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[2024] ZALCJHB 142
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B Sure Insurance Advisors (Pty) Ltd v Schnepel and Another (J29/24) [2024] ZALCJHB 142 (22 March 2024)
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Certain
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Policy
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
No: J29/24
In
the matter between:
B
SURE INSURANCE ADVISORS (PTY) LTD
Applicant
and
WARREN
SCHNEPEL First
Respondent
MONT
BLANC FINANCIAL SERVICES (PTY) LTD Second
Respondent
Heard:
29 February 2024
Delivered:
22 March 2024
This
judgment was handed down electronically by circulation to the parties
and legal representatives by email. The date of hand-down
is deemed
to be 22 March 2024.
JUDGMENT
MAKHURA,
J
Introduction
[1] The
applicant seeks a final order interdicting and restraining the first
respondent from breaching the
terms of the restraint of trade
agreement entered into on 2 January 2019. The relief sought by the
applicant is formulated as follows:
‘
2. Interdicting
and restraining the first respondent from disclosing or making
available any of the applicant’s
confidential information to
any other person, including the second respondent.
3. interdicting
and restraining the first respondent from, at any time prior to 1
November 2025 and within
the Republic of South Africa, whether
directly or indirectly, in any capacity whatsoever, carrying on or
being interested or engaged
in, or concerned with, or employed by –
3.1. the
business of the second respondent; or
3.2. Any
company, close corporation, firm, undertaking or concern that
conducts a business that competes
with the business of the applicant,
or is engaged in any activity relating to selling short-term
insurance products.
4. Interdicting
and restraining the first respondent from, at any time prior to 1
November 2025, soliciting
any employees of the applicant.’
[2] The
application is opposed by the first respondent (Schnepel). In his
opposition Schnepel raised two
preliminary points and filed two
applications to strike out certain matters or paragraphs or
allegations and material from the
applicant’s founding and
replying affidavits.
Material
facts
The
applicant’s business
[3] The
applicant is a financial services provider. It is an insurance
brokerage or agent which offers short-term
motor vehicle insurance
products to its customers through its relationship with motor vehicle
dealerships. The applicant alleges
further that it provides this
service across South Africa in compliance with the Financial Advisory
and Intermediary Services Act
[1]
(FAIS Act).
[4] As
a brokerage of an insurer, the applicant contends that it offers
competitive insurance premiums to
its customers ‘
from a
variety of leading South African insurers
’. The insurer is
an underwriter and designs insurance products which it then sells
primarily through insurance brokerage
such as the applicant.
[5] The
applicant contends that its business is reliant predominantly on a
steady stream of leads generated
through various national and local
motor vehicle dealerships. That is, it relies on referrals of
customers by motor vehicle dealerships,
the individual dealer from
the motor vehicle dealership and/or Financial and Intermediary
Consultants (F&Is) employed by the
motor vehicle dealership.
These motor vehicle dealerships or individual dealers or F&Is do
not provide customers exclusively
to the applicant but are free to
refer them to multiple brokerages.
[6] The
applicant sells its products through its two divisions, the Dealer
Sales division, which is now called
Partner Business division and the
Strategic Partner Business division.
[7] The
Dealer Sales Consultants or Partner Advisors employed within the
Partner Business division are responsible
for building and
maintaining relationships with the motor vehicle dealerships,
individual dealers and/or F&Is by inter
alia
maintaining
regular contact and ensuring that their needs and those of their
customers are met. It is contended further that the
Dealer Sales
Consultants, their Team Leads (Dealer Sales Consultants’
supervisors) and the Manager in Dealer Sales division
have integral
knowledge of and access to various dealerships that the applicant has
relationships and agreements with, contents
of the agreements between
the applicant and these dealerships, key personnel and decision
makers at these dealerships and ‘
biographical information on
these key people and decision makers, and how to approach them to
best maintain the relationship
’.
[8] The
Strategic Partner Business division focuses on selling products to
customers who were referred to
the applicant as part of a service
level agreement concluded between the applicant and the dealership,
where the applicant is registered
on the dealership’s database.
These referrals are still at the discretion of the dealerships or
their individual dealers
or F&Is.
[9] The
applicant contends that all sales consultants and team leads in both
divisions are exposed to the
same confidential information. Only the
General Manager of both divisions, the Business Development
Representative, the Chief Executive
Officer and the applicant’s
director are acquainted and involved with key persons and decision
makers at corporate level
of dealerships, with the biological
information on these key persons and decision makers and in the
negotiation of service level
agreements. Thereafter, the sales
consultants and team leads are responsible to build and maintain the
relationship.
Schnepel’s
employment and restraint undertaking
[10] Schnepel
took up employment with the applicant as Dealer Sales consultant with
effect from 2 January
2019. A restraint of trade agreement was
concluded in terms of which Schnepel undertook not to work for or be
interested or engaged
in or concerned with a competitor, 24 months
after termination of employment with the applicant. Schnepel also
undertook to keep
confidential and refrain from divulging or
disclosing whether directly or indirectly to any person any
information relating to
the applicant’s business and its
customers, employees or person with whom Schnepel dealt with whilst
employed by the applicant.
[11] On
1 February 2020, Schnepel was promoted to the position of Dealer
Sales Team Lead. He managed a team
of Dealer Sales consultants in the
form of mentoring, training and motivating them. He supervised their
work and performance and
would intervene as and when necessary to
assist them in dealing with the applicant’s partners.
[12] On
1 April 2022, he was permanently appointed as Dealer Sales Manager,
leading a team of more than 30
individuals. The applicant contends
that in this role, Schnepel became intimately familiar with the
applicant’s processes
and how to review those processes and
implement changes where necessary. The applicant contends further
that Schnepel was required
to attend weekly managers meetings with
the CEO, General Manager and departmental managers, monthly team led
conferences, monthly
and quarterly manager conference and monthly
development committee meetings. As a result of his attendance to
these meetings, so
the applicant contends, Schnepel ‘
became
intimately familiar with trends and patterns developing in the
short-term insurance industry; and on the strategies implemented
by
the applicant to adapt to market behaviour’
. In addition,
Schnepel participated in the employment and placement of sales
consultant, incentivising consultants, auditing, monitoring
and
reporting and maintaining partner business.
[13] Schnepel’s
title later changed to that of Executive Manager: Dealer Business but
he continued
with the same functions as a Dealer Sales Manager.
[14] On
1 May 2023, Schnepel was promoted to the position of General Manager:
Partner Business. In this position,
he was the head of the two
divisions, reporting to the CEO. In addition to the meetings he
attended as a Dealer Sales Manager,
Schnepel was required to attend
the General Manager Catch Up meetings where the applicant’s
departments are reviewed as part
of the business to ensure
‘
concurrent and cohesion among the departments in the
projects (current and future) undertaken by the applicant, together
with other
General Managers, the CEO and the Chief Operations
Officer
’. The applicant continues:
‘
It
follows that, as General Manager, the [first respondent] acquired
knowledge of the long-term goals and general direction of the
applicant’s business, and the factors that have an effect
thereon (both internally, such as employee relations and budgetary
restrictions; and externally, such as market conditions and economic
drivers).
The
first respondent was involved in developing new and improving
existing committees and training programmes within the applicant’s
structures (such as the Bootcamp Programme and the Brilliance
Committee). The ultimate purposes of these programmes are to develop
the applicant’s employees’ knowledge and skills in
specific areas such [as] public speaking, conflict resolution and
the
attainment of an adequate work-life balance; to increase job
satisfaction; and to create a company culture that would motivate
employees to do well in their jobs. All this translates into
increased productivity, lead generation and revenue for the
applicant.
Needless
to say, such information would be of immense value to a rival
brokerage seeking to navigate and grow its business in the
competitive short-term insurance market.
…
As
a result, the General Manager is at the coalface of relationships
with strategic partners, responsible for obtaining appointments
from
new strategic partners and for maintaining good relationships with
existing strategic partners. This included having to report
to
strategic partners on their referrals to the applicant and the
resultant sales made, and in addressing any concerns that a strategic
partner may have.’
[15] The
applicant summed up its case as follows:
‘
The
first respondent has been exposed to the applicant’s inner
working and have learnt his way around the business for almost
5
years. What he has learned in the different roles in which he has
acted, particularly as General Manager, has equipped him with
the
knowledge and skill necessary to start a successful short-term
insurance brokerage in competition with the applicant.
The
relationship that he established and maintained, the knowledge that
he built up, and the confidential information that he gained
would be
a treasure for any competitor of the applicant, which would in turn
have a severe impact on the applicant’s business,
relationships, and revenue.
In
addition to this, because the first respondent had been assigned
employees who reported to him, he has the perfect opportunity
to
poach employees of the applicant, further making inroads into the
applicant’s ability to run smoothly and generate revenue.’
The
second respondent’s business
[16] The
applicant describes the second respondent as a company with limited
liability duly registered and
incorporated in terms of the South
African laws. The second respondent is further described as an
insurance brokerage and ‘a
trade rival of he applicant’.
[17] In
his answering affidavit, Schnepel stated that the second respondent
is not the applicant’s
competitor and that he is not with or
does not deal with motor vehicle dealerships.
[18] In
reply, the applicant then attached Google Search Engine screenshots
which sought to demonstrate that
the second respondent sells motor
vehicle insurance. In addition, the applicant attaches to its
replying affidavit a screenshot
from the second respondent’s
website and contends that it shows the second respondent explicitly
boasting about its competitiveness
as a vehicle insurance brokerage.
Termination
of employment and breach of restraint undertaking
[19] Schnepel’s
employment terminated by mutual separation on 31 October 2023. He
took up employment
with the second respondent on 1 December 2023. In
his answering affidavit, Schnepel articulates how he joined the
second respondent:
‘
I
am skilled at selling short term insurance products so I was
approached by the second respondent for the employment and I took
up
employment with the second respondent on 1 December 2023.
At
the time I informed … Kristy Bezuidenhout of the second
respondent of the restraint of trade agreement and fiduciary
agreement concluded with the applicant and was informed that
the
second respondent does not compete in that market place
and that
I have a right to be employed in the insurance industry and to earn
my keep that way as long as I do not disclose any
information of the
applicant which is worthy of protection, and as long as I do not lure
away or try to lure away any of the applicant’s
trade
connections and customers.’ (Own emphasis)
[20] The
applicant first became aware of Schnepel’s employment on 4
December 2023. This information
was confirmed and verified on 6
December 2023. On 6 December 2023, the applicant’s attorneys
addressed a letter to Schnepel.
The letter alleged that Schnepel took
up employment at its direct competitor and in breach of the restraint
of trade agreement.
The applicant demanded that Schnepel should cease
his employment with the second respondent with immediate effect and
to give an
undertaking to comply with the restraint of trade
agreement.
[21] On
8 December 2023, the second respondent addressed an email to the
applicant. The second respondent
stated that they were happy for
Schnepel to sign an undertaking not to ‘canvas’ the
applicant’s clients or use
information gained during his
employment with the applicant or to entice the applicant’s
employees to join the second respondent
or to use the applicant’s
lead providers. The email also made reference to both companies
employing each other’s employees
without the employees
breaching their restraint of trade agreements. The email attached
messages showing that Schnepel had referred
the lead providers who
contacted him after he left the applicant’s employment and also
after joining the second respondent
back to the applicant. This was
considered to be proof of Schnepel’s commitment to comply with
the restraint undertaking.
[22] The
applicant argued that the attachment shows that Schnepel has created
and continues to retain records
of his dealings with the applicant’s
lead providers or customers and that the information in Schnepel’s
possession
contain customer names and information, vehicles insured,
insurance quotations, policies and insurance cover information. It
argued
further that this information is confidential, of economic
value to the applicant and useful to a competitor. Further, that the
information shows that Schnepel has been sharing the applicant’s
confidential information with the second respondent and
that he
continued to maintain and nurture relationships with trade
connections. Schnepel is also accused of lying about his future
employment.
[23] In
his answering affidavit, Schnepel bemoans that the applicant’s
affidavit is littered with legal
arguments and unsubstantiated and
irrelevant averments. He concedes that the applicant sells short-term
motor vehicle insurance
products over the telephone through referrals
from the motor vehicle dealership.
[24] Schnepel
specifically pleads that the applicant has agreements with motor
vehicle dealerships in terms
of which the dealership provide
information of a motor vehicle sale transaction and the information
of the buyer to the applicant
in exchange for a fee payable on
condition that an insurance product is sold to the motor vehicle
buyer. He contends that in addition
to the agreements, there are
ad
hoc
deals with other dealerships where there are no standing
agreements.
[25] Schnepel
specifically pleaded that:
‘
At
the second respondent I am not involved with motor vehicle
dealerships at all as the second respondent does not partake or
compete
in that market place. I am a personal lines sales consultant
and I do not have contact with dealerships at the second respondent.’
[26] In
reply, the applicant states that:
‘
I
deny the content of the paragraph under reply against the background
of what I have stated in the founding affidavit and elsewhere
in this
affidavit.’
[27] On
18 December 2023, the applicant afforded the respondents a further
opportunity to comply with its
demand. A further correspondence from
the applicant was sent on 8 January 2024. The second respondent
responded on 11 January 2024,
denying that Schnepel breached his
restraint undertaking. The second respondent also denied he had
shared any confidential information
with the second respondent.
Analysis:
Preliminary issues
[28] Schnepel
raised two points in
limine
– first he challenged the
authority of the deponent to institute the proceedings and second,
urgency. He also brought two
applications to strike out. I deal first
with urgency.
Urgency
[29] After
consideration of the papers and the grounds for urgency, I expressed
my view upfront with the
parties that I was inclined to entertain the
application. The applicant has relied partly on the festive season
holidays and partly
on the opportunity afforded to the respondents,
in particular Schnepel, to comply with the restraint of trade
agreement. The restraint
agreement is due to expire at the end of
October 2025 and Schnepel is alleged to have been in breach from
December 2023. Considering
the matter and issues, I was satisfied
that the matter should be entertained on an urgent basis.
Authority
to institute proceedings
[30] Schnepel
raised this issue in two parts – the authority of the applicant
to institute the proceedings
and the legal practitioner’s
authority to represent the applicant. I deal with both points below.
[31] With
regard to the first part, the contention is that the applicant failed
to furnish any material to
show that the deponent to the affidavit is
authorised to institute the proceedings in terms of section 66(1) of
the Companies Act
[2]
. This
section provides that:
‘
The
business and affairs of a company must be managed by or under the
direction if its board, which has the authority to exercise
all of
the powers and perform any of the functions of the company, except to
the extent that this Act or the company’s Memorandum
of
Incorporation provides otherwise.’
[32] Schnepel
contends that no averment is made in the founding affidavit that the
applicant’s board
of directors authorised the institution of
these proceedings or that the institution is authorised by any
provision of the Companies
Act or its Memorandum of Incorporation. On
this basis, so he argues, the application falls to be dismissed with
costs.
[33] Regarding
the second part, Schnepel contends that the applicant has failed to
allege and prove in its
founding affidavit that it is duly
represented by a legal practitioner in these proceedings.
[34] For
his contentions, Schnepel relied on the judgment of
Cullinan
Holdings Ltd v Lezmin 2768 CC
[3]
,
where the Court held as follows:
‘
8.
Henochsberg on the
Companies Act 71 of 2008
, vol 1 [issue 5] 253-257
deals with the topic of directors and legal proceedings involving
companies. The learned author says:
The
directors’ powers under
s 66
enable them to cause the company
to participate in legal proceedings. For this purpose they must
authorise the institution of the
proceedings and the prosecution
thereof … They must also authorise one of their number or
someone else (eg a manager or
the secretary) to represent the company
in such proceedings … There must be evidence before the Court
that the person purporting
to represent the company has been
authorised accordingly with regard to the particular proceedings …
While in motion proceedings the best evidence would be an
affidavit by an officer of the company annexing a copy of the
relevant
resolution of the board, such evidence is not necessary in
every case
. Each case must be considered on its own merits and
the Court must decide whether enough has been placed before it to
warrant the conclusion that it is [the company] which is litigating
and not some unauthorised person on its behalf
(
Mall (Cape)
(Pty) Ltd v Merino Kooperasie Bpk
1957 (2) SA 347
(C) at 351 –
352).
9.
In
Ganes case supra at 624F-J the Supreme Court of Appeal held that it
is irrelevant whether the deponent to an affidavit filed
in support
of an application on behalf of a company is authorised to depose to
the affidavit. What is relevant is that it is ‘the
institution
of the proceedings and the prosecution thereof that must be
authorised.’
[4]
(Own
emphasis)
[35] In
response, the applicant contends that Schnepel’s point has been
improperly raised. The applicant
contends that Rule 7 of the Uniform
Rules of Court is applicable in these proceedings and that Schnepel
failed to invoke and follow
the process therein. Rule 7(1) provides:
‘
7
Power of Attorney
Subject
to the provisions of subrules (2) and (3) a power of attorney to act
need not be filed, but the authority of anyone acting
on behalf of a
party may, within 10 days after it has come to the notice of a party
that such person is so acting, or with the
leave of the court on good
cause shown at any time before judgment, be disputed, where after
such person may no longer act unless
he satisfied the court that he
is authorised so to act, and to enable him to do so the court may
postpone the hearing of the action
or application.’
[36] Mr
Nel, for the applicant, relied on the judgment of
Ganes
and another v Telecom Namibia Ltd
[5]
.
There, the Supreme Court of Appeal held that:
‘
[19] There
is no merit in the contention that Oosthuizen AJ erred in finding
that the proceedings were duly
authorised. In the founding affidavit
filed on behalf of the respondent Hanke said that he was duly
authorised to depose to the
affidavit. In his answering affidavit the
first appellant stated that he had no knowledge as to whether Hanke
was duly authorised
to depose to the founding affidavit on behalf of
the respondent, that he did not admit that Hanke was so authorised
and that he
put the respondent to the proof thereof. In my view it is
irrelevant whether Hanke had been authorised to depose to the
founding
affidavit. The deponent to an affidavit in motion
proceedings need not be authorised by the party concerned to depose
to the affidavit.
It is the institution of the proceedings and the
prosecution thereof which must be authorised. In the present case the
proceedings
were instituted and prosecuted by a firm of attorneys
purporting to act on behalf of the respondent. In an affidavit filed
together
with the notice of motion a Mr Kurz stated that he was a
director of the firm of attorneys acting on behalf of the respondent
and
that such firm of attorneys was duly appointed to represent the
respondent. That statement has not been challenged by the appellants.
It must, therefore, be accepted that the institution of the
proceedings were duly authorised. In any event, rule 7 provides a
procedure to be followed by a respondent who wishes to challenge the
authority of an attorney who instituted motion proceedings
on behalf
of an applicant. The appellants did not avail themselves of the
procedure so provided.
(See
Eskom
v Soweto City Council
1992
(2) SA 703
(W)
at
705C-J.)’
[37] Mr
Myburgh, acting for Schnepel, relied on the decision of
Lancaster
101 (RF) (Pty) Ltd v Steinhoff International Holding N.V and
others
[6]
(Lancaster) to advance the point that the applicant was required to
provide proof of authorisation of the institution of the proceedings,
in the form of a resolution.
[38] The
question is whether the applicant has placed sufficient evidence
and/or material to warrant a conclusion
that it is indeed the
applicant who is before Court and not some unauthorised person
purporting to act on its behalf. The deponent
to the founding
affidavit, Stephen Williams (Williams) is the sole director of the
applicant. He has attached a copy of the Companies
and Intellectual
Property Commission reports, which supports this allegation. He
averred that he is duly authorised to depose to
the affidavit. Having
considered these averments, I am satisfied that Williams has placed
sufficient material before this court
to prove that the institution
of the proceedings was authorised by the applicant. Schnepel’s
denial that Williams is the
sole director is an overly technical
point which does not deserve any further attention by this Court.
[39] The
second point is whether the applicant’s legal representatives,
Jansen & Jansen Incorporated,
are authorised to represent the
applicant. This point should have been raised in terms of Rule 7 of
the Uniform Rules of Court.
It was not. On this basis alone, it falls
to be dismissed. Even if I am wrong, Schnepel has not put facts to
suggest that Jansen
& Jansen Inc are not authorised to represent
the applicant in these proceedings. Jansen & Jansen Inc have been
on record
from the inception of this matter when the applicant issued
a letter of demand. The notice of motion states that the applicant
appointed Jansen & Jansen Inc. in these proceedings. Williams has
also averred that the legal contentions made in his affidavit
are
based on the advice from the applicant’s legal representatives.
Therefore, the point stands to be dismissed.
[40] The
point in
limine
raised by Schnepel is a complete and
unnecessary nuisance to the application. It is also a waste of the
court’s limited resources.
Overly-technical and unnecessary
points in
limine
must be punishable with a costs order.
Accordingly, the first respondent’s point in
limine
stands to be dismissed with costs, including the costs of counsel.
Applications
to strike out
[41] Schnepel
brought two applications to strike out. One against certain averments
or matters in the founding
affidavit and another against paragraph
39, its sub-paragraphs and annexures. These applications are opposed
by the applicant.
[42] In
his first application, Schnepel seeks to strike out paragraphs 15 to
38, 85, 86, 88, 99, 100, 114,
117 to 120, annexures M1 to the notice
of motion and FA11 to the founding affidavit, the word ‘hushed’
at paragraph
100 and the heading ‘
the second respondent and
its history of poaching the staff of the applicant
’.
Lastly, Schnepel seeks to strike out paragraph 31 of the replying
affidavit together with annexure SA1.
[43] Paragraphs
15 to 38 deal with the applicant’s business and activities.
Paragraphs 85, 86 and 99
deal with Schnepel’s post termination
of employment plan, paragraphs 88, 114, 117, 118, 119, 120, the word
‘
hushed
’ in paragraph 100 and the heading ‘
the
second respondent and its history of poaching the staff or the
applicant
’ deal with second respondent’s history of
‘poaching’ the applicant’s employees) and annexure
FA11
is the mutual separation agreement. Paragraph 39 of the replying
affidavit seeks to reply to Schnepel allegation that the applicant
failed to prove that the second respondent is a competitor. Annexure
SA1 is attached to seek to demonstrate that the second respondent
is
a competitor.
[44] Regarding
the applicant’s business and activities, Schnepel’s
complaint is that the applicant
did not make out a case that it has a
protectable interest. He contends that based on the averments in
these paragraphs, ‘
a court will never grant any relief to
protect the trade connections
’. He contends further that
the allegations are vague and ambiguous and that if allowed, he
stands to suffer prejudice in
his opposition of the application
because he would ‘
not know if the POPI Act applies to the
applicant’s activity and method or not
’.
[45] Schnepel
also complains about paragraphs 85, 86 and 99. These paragraphs deal
with the facts around
the time of the parties reaching a mutual
separation agreement on 31 October 2023. The applicant alleged that
Schnepel informed
its attorney about his future employment plans and
that he wanted a change. He was going to work in a different industry
where
he would be selling tyres. Further, the applicant pleads the
facts relating to how it became aware that Schnepel was employed by
the second respondent. Based on what Schnepel informed the
applicant’s attorney and the fact that Schnepel went to work
for the second respondent, the applicant argued that Schnepel was
untruthful about his future employment plans and that it cannot
therefore rely on him to act honourably to not disclose the
applicant’s ‘confidential information’.
[46] The
next category is the ‘poaching’ history. Schnepel seeks
the striking out of these paragraphs,
words and phrases because inter
alia
the applicant omitted material to support the averments
of poaching, that they are inadmissible, unsubstantiated and
irrelevant
and if allowed to stand, he would suffer prejudice because
he would not know what material he had to answer to, that the court
will understand the content of this material to mean that he
participated in poaching and diminish his chances of success in the
main application.
[47] Regarding
the striking out of annexure FA11, which is the mutual separation
agreement, Schnepel contends
that this should be struck out to the
extent that it shows that disciplinary action was going to be
instituted against him. The
applicant relied on this agreement to
show that on his last day of work on 31 October 2023, Schnepel
basically recommitted to the
restraint of trade undertaking that was
signed in January 2019.
[48] Schnepel
contends that annexure SA1 and paragraph 39 of the replying affidavit
constitute new material
and this is against the trite legal
principles. He therefore seeks that this be struck out.
[49] Applications
for strike out are regulated by Rule 6(15) of the Uniform Rules of
Court. This rule provides
that:
‘
The
Court may on application order to be struck out from any affidavit
any matter which is scandalous, vexatious or irrelevant,
with an
appropriate order as to costs, including costs as between attorney
and client. The Court shall not grant the application
unless it is
satisfied that the applicant will be prejudiced in his case if it be
not granted.’
[50] This
is a two-stage enquiry.
[7]
First, an applicant to strike out must show that the matters sought
to be struck out are scandalous, vexatious or irrelevant. If
the
applicant fails to show that the matters are scandalous, vexatious or
irrelevant, that is the end of the enquiry and the application
fails.
If, however, the applicant is able to show that the matters sought to
be struck out are scandalous, vexatious or irrelevant,
the court must
be satisfied that the applicant would suffer prejudice if the matters
are not struck out.
[51] I
have great difficulties comprehending the motive for Schnepel’s
applications. He seeks to strike
out matters that relate to the
business activities of the applicant, matters where he is able to
plead and argue that the applicant
failed to make out a case and
matters that he is not contending that are irrelevant. He brought an
application to strike out matters
that he alleges are pleaded for the
first time in the replying affidavit when he knows very well what the
legal principles applicable
are and the onus of proof.
[52] That
the facts are pleaded vaguely or that the application is half-baked
is not the test for strike
out applications. If the applicant failed
to make out a case in its founding papers, the respondent should
plead accordingly and
argue the point. The failure to make out a case
is not a ground to apply to strike out the matters. Inexplicably,
Schnepel brought
a strike out application against annexure SA1 and
paragraph 39 of the replying affidavit. He makes no allegation that
the matters
raised in the annexure and affidavit are irrelevant or
scandalous or vexatious. He simply complains about the fact that he
has
no opportunity to respond to the allegations, which according to
him are new. However, importantly, Schnepel, of course represented
by
a legal practitioner, fully appreciate the onus of proof, the legal
principle relating to introduction of new evidence and how
new
matters or facts should be introduced. Regardless, he brought the
application to strike out.
[53] The
matters contained in the affidavits and the annexures are relevant to
the application and to the
relief sought by applicant. If they are
relevant, the respondent cannot claim to be prejudiced by pleading
thereto. Indeed, no
prejudice can exist. Having considered the two
applications, I am not persuaded that Schnepel made out a case.
[54] The
applications are ill-advised and misdirected. They are an unnecessary
nuisance, meritless and intended
to avoid dealing with the
substantive issues raised in the founding affidavit. Schnepel was in
fact able to plead to and respond
to the case set out in the
applicant’s founding affidavit. He was not prejudiced in any
form.
[55] Schnepel
cannot escape punishment for this conduct. This is not how
litigations, particularly in this
court, are conducted. The applicant
incurred costs in opposition of these meritless and unnecessary
applications. A costs order
in these applications is in my view
appropriate. In the premises, the applications to strike out fall to
be dismissed with costs,
including the costs of counsel.
Analysis:
Main Application
[56] The
legal principle on enforcement of restraint of trade agreements is
trite. A party who seeks to enforce
a restraint of trade agreement
need only establish the existence of the agreement and prove that its
terms have been breached.
It is upon proof of the restraint agreement
and the breach thereof that the evidentiary burden shifts to the
person resisting the
enforcement of the restraint agreement to prove
that the restraint agreement is unenforceable because it is
unreasonable.
[8]
[57] The
judgment of
Basson
v Chilwan
[9]
sets out the test to determine the reasonableness of a restraint
agreement. First, is there an interest that is worthy of protection,
second, is such interest being prejudiced by the other party, third,
whether the interest weigh up qualitatively and quantitively
against
the interest of the other party not to be economically inactive or
unproductive and fourth, whether there is another facet
of public
policy that requires that the restraint agreement be maintained or
rejected.
[58] In
casu
, the existence of the restraint of trade agreement is not
in dispute. What is in dispute is the breach. Therefore, before this
Court can consider the reasonableness test set out above in
Basson
,
the first question is whether there has been a breach. To establish
breach, the applicant has to show, inter
alia
, that Schnepel
is engaged by a competitor. Schnepel contends that the applicant
failed to establish that the second respondent
is its competitor. If
the second respondent is not the applicant’s competitor, then
that should be the end of the enquiry.
If, however I find that the
second respondent competes with the applicant, the next issue, is to
consider whether there is any
trade secret worthy of protection.
[59] The
applicant describes its business and activities in some detail. It is
established that it sells
its products through the agreements with
motor vehicle dealerships in terms of which information of a motor
vehicle sale transaction
and the buyer is provided to the applicant
by the dealership in exchange for a fee paid on condition that the
product is sold to
the buyer. Once the product is sold, the applicant
would then pay a fee to the dealership in terms of the agreement. In
addition,
there are
ad hoc
referrals of motor vehicle sale
transactions and buyer from other dealerships to the applicant.
[60] Who
is the second respondent? This Court is informed that the second
respondent is:
‘
a
private company with limited liability duly registered and
incorporated in terms of the Laws of the Republic of South Africa
with registration number 2002/001890/07 and with principal place of
business at 1[…] B[…] Road, B[…], Gauteng.’
[61] The
applicant contends that the second respondent is an insurance
brokerage and its trade rival. It
states that Schnepel became engaged
by a competitor. Mr Nel, for the applicant, submitted that the second
respondent sells short
term motor vehicle insurance and is therefore
a competitor.
[62] The
applicant argued that second respondent’s email in December
2023 to the effect that Schnepel
may sign another undertaking that he
would not entice or engage or solicit the applicant’s clients
or use information obtained
whilst employed by the applicant to
entice the applicant’s employees to take up employment with the
second respondent, constitutes
an admission that the second
respondent is a competitor.
[63] Mr
Myburgh referred to the subsequent email from the second respondent
which disputed that Schnepel
was in breach of the restraint
agreement. He submitted that the applicant has not made out a case to
establish that the second
respondent is a competitor.
[64] Schnepel
pleaded that in his current position as personal lines sales
consultant with the second respondent,
he is not involved with motor
vehicle dealerships at all and had no contact with the motor vehicle
dealerships. He also contended
that the second respondent does not
partake or compete in that market place.
[65] In
its replying affidavit, the applicant attached the screenshots of the
second respondent’s websites
to attempt to show that it is a
competitor. The applicant makes an astounding allegation that
Schnepel failed to prove that the
second respondent is not a
competitor. In my view, the onus is on the applicant that Schnepel
breached the restraint agreement.
That onus extends to proving that
the new employer is a competitor. Therefore, the applicant
misconceived the onus, and this is
fatal to its case.
[66] The
details of the second respondent are non-existent. This Court is
therefore not in the know as to
who the second respondent really is,
except that it is an insurance brokerage and the applicant’s
rival. It was the applicant’s
duty to show that the second
respondent is indeed a competitor, not to make an unsubstantiated
allegation. There are no details
before this Court inter
alia
to demonstrate how and where the second respondent competes with the
applicant, the products they sell, the method used by the
second
respondent to sell these products and the list of motor vehicle
dealerships they are both competing to get referrals, are
not
contained in the affidavits.
[67] Even
if the material provided in reply was contained in the founding
papers, it falls short of establishing
that the second respondent is
a competitor. There is no evidence that the second respondent works
with dealerships, the names of
the dealerships that the second
respondent has relationships and/or agreements with. What is worse,
the applicant has not even
provided the list of dealerships that it
has agreements with and those that it works with on an
ad hoc
basis. This Court does not know where the second respondent operates,
the products it sells, how it sells them, and its clients.
[68] I
am not persuaded that the applicant has established that the second
respondent is a competitor. Consequently,
the applicant failed to
establish that Schnepel has breached the restraint of trade
agreement. In light of this finding, the issue
of reasonableness of
enforcing the restraint of trade agreement does not arise. I do not
need to address any further contentions
in Schnepel’s
affidavit. The application stands to be dismissed.
Costs
[69] I
have already awarded costs against the first respondent for raising
what I consider to be overly-technical,
meritless and unnecessary
point and strike out applications.
[70] Both
parties did not pursue costs of the application. Although this is a
contractual claim where costs
ordinarily follow the result, it is
ultimately for this Court to decide whether or not to award costs.
The applicant did not bring
a frivolous claim before this Court.
Inasmuch as the first respondent is a successful litigant in the main
application and that
he was mulcted with costs on the failed
preliminary and interlocutory issues, it is my view, consistent with
the parties’
wishes, that there should be no costs order
awarded.
[71] In
the premises, the following order is made:
Order
1.
The
matter is heard as one of urgency.
2.
The
first respondent’s point in
limine
is dismissed with costs, including the costs of counsel.
3.
The
first respondent’s applications to strike out are dismissed
with costs, including the costs of counsel.
4.
The
applicant’s application is dismissed with no order as to costs.
M.
Makhura
Judge
of the Labour Court of South Africa
Appearances:
For
the Applicant
:
Adv. E.J.J. Nel
Instructed
by
: Jansen & Jansen Inc.
For
the First Respondent :
Mr. A.S. Myburgh of Engelbrecht Attorneys
[1]
Act 37 of 2002.
[2]
Act 71 of 2008.
[3]
[2016] ZAGPPHC 758 (26 August 2016).
[4]
Ibid paras 8 – 9.
[5]
2004 (3) SA 615
(SCA) at para 9.
[6]
[2021] 4 All 810 (WCC).
[7]
See: Beinash v Wixley
[1997] ZASCA 32
;
1997 (3) SA 721
(SCA) at p733.
[8]
Magna Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A); Basson v Chilwan
[1993] ZASCA 61
;
1993 (3) SA 742
(A); Reddy v Siemens
Telecommunications (Pty) Ltd
2007 (2) SA 486
(SCA) at paras 10 and
16; Experian South Africa (Pty) Ltd v Haynes
2013 (1) SA 135
(GSJ),
at para 14; New Just Fun Group (Pty) Ltd v Turner and others (2018)
39 ILJ 2721 (LC) at paras 9 and 10.
[9]
[1993] ZASCA 61
;
1993 (3) SA 742
(A).