J
dismissed the application with costs, thereby discharging the
rule
nisi
in its entirety.
THE JUDGMENT OF THE COURT
A
QUO
[9] In dealing with the merits of the
application, Blignault J saw the crux of appellant’s case as
being an attempt to protect
confidential information in regard to its
customer connections. As a result the critical question was whether
it would be reasonable
for appellant to enforce the restraint clause
against respondent in circumstances where he was actually working,
and intended to
continue working until the restraint expired, as a
sales representative in an area
outside
appellant’s exclusive franchise area. The Court noted that,
although it was not suggested that respondent himself would exploit
these connections, appellant’s case was that there was a danger
that he might convey the confidential information in his
possession
about his former customer connections to fellow employees of his new
employer who would then be in a position to exploit
these connections
within the exclusive franchise area of appellant to its detriment.
[10] The learned judge considered the
two categories of interest which appellant was seeking to protect and
found that, on the facts
before him, respondent’s mere
knowledge of customer connections, in an area where he himself was
not working as a sales representative,
was insufficient to justify
the enforcement of the restraint.
[11] With regard to appellant’s
reliance on the protection of its trade secrets, Blignault J then
considered whether he was
being required by appellant to protect the
knowledge which respondent had acquired of appellant’s
customers during his employment.
He found that although a customer
list could, in appropriate circumstances, qualify as protectable
confidential information, a
distinction had to be drawn where such
confidential information was used for the purposes of impersonal
large scale marketing,
as was the case in
Telefund
Raisers CC v Isaacs and Others
1998 (1) SA 521
(C), and the situation where the sales representative
builds up personal connections with the customers. Presumably taking
into
account the fact that respondent would not be working in the
appellant’s exclusive franchise area, at least until his
restraint
expired, and his undertaking not to target the appellant’s
existing customers, Blignault J concluded that appellant had not
established that it reasonably required to enforce the restraint
clause against respondent in the area where he was working for
the
purposes of protecting its confidential information about customers.
GROUNDS OF APPEAL
[12] Appellant’s main grounds of
appeal were that the court
a
quo
failed to have proper
regard to the nature of competition within the office automation
industry and the value to competitors of
appellant’s customers
lists and information regarding contractual details and customer
requirements contained therein. Appellant
also contended that the
court
a quo
erred in effectively requiring appellant, notwithstanding that it had
established both the restraint of trade provisions and the
breach
thereof by respondent, to police respondent’s compliance with
the provisions of the restraint of trade. Appellant
also averred that
the court had erred in failing to confirm the terms of the interim
order. In argument it was contended, furthermore,
that the court
a
quo
had incorrectly
approached the matter on the basis that appellant had to establish
that enforcement of the restraint was reasonable.
[13] In granting leave to appeal
Blignault J explained that, despite wording which may have suggested
otherwise, he had not approached
the matter on the basis the
appellant bore an onus to establish the reasonableness of the
restraint. Recently, in
Reddy
v Siemens Telecommunications (Pty) Ltd
1
the Court considered a
challenge, based on s 22 of the Constitution of the Republic of South
Africa, 1996, to the rule established
in
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
2
that the party seeking to avoid a restraint of trade bears the onus
of showing that it is unreasonable. The Court held that it
was not
called upon to decide that issue since the question of where the
onus
lies in a particular case is a consequence of the substantive law on
the issue. At the same time the Court pointed out that the
incidence
of the
onus
plays no role in the question of whether a restraint is reasonable or
not on a set of given facts since answering that question
calls for a
value judgment. In the circumstances, I approach the question of the
reasonableness of the restraint on the basis that
neither party bears
any
onus
of proof in this regard.
THE EXISTING LAW AND THE IMPACT
OF THE CONSTITUTION UPON RESTRAINT OF TRADE AGREEMENTS
[14] In
Magna Alloys
(supra), it
was held, contrary to the position in English law, that agreements in
restraint of trade are valid and enforceable
unless they are
unreasonable and thus contrary to public policy. A necessary
consequence of that approach, it held, is that the
party who
challenges the enforceability of the agreement must bear the burden
of proving that it is unreasonable. Whether the restraint
is in fact
unreasonable must be determined with reference to the circumstances
of the case and with account being taken of the
situation prevailing
at the time that enforcement is sought.
3
[15] In
Basson
v Chilwan
4
Nienaber JA identified four
questions which should be asked when considering the reasonableness
of a restraint:
Is there an
interest of the one party which is deserving of protection on the
termination of the agreement;
Is such
interest being prejudiced by the other party;
If so, does
such interest weigh qualitively and quantitively 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 enforced
or not?
In Reddy (supra) it was said that in
determining the reasonableness of a restraint:
“
A Court
must make a value judgment with two principal policy considerations
in mind in determining the reasonableness of a restraint.
The first
is that the public interest requires that parties should comply with
their contractual obligations, a notion expressed
by the maxim
pacta
servanda sunt
.
The second is that all persons should in the interest of society be
productive and be permitted to engage in trade and commerce
or the
professions.”
5
Malan AJA stated further as follows at
497[C]:
“
In
applying these two principal considerations, the particular interest
must be examined. A restraint would be unenforceable if
it prevents a
party after termination of his or her employment from partaking in
trade or commerce without a corresponding interest
of the other party
deserving of protection. Such a restraint is not in the public
interest. Moreover, a restraint which is reasonable
as between the
parties may for some other reason be contrary to the public
interest.”
The learned judge cited with approval
the four questions identified in
Basson
v Chilwan
(supra).
[16] In
Advtech
Resourcing (Pty) Ltd t/a Communicate Personnel v Kuhn and Another
,
6
Davis J considered the impact of the Constitution on the
interpretation and enforcement of restraint agreements. He concluded
that contractual terms are subject to constitutional rights and that
the courts will invalidate and refuse to enforce agreements
that are
contrary to public policy. Inherent within the test established in
Basson v Chilwan
(supra) for determining the reasonableness of a restraint agreement,
is the principle of proportionality, a part of constitutional
jurisprudence, and which involves a careful weighing of the competing
interests of the parties. In this balancing exercise, in
Davis J’s
view, the concept of the dignity of work, which encompasses the
freedom to choose a vocation, one’s work
being a part of one’s
identity and “…constitutive of one’s dignity”,
must be given due weight. Dealing
with the desirability of the courts
re-visiting the issue of restraints of trade from a perspective which
places less emphasis
on the notion of contractual autonomy, Davis J
stated as follows:
“
However,
even if I were to be permitted by precedent to move more definitely
in this direction it is unnecessary in this dispute
to go further
than the position adopted in Reddy, supra. In my view that judgment,
read together with the test articulated by Nienaber
JA in Basson,
supra, can be easily infused with the spirit and objectives of the
Constitution…”
.
7
[17] Key aspects of the judgment in
Advtech
were
criticised in
Den Braven SA
(Pty) Ltd v Pillay
and
Another
.
8
Wallis AJ disagreed with the view that an applicant seeking to
enforce the provisions of a restraint of trade agreement should
not
only have to prove the breach or threatened breach of that agreement
but also show that the restraint was reasonable and justifiable
in an
open and democratic society based on human dignity, equality and
freedom.
9
Wallis AJ also took issue with
the approach of Davis J in refusing to grant relief for the breach of
a restraint of trade agreement
on the grounds that the agreement as a
whole was unenforceably wide and the application of a severability
clause would result in
the court developing an entirely different
contract for the parties.
[18] The court’s conclusions in
Den Braven
are preceded by a thorough analysis of the case law particularly as
it bears upon the questions of where the onus of proof lies
and the
weight to be given to the two conflicting principles involved in the
value judgment concerning the reasonableness of a
restraint of trade.
[19] Wallis AJ expresses the view that
the right of every citizen to choose their trade, occupation or
profession freely can have
no direct application to restraint of
trade agreements
inter alia
because such application would have the inevitable effect of
nullifying all such agreements. That right, however, has indirect
application through the vehicle of public policy which represents the
legal convictions of the community, in turn expressed in
the founding
provisions of the Constitution, including the values of human
dignity, equality and freedom. Wallis AJ cites the following
extract
from the majority judgment of Ngcobo J in
Barkhuizen
v Napier
:
10
“
On the
one hand public policy, as ….formed by the Constitution,
requires in general that parties should comply with contractual
obligations that have been freely and voluntarily undertaken. This
consideration is expressed in the maxim pacta sunt servanda,
which,
as the Supreme Court of Appeal has repeatedly noted, gives effect to
the central constitutional values of freedom and dignity.
Self-autonomy or the ability to regulate ones own affairs, even to
one’s own detriment, is the very essence of freedom and
a vital
part of dignity. The extent to which the contract was freely and
voluntarily concluded is clearly a vital factor as it
will determine
the weight that should be afforded to the values of freedom and
dignity.”
As Wallis AJ points out, it is where
the enforcement of a contractual provision would be unreasonable and
unfair in the light of
the fundamental constitutional values of
freedom and dignity that it will be contrary to public policy to
enforce the contractual
term in question.
WAS THE RESTRAINT
IN
CASU
BREACHED AND WAS
IT REASONABLE?
[20] It is against this background
that Blignault J’s evaluation of the reasonableness of the
restraint of trade to which
the respondent was subject, must be
considered. Appellant had no difficulty establishing the provisions
of the restraint of trade
constraining the respondent. They largely
followed the wording of the relief sought in paragraph 1.2.2 of the
interim order and
were applicable for a period of 24 months after
termination of respondent’s employment. The overall restraint
was geographically
restricted by clause 12.3 of the employment
agreement which reads as follows:
“
This
restraint shall apply to the area of Nashua’s franchise as same
exists at date of termination of the employees employment,
irrespective of the franchise area in existence upon the effective
date hereof.”
Likewise appellant had no difficulty
in establishing that respondent was
prima
facie
in breach of the
terms of the restraint. Both
Gestetner
and
Smart
Copy
not only had offices
within appellant’s exclusive franchise area, but competed with
it in that area. Accordingly Blignault
J appeared to approach the
dispute regarding the enforceability of the restraint as one relating
largely to the question of its
reasonableness.
[21] In considering whether to enforce
the restraint, Blignault J analysed to what extent the employer’s
interest in its trade
secrets and trade connections were reasonably
capable of being protected by means of a restraint of trade. He
commenced from the
starting point that what appellant was seeking was
to protect was confidential information in regard to its customer
connections.
Here the Court drew a distinction between mere
information regarding an employer’s customers on the one hand
and protectable
customer connections on the other, the latter having
been described in an American case as depending 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
the rival he
automatically carries the customer with him in his pocket.”
11
Without explicitly finding that
respondent had developed such strong customer connections, Blignault
J found that his uncontested
statement that he would not have
significant personal conduct with his former customers whilst working
outside the appellant’s
exclusive franchise area, neutralised
or removed any risk of prejudice to appellant in this respect. The
learned judge appears
thus to have answered the first and second
questions posed in
Basson v
Chilwan
in favour of
appellant and respondent respectively, namely, that the employer had
established an interest worthy of protection
but that such interest
was not being prejudiced by the former employee. Blignault J’s
approach may thus have elided the second
question posed in
Basson
with the issue of the
overall reasonableness of the restraint. In passing, it should also
be noted that respondent contended throughout
that the appellant had
failed to establish any interest worthy of protection. In the view I
take of this matter, however, it is
not necessary to re-examine the
question of whether appellant did indeed prove such an interest.
[22] Appellant argues, however, that
the respondent could easily, either consciously or inadvertently,
convey confidential information
about his former customer connections
to fellow employees of his new employer who themselves would be able
to exploit those connections.
It was argued further on behalf of
appellant that it did not have to prove that this would probably take
place since it was not
obliged to police the application of the
restraint of trade agreement. Whilst both of these propositions may
well be correct as
far as they go, acceptance thereof does not
obviate the need, in determining overall the reasonableness of the
restraint, to weigh
the harm to the employer if the risk should
eventuate against the former employee’s interest or right to be
economically
active.
[23] As I have stated, even assuming
that the court
a quo
should have found, or should have stated more clearly, that the
second question postulated in
Basson
(supra) had to be answered
in favour of appellant, i.e. that its protectable interest was
prejudiced by respondent’s new employment,
it is still
necessary to weigh the respective merits of the covenantee’s
interests against the covenantor’s interest
not to be
economically inactive and unproductive. Where the latter’s
interest weighs more heavily than the interest to be
protected, the
restraint is unreasonable and consequently unenforceable.
[24] The weighing exercise involves a
balancing of two conflicting principles, the first expressed by the
maxim
pacta servanda sunt
and the second being that all persons should be permitted to engage
in trade and commerce or a profession. Not only does the exercise
calls for a value judgment to be made, as was stated in Reddy
(supra):
“
(t)he
enquiry which is undertaken at the time of enforcement covers a wide
field and includes the nature, extent and duration of
the restraint
and factors peculiar to the parties and their respective bargaining
powers and interests.”
12
[25] Blignault J did not expressly
list the factors which led him to the conclusion that the balance of
reasonableness was tipped
in favour of respondent save in one
important respect, namely, that respondent would not be physically
working within appellant’s
exclusive franchise area. Although
this is a factor which must be given due weight it is by no means
decisive in itself either
way since, as was pointed out in
BHT
Water Treatment (Pty) Ltd v
Leslie and Another
13
and reinforced in
Reddy’s
case, in an appropriate case it is sufficient if the covenantor has
the confidential information in his/her possession and the
opportunity to disclose or impart to his/her new employer.
[26] There are, however, additional
factors, not mentioned specifically by the court
a
quo
, which must be brought
into the reckoning. In the first place it is relevant, in my view,
that respondent was at all times in a
comparatively junior position.
It follows from this, notwithstanding that respondent entered into
the employment agreement, which
included the restraint of trade
conditions, freely and voluntarily, that the respective bargaining
positions of the parties at
the commencement of the employment
contract would have been quite substantially weighted towards
appellant. At that stage respondent
was a young man, apparently
without any previous experience or expertise in the particular field.
Nor was any case made out by
appellant that respondent had, in the
course of his three years’ employment, acquired a particularly
influential or key position
in appellant’s organisation.
[27] As far as the actual terms of the
restraint provisions are concerned, on the face of it the
geographical reach of the restraint
is not particularly wide, limited
as it is to that part of Cape Town comprising appellant’s
exclusive franchise area. However,
it is significant that the general
effect of the restraint was to extend it to the larger Cape Town area
since it stipulates that
respondent could not work or in any way be
associated with any entity which competed with appellant in its
exclusive franchise
area. Since that latter area comprised a very
substantial portion of Cape Town, including the commercial centre of
the city and
the southern suburbs, the effect thereof was to
disqualify respondent from being employed by any firm which itself
did not limit
its business to a much smaller area in Cape Town.
[28] The period of the restraint, 24
months, is by no means insubstantial. Appellant sought to justify
this period on the ground
that it is not arbitrary but rather based
upon the fact that as a rule service contracts for leased equipment
with customers are
concluded for 60 month periods. After 36 months
the customer’s requirements are reviewed and “invariably”
their
equipment is upgraded within the last 24 months of the contract
term and a new contract is concluded with the customer. However,
I
fail to see how these factors in any way justify the restraint for a
period as long 24 months unless all or the majority of contracts
are
concluded by appellant at the same time of the year, something that
was not suggested and is highly unlikely. It seems safe
to assume
that contracts are concluded by sales persons throughout the year, in
which event the rationale relied on by appellant
has no bearing
whatsoever on the duration of the restraint or its reasonableness.
[29] A further factor deserving of
consideration is that on appellant’s own version, although it
has sought to enforce restraints
of trade against former employees
over the past few years, it has by no means been consistent in this
regard. Several instances
are cited in the papers of employees who
were in a similar or more influential position than respondent but
against whom appellant
took no action when they left its employ and
begun working for a competitor or setting up their own business, and
in so doing,
breached the terms of their restraint of trade.
Appellant ascribed this failure, somewhat unconvincingly in my view,
to policy
considerations relating to the expense involved in
enforcing restraints of trade provisions against former employees.
[30] It was contended on behalf of
appellant that trade secrets and confidential information of a
similar nature have been held
by this Court to be worthy of
protection and, furthermore, that the self-same restraint has been
upheld in similar circumstances.
However, the judgments relied upon
in this regard are, in my view, for the most part distinguishable,
either on their facts or
by virtue of the form of relief sought. The
one exception appears to be that of
Random
Logic (Pty) Ltd t/a Nashua Cape Town v Phillip Malherbe
in which judgment was delivered by Cleaver J on 19 November 2007. In
that case the learned judge, although making a final order
enforcing
the restraint agreement, ordered the applicant to pay the
respondent’s costs on the basis that the applicant should
have
accepted an undertaking by the respondent that he would not be
employed as a salesman within applicant’s exclusive franchise
area. In making the costs order, Cleaver J expressly adopted the
reasoning of Blignault J in the present matter to the effect that
mere knowledge of customer connections in an area where respondent
himself is not working as a salesman is not sufficient to justify
a
restraint of the present nature.
[31] In my view it is inevitable that,
as the values of dignity, equality and freedom which underlie our
Constitution take root,
greater weight will be given to the right of
every citizen to choose their trade, occupation or profession freely
and that the
courts will look more critically at restraint of trade
agreements where, for example, they were concluded between parties
whose
respective bargaining powers were substantially disparate,
where the
quid pro quo
is either non-existent or no more than the opportunity of employment
and, where the attempt to enforce the restraint owes more
to an
aversion to fair competition than the protection of any legitimate
employer interest. I do not suggest by these remarks,
however, that
the restraint agreement at issue herein bears each of these
characteristics. Whether the employee’s s 22 right
will plays a
more decisive role in the evaluation of the reasonableness of
restraint of trade agreements through the direct route
envisaged by
Davis J in
Advtech
or through the vehicle of public policy remains to be seen.
[32] To sum up, respondent concluded
the restraint agreement for no consideration as a junior employee.
When he left some three
years later to work in the same industry, but
in a different area of Cape Town, he was still a relatively junior
sales person.
He undertook not to use his customer connections during
the term of the restraint and there was no indication that he would
do
so. I have previously noted that the reach of the restraint was
wide, particularly its duration of two years. As Wallis AJ pointed
out in
Den Braven
,
a two year term constitutes the upper-limit of such proscriptions.
The geographical reach of the restraint, although apparently
only
limited to a portion of Cape Town is, in practice, extended by virtue
of the fact that most major suppliers of office automation
equipment
will in all likelihood look to do business in central Cape Town and
the southern suburbs having regard to the amount
of economic activity
carried on in those areas. A further important factor is appellant’s
acceptance that the limit of the
risk which it faced should
respondent remain unrestrained, was no more than that of his
inadvertently, or at worst even deliberately,
supplying information
regarding his former customers to fellow employees of his new
employer. Not only was no persuasive case made
out that respondent
had developed such close relations with his customer connections that
he could “carry them away in his
pocket”, but whatever
influence or entrée he had would be diluted by the fact that
there would, at least during the
period of the restraint, be no
direct contact between the respondent and his former customers.
Lastly, regard must also be had
to appellant’s lack of
consistency in previously enforcing similar restraints where, on the
face of it, its commercial interests
were more directly threatened.
[33] It bears noting that questions of
the severability of the restraint do not arise in the present matter.
It was never appellant’s
case that it would limit its relief to
a lesser period of time than that stipulated in the restraint or to a
smaller geographic
area or in any other significant respect.
Assuming, for the purposes of argument, that the court might have
been amenable to reducing
the scope and breach of the restraint
agreement, I nevertheless consider that the party seeking to enforce
the restraint is obliged,
at least, should it see fit, to indicate
those elements of the restraint where the court should wield the
notional blue pen.
[34] Taking all these factors into
account, I remain unpersuaded that the court
a
quo
erred, on any of the
grounds of appeal advanced, in holding that enforcement of the
restraint in question would be unreasonable.
In my view, in the
circumstances of this case, the interests of respondent not to be
economically inactive or unproductive outweighed
the interests of
appellant to restrain respondent from being employed in his new
position.
COSTS
[35] On behalf of the appellant it was
contended that Blignault J had erred in not making the terms of the
interim interdict, set
out in paras 1.1 and 1.2.1 of the rule
nisi
,
final. However, as the learned judge pointed out in granting leave to
appeal, the focus of argument on the return day was the
final relief
sought in relation to the restraint agreement, para 1.2.2 of the rule
nisi
.
Respondent agreed to the terms of the interim interdict. This appears
from the fact that the original order made on 5 December
2006, cast
in the form of a rule
nisi
,
was taken by agreement. All the indications are, furthermore, that
this would have continued to be respondent’s stance on
the
return day. This is also borne out by the case which respondent made
out in response to the application, namely, that he would
respect the
terms of the employment agreement insofar as it related to the
divulging of appellant’s trade secrets and confidential
information and would conduct no business within appellant’s
franchise area during the relevant period.
[36] By now, slightly more than two
years have passed since respondent terminated his employment with
appellant and no point would
be served by seeking to remedy what
might have been an understandable oversight on the part of the court
a quo
by resuscitating,
ex post
facto
, the terms of the
agreed interim interdict. Further, in my view, this subsidiary issue
has no cost implications for the parties
since the primary focus of
the initial hearing, and in this appeal, was the relief relating to
the restraint. It is doubtful whether,
had it not been for the
restraint dispute, the matter would have gone forward to argument
before Blignault J on 5 December 2006.
The real dispute between the
parties has at all times been the enforceability of the restraint of
trade. In this respondent has
been successful throughout and
therefore I can see no good reason why the court
a
quo
’s order
dismissing the application with costs should be varied or why
respondent should not be awarded costs in the appeal.
[37] In the result I would dismiss the
appeal with costs.
_________________
LJ BOZALEK, J
DESAI J
:
I agree, and it is so
ordered.
_________________
S DESAI, J
NC ERASMUS J
:
I agree.
__________________
NC ERASMUS, J
1
2007 (2) SA 486
(SCA)
2
[1984] ZASCA 116
;
1984 (4) SA 874
(A)
3
J Louw and Company
(Pty) Ltd v Richter and Others
1987 (2) SA 237
(N) at 243[B] – [C]
4
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at
767[G] – [H]
5
At 496 [D] – [E]
6
2008 (2) SA 375
(C);
[2007] (4) All SA 368
7
At page 389[A] – [B]
8
2008 (6) SA 229
(D &
CLD)
9
At page 248 [D].
10
At page 250[E] – [G]
11
Quoted in
Rawlins
and Another v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541[C] – [I]
12
At 947 [F]
13
1993 (1) SA 47
(W)