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2024
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[2024] ZALCJHB 126
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Demari Tools and Supplies (Pty)Ltd v Abiel and Another (J 1600/23) [2024] ZALCJHB 126 (23 February 2024)
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case No: J 1600/23
In the matter between:
DEMARI TOOLS AND
SUPPLIES (PTY) LTD
Applicant
And
CHABANE,
ABIEL
First Respondent
SA SAW BLADES (PTY)
LTD
Second Respondent
Heard:
30 November 2023
Date
Delivered
:
23
February 2024
This judgment was
handed down electronically by circulation to the parties via email.
The date for hand-down is deemed 23 February
2024.
JUDGMENT
NGWENYA, AJ
Introduction.
[1] The
Applicant, has approached this Court, on an urgent basis, seeking to
enforce written restraint of
trade undertakings made by the First
Respondent, in an employment contract. Urgency was not contested and
in exercising my discretion
I will treat the application as urgent.
The Relevant
Factual Background
[2] On
or about 28 February 2023, the applicant and the first respondent
concluded a written contract of
employment. The contract of
employment was for a fixed term until the period 28 April 2023.
Pursuant to the expiry of the first
contract of employment, on 1 May
2023, the applicant and the first respondent entered into a further
contract of employment, in
terms of which the first respondent would
be employed for a further month. The contract of employment was to
terminate on 31 May
2023.
[3] The
first respondent was employed, it is pleaded, in terms of both
contracts of employment, as a sales
representative and driver. As a
sales representative and driver, it is explained, the first
respondent was responsible for duties
which entailed attending at the
applicant’s customers as well as generating further sales by
approaching potential new customers
within his designated area of
operation – Gauteng.
[4] Both
contracts of employment incorporated confidentiality and restraint
undertakings which read as follows:
A CONFIDENTIALITY
A.1 During the period
of employment of the employee and subsequent thereto, the employee
shall keep confidential and shall not disclose
any of the Company’s
secrets or confidential information or that of its subsidiary or
associated Company’s other than
to persons authorised by the
Company or those employed by the Company who are required to know
such confidential information for
the purposes of their employment
with the Company.
A.3 For the purposes
of this clause, “confidential information” means any and
all information which is stated confidential,
or imparted and
received in confidence, or by its nature, intended to be kept
confidential, including particulars of the Company’s:
·
Customers
or suppliers and arrangements with them.
·
Products
and their commercial sales and distribution.
·
Operating
methods, operating processes, financial arrangements, marketing
strategies and marketing techniques.
·
Patents,
trademarks, and trade secrets.
·
Computer
and information technology programmes.
·
Databases
and the contents thereof.
·
Product
pricing and discounts
C2. SECRECY AND
RESTRAINT AFTER EMPLOYMENT WITH COMPANY:-
The employee hereby
undertakes, should the employee cease to be employed by the Company
for any reason whatsoever, that the
employee shall not for a period
of 12 months within all provinces in South Africa, either directly
or indirectly obtain employment
with any firm or company who or
which competes in any way with the activities then pursued by the
Company Demaro Tools &
Supplies (Pty) Ltd. It is recorded that
the definition of the Company’s activities is defined as
collection, delivery
or blades / cutting tools, sharpening of
blades, commercial sales and distribution of new blades, cutting
tools, diamond tooling,
the machining of all ranges of cutting
blades, cutting blades, cutters and spares used predominantly in
the woodworking, steel
and aluminium industry as well as the
non-wood industry (UPVC.)
[5] There
is some dispute about the date on which the first respondent’s
employment terminated. The
first respondent states that he only
“
worked a week”
in terms of the second contract of
employment, while the applicant appears to rely on the termination of
employment as at the date
of 31 May 2023, when the second contract of
employment expired. Although this is an area of dispute between the
parties, I am of
the view that it is not a significant area of
dispute, as I accept that the first respondent’s employment
terminated during
May 2023.
[6] The
applicant stated that during or about 19 October 2023, it became
aware that the first respondent
was employed by the second
respondent. Upon becoming aware of this fact, the applicant’s
attorneys of record wrote a letter
to the second respondent and
indicated that the first respondent was in breach of his restraint
undertakings. The second respondent
responded and in essence stated
that it was not unlawfully competing with the first respondent. The
balance of the correspondence
is not relevant, as the second
respondent delivered a notice to abide.
[7] This
urgent application was launched by the applicant against this
background.
The Competition
between the applicant and the second respondent as pleaded
[8] The
applicant is a business which it is alleged, consists of
inter
alia
, the import and sale of aluminium tooling for manufacturers
in the aluminium window industry and consists of approximately 500
different products. The business activities, consist of the
collection, delivery of blades/cutting tools, sharpening of blades,
commercial sales and distribution of new blades, cutting tools,
diamond tooling, the machining of all ranges of cutting blades,
cutting blades, cutters and spares used predominantly in the
woodworking, steel and aluminium industries, as well as the non-wood
industry. The applicant additionally imports and commercially sells
German tools.
[9] The
applicant also offers sharpening services which services consist of
the collection of tools from
a customer which are then brought to the
applicant’s premises where staff members sharpen the tools.
Once the process is
completed, the tools are returned to the
customers. Generally, it is pleaded, a sales representative such as
the first respondent
would deliver approximately 10 to 60 blades a
day for sharpening. The sharpening services are the lifeblood of the
applicant, as
the average saw blade has a running life of 9 working
hours before it goes blunt – then it requires sharpening.
[10] There
is no dispute, on the papers before me, that the applicant and the
second respondent are competitors.
The applicant pleads that the
second respondent’s websites state that it is a supplier of saw
blades, cutter heads, routing,
drilling, planer knives and spare
parts utilised in the wood industry. In addition, the second
respondent offers the same sharpening
services as the applicant and
it is alleged “
is actively targeting the applicant’s
client base specifically in this area”
.
The protectable
interest as pleaded
[11] The
applicant states that although the first respondent was employed for
only a relatively short period,
all of the applicant’s
customers were introduced to the first respondent. The first
respondent gained insight into the type
of products and services the
applicant’s customers required and ordered from the applicant,
the regularity of the orders
and the prices.
[12] The
deponent to the applicant’s founding affidavit, states that he
personally trained the first
respondent on customer training which
included customer pricing, introduction to applicant’s
customers and training on the
products customers required from the
applicant and on sold. The applicant’s confidential information
it is contended, included
but was not limited to customer lists,
products listing, services and pricing.
[13] Chris
Poltera (“Poltera”), the applicant’s sales
representative accompanied the first
respondent on the road to do on
the road training by visiting the applicant’s customers and
showing the first respondent
how to address customers, how to market
to the customer and what to look out for at the customer’s
premises to drive sales
and services.
[14] It
was explained that the first respondent duties entailed call sheets,
which call sheets had customers
names and contained confidential
information such as the identification of the customer, locations of
the customers, products or
services, prices and mark ups or profit
margins.
[15] In
addition, it is stated that the first respondent would be on the road
all day attending to customers’
needs and procuring new
customers for the applicant. The information that was gathered during
the day would be handed to the deponent
of the founding affidavit who
would prepare a quote for the customer and if accepted would be
invoiced by the deponent or the financial
staff of the applicant.
[16] In
relation to trade connections, it is pleaded that the first
respondent had contact with any and all
of the applicant’s
customers within his designated territory being Gauteng on a daily
basis and met with them frequently
on a bi-weekly basis.
The pleaded breach
of the restraint undertakings
[17] The
applicant became aware of the first respondent’s employment
with the second respondent during
October 2023. The applicant became
aware of this fact because Poltera was informed that the first
respondent had attended at the
premises of an existing customer of
the applicant, Bed Base in Lanseria and had left a business card
saying that he works for the
second respondent and could offer better
prices. Poltera was also informed that the first respondent had been
at the premises of
another customer, Status Shopfitters in Kya Sands,
Poltera was again presented with a business card of the first
respondent.
The Applicable
Legal Principles
[18]
The
issues in this application concern whether, the first respondent’s
employment, with the second respondent breaches the
restraint
undertakings contained in the employment contracts. That requires a
consideration of the protectable interest as pleaded
by the
applicant, because, as the Labour Appeal Court has stated in
Labournet
(Pty) Ltd v Jankielsohn and another
[1]
:
“…
a
restraint is only reasonable and enforceable if it serves to protect
an interest, which, in terms of the law, requires and deserves
protection. The lists of such interests is not closed, but
confidential information (or trade secrets) and customer (or trade)
connections are recognised as being such interests. To seek to
enforce a restraint merely in order to prevent an employee from
competing with an employer is not reasonable.”
[19]
In
deciding whether the enforcement of a restraint of trade would be
reasonable, is dependent on the test which was expressed in
Basson
v Chilwan and others
[2]
as follows:
a.
Is there an interest of the one party which is deserving of
protection at the termination of the agreement?
b.
Is such interest being prejudiced by the other party?
c.
If so, does such interest so weigh up qualitatively and
quantitatively against the interest of the other
party that the
latter should not be economically inactive and unproductive?
d.
Is there any other facet of public policy having nothing to do with
the relationship between the parties
but which requires that the
restraint should either be maintained or rejected?
[20]
The
interest that can be protected, as stated by the LAC
[3]
is confidential information and customer connections. This Court
recently, in
Mapa
Cleaning Technologies CC v Letlhogonolo Pearl Lettie Kgawane
[4]
explained the protectable interests as follows:
[
29] Confidential
information would be: (a) Information received by an employee about
business
opportunities available to an employer; (b) information that
is useful or potentially useful to a competitor, who would find value
in it; (c) Information relating to proposals, marketing or
submissions made to procure business; (d) information relating to
price
and/or pricing arrangements, not generally available to third
parties; (e) information that has actual economic value to the person
seeking to protect it; (f) customer information, details and
particulars; (g) information the employee is contractually,
regulatory
or statutory required to keep confidential; (h)
Information relating to the specifications of a product, or a process
of manufacture,
either of which has been arrived at by the
expenditure of skill and industry which is kept confidential; and (i)
information relating
to know-how, technology or method that is unique
and peculiar to a business. Importantly, the information summarized
above must
not be public knowledge or public property or in the
public domain. In short, the confidential information must be
objectively
worthy of protection and have value.
[30]
Trade
connections as an interest worthy of protection would be 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 or she
leaves employment and becomes employed by a competitor,
the employee
could easily or readily induce the customers to follow the employee
to the new business. Whether the employee can
be seen to have the
ability to exert this kind of influence, is dependent upon: (a) the
duties of the employee; (b) the employee’s
particular
personality and skill; (c) the frequency and duration of contact
between the employee and the customer(s); (d) the nature
of the
relationship between the employee and the customer(s) and in
particular whether the relationship carried with it a notion
of trust
and confidence; (e) the knowledge of the employee concerning the
particular requirements of the customer and the nature
of its
business; (f) how competitive the rival businesses are, and (d) the
nature of the product or services at stake.
(footnotes omitted)
Analysis
[21]
The
application is focussed on two key areas; (i) confidential
information and (ii) customer connections. The first respondent
disputes that he has access to the type of confidential information
which the applicant seeks to rely upon in support of this
application.
Where it comes to factual disputes, I will determine
these factual disputes in line with the principles established in
Plascon
Evans Paints v Van Riebeeck Paints
[5]
,
which equally apply in restraint of trade applications.
[22] I
will deal first with the pleaded case concerning confidential
information. The applicant alleges that
the first respondent had
access to customer lists, product listing, services and pricing. The
affidavit does not sufficiently make
out a case concerning the
confidential nature of the product listing and services and is
primarily focussed on customer lists and
information as well as
pricing.
[23] The
first respondent denies access to the confidential information
contended for and states that he
“
was never allowed, and or
invited or was shared to [me], not in my first employment with the
Applicant, nor the short terms of my
last employment with the
applicant to learn how prices was calculated, or costings or who the
suppliers are”
. In relation to customer lists, the first
respondent explains that “
[I]t was my instruction by the
Applicant, to find and approach new customers while I am on my routes
to do the deliveries and collection
at customers that was written on
the trip sheets. The trip sheet were always handed in and new ones
was issued in the mornings”.
[24] Even
if it can be accepted that the information relied upon by the
applicant is information worthy of
establishing a protectable
interest, I am not convinced that the first respondent is possessed
of any of this kind of information
to the extent that it can have any
value to a competitor.
[25] In
my assessment, on the pleaded case, the first respondent was not
involved in the determination of
pricing structures with the
applicant’s clients. This is based on the applicant’s
version and the first respondent’s
version. The applicant’s
deponent clearly stated that once a trip sheet is provided by the
first respondent, the deponent
to the founding affidavit and/or
employees in the finance department would prepare a quote to the
customer and would provide such
quote to the customer. This was
confirmed in the first respondent’s answering affidavit.
[26] The
first respondent explains this aspect clearly and states that “
[I]t
was my duty to find the customers, but the applicant and Mr. Poltera
would then take the matter further, by visiting them or
phoning
them”
. The first respondent was therefore not engaged in
the negotiations with the customers and therefore would not be privy
to the
pricing structures of the applicant or any discounts applied.
[27] The
applicant additionally relies on customer lists. There is a dispute
in this respect. The applicant
pleads that the first respondent
would, during the short period of employment, have “
been
introduced to all the applicant’s customers”
and the
first respondent would have gained “
insight (as he was
required in terms of his job description) into the type of products
and services the applicant’s customers
required and ordered
from the applicant, the regularity of the orders and the prices
charged”.
[28] The
first respondent denies access to customer lists, and he explains
that he would be provided with
a trip sheet and these trip sheets
would be returned to the applicant. Although this was clearly raised
in the answering affidavit,
the replying affidavit does not engage
with this aspect at all. The first respondent’s version is
additionally confirmed
by the applicant’s own version, as I
stated above, which is that the trip sheets are returned to the
applicant. I am also
fortified in my view by the applicant’s
founding affidavit, which attaches a document which is termed
“
Ongoing Demaro Customer List”
. The document is
blank and states “
ongoing list”
. I accept the
first respondent’s version that he did not have access to the
applicant’s database and customer lists.
[29] I
am not persuaded that the applicant has access to the confidential
information as contended for by
the applicant.
[30] That
brings me to the trade connections, which the applicant relies upon
in support of its case. On
this score, I do not believe that the
applicant has done enough to make out a case relating to a
protectable interest where it
comes to trade connections.
[31] Other
than general statements about what was expected of the first
respondent where it comes to dealing
with customers, there is little
in the form of elaboration as to why the first respondent would hold
a particular relationship
with customers that would cause him to
carry these customers in his pocket. The first respondent stated that
all of the negotiations
and meetings with the customers was not
attended to by him. I am not convinced that the relationship between
the first respondent
and the customers was of the nature of a close
working relationship and relationship of trust that would cause the
first respondent
to carry those customers in his pocket.
[32] Concerning
the two customers which it is contended the first respondent visited,
I am not satisfied
that it evidences a breach of the restraint of
trade nor that it supports the contention that the first respondent
has any trade
connections with the customers. In relation to the
customer Bed Base, the first respondent explained that he had a
relationship
with the customer even before working for the applicant
but additionally the company Bed Base works with various several
tooling
suppliers. This aspect was not disputed or dealt with at all
in reply, except to simply point out that the first respondent
admitted
to have visited Bed Base.
[33] In
addition, the first respondent denies having made any offers to the
Bed Base customer of better pricing.
This is because, as he explains,
he did not have access to any of the pricing. There is no
confirmatory affidavit from the customer
to confirm the conversation
that was held between the customer and the first respondent and such
conversations amounts to inadmissible
hearsay and no basis has been
made out for its admission.
[34] In
relation to the second customer, the first respondent denied having
visited such customer, and provided
a plausible explanation that
another employee of the second respondent was responsible for
servicing that client.
[35]
Accordingly
I find that the applicant has failed to establish a protectable
interest relating to trade connections that corresponds
with the
Court’s dictum in
Rawlins
and another v Caravantruck (“Pty”) Ltd
[6]
,
where the Court said:
“
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 leave the employer’s
service he could easily induce
the customers to follow him to a new
business..”
[36] This
should be end of the enquiry, however , even on the score of
quantitative and qualitative weigh
off to be conducted, I am not
satisfied that the restraint of trade should be enforced.
[37]
The
Court in
Plumblink SA
(Pty) Ltd v Legodi and Another
[7]
summarized the factors to be considered, being (1) the scope and
period of the restraint; (2) whether the employee was possessed
of
the skills, expertise, qualifications and experience before joining
the employer; (3) the nature of the industry; and (4)
the
ability of the employee to secure gainful employment elsewhere, it
must also be considered whether the enforcement of the restraint
would go further than necessary in order to protect the interests of
the employer.
[38]
In
relation to the nature of the industry, the applicant has not pleaded
any particular features which would distinguish it from
all other
businesses in the industry, which would be of value to the second
respondent. The first respondent was not involved in
the negotiations
with the clients or the determining of prices.
[39]
In
relation to experience, the first respondent explained that he had
been engaged in this industry for a number of years and obtained
his
skills over the course of years, he denied any specific training from
the applicant.
[40]
Finally,
it weights in my consideration that the applicant seeks to enforce a
restraint for a period of 12 months in circumstances
where the first
respondent was only employed for a period of approximately four
months.
[41]
For
all these reasons, I am not satisfied that the requirement of
quantitative and qualitative weight off favours the applicant,
even
if the applicant had made out a case of a protectable interest.
Conclusion
[42] In
summary, although the applicant has demonstrated a valid restraint of
trade agreement, the applicant
has not demonstrated a protectable
interest worthy of protection.
[43] In
the premise I make the following order:
Order:
[44] The
application is dismissed.
[45] There
is no order as to costs.
Z NGWENYA
Acting Judge of the
Labour Court of South Africa
APPEARANCES:
For the Applicant:HJ
Fischer
Instructed by:Spellas
Lengert Kuebler Braun Inc
For the First
Respondent:In person
[1]
[2017]
5 BLLR 466
(LAC) para 40
[2]
[1993] ZASCA 61
;
1993
(3) SA 742
(A); Also see Medtronic (Africa) (Pty) Ltd v Van Wyk and
Another (2016) 37 ILJ 1165 (LC)
[3]
Labournet
v Jankielson (2017) 38 ILJ 1302 (LAC)
[4]
[2023]
JOL 61568
(LC); [2023] ZALCJHB 305 (24 October 2023)
[5]
1984
(3) SA 623 (A)
[6]
1993
(1) SA 537 (A)
[7]
(2020)
41 ILJ 1742 (LC)