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2024
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[2024] ZAMPMBHC 68
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Bearing International, A Division of Hudaco Trading (Pty) Ltd v Treherne and Another (4113/2023) [2024] ZAMPMBHC 68 (9 September 2024)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(MPUMALANGA DIVISION,
MBOMBELA)
CASE NO: 4113/2023
(1)
REPORTABLE: NO
(2) OF INTEREST TO
OTHER JUDGES: YES
(3) REVISED: YES
SIGNATURE:
DATE:
09/09/2024
In the matter between:
BEARING INTERNATIONAL,
A DIVISION OF HUDACO
TRADING
(PTY)
LTD
APPLICANT
and
DAVID
MARK TREHERNE
FIRST RESPONDENT
14
TWENTY-ONE (PTY) LTD
SECOND RESPONDENT
This judgment was
handed down electronically by circulation to the parties and/or
parties’ representatives by email. The date
and time for
hand-down is deemed to be 09 September 2024 at 10:00.
JUDGMENT
MASHILE J
INTRODUCTION
[1]
Central to this application is whether the First Respondent
(“Trehern”) was ever a
party to the agency agreement
and/or restraint of trade (“restraint”) concluded between
Easy Hire Events and Tents
(Pty) Ltd which is now known as 14
Twenty-One (Pty) Ltd (“14 Twenty-One”), and the Applicant
(“Bearings International”).
Bearings International seeks
to hold Treherne to the restraint of trade agreement, which is an
integral part of the agency agreement.
The substance of Treherne’s
defence is that the parties never intended the restraint of trade to
apply to him in his personal
capacity. The objective of the
restraint, he says, has always been directed at 14 Twenty-One. If the
restraint is applicable to
Treherne, this Court will be obliged to
consider the merits of the application.
FACTUAL
MATRIX
[2]
On 25 May 2019, Bearings International concluded the agency agreement
with 14 Twenty-One. The
agency agreement became effective on 1 June
2019. 14 Twenty-One was still called Easy Hire Events and Tents (Pty)
Ltd. The Agency
Agreement had an initial duration of three years
whereafter it would automatically renew for another three-year period
unless either
party gave six months written notice of its intention
to terminate the agreement. Treherne signed the Agency Agreement on
behalf
of 14 Twenty-One as its duly authorized agent.
[3]
In terms of the Agency Agreement, 14 Twenty-One was required to
attend to the marketing, distribution,
sale and management of the
engineering products of Bearings International within the territorial
areas of Machadadorp (West), Lydenburg
(North West – excluding
Glencore), the Southern border of Hoedsprult (North), Mozambique
(East) and Swaziland (South East)
(“the territory”). The
engineering products include electric motors, gearboxes, v-belts,
pulleys, bushes, chains, bearings,
sprockets, couplings, motor
mounts, and related products (including oil seals, adhesives, and
lubricants).
[4]
The parties agreed that when Bearings International and 14 Twenty-One
entered into the Agency
Agreement, Treherne had years of experience
in the bearing industry. He had also completed a three-year training
program with particular
interest in the engineering products included
in the scope of the Agency Agreement and training modules. Through
this, he gained
detailed technical knowledge of the engineering
products and the bearings industry.
[5]
Additionally, it is common cause that considering the obligations and
opportunities of 14 Twenty-One
under the Agency Agreement, Treherne
was ideally placed to discharge his duties as its sole director. As
an experienced and astute
businessperson, he was toe-to-toe with
Bearings International when he bargained. Bearings International
alleges that Treherne’s
experience and expertise could present
a significant risk to its proprietary rights, goodwill and
confidential information.
[6]
The bearings industry, claims Bearings International, is typified by
various technical and commercial
trade secrets that give businesses a
competitive edge. An agent is likely to have access to these trade
secrets, which, if appropriated
or abused, can result in substantial
losses for a business. An agent with harmful intentions can also
misuse confidential information
to ruin the brand of a company
bearing upon the goodwill developed and built over years. Protecting
the innovations, knowledge
and goodwill developed by Bearings
International was as such, critical for maintaining its competitive
advantage.
[7]
Bearings International further claims that over the decades, it has
invested substantial resources
in innovation, supply chain
management, marketing and client management to develop a robust and
distinctive brand in the bearings
industry and nurture relationships
with clients, suppliers and other stakeholders. It has historically
enjoyed customer loyalty
and an excellent reputation. Given that
agents who act as business representatives play a pivotal role in
developing and maintaining
these relationships, it thought it wise to
protect its goodwill from potential mishandling or misuse by its
agents.
[8]
With the above in mind, the parties sought to secure the proprietary
interests and rights of Bearings
International when the agency
agreement terminated in whatever manner. This is how the idea of a
restraint was conceived. Thus,
they added to the agency agreement an
annexure, which fundamentally restrains the agent in the event of the
agency agreement coming
to an end. The restraint prescribes that:
“
In
order to protect the proprietary interests of the Company and its
successors-in-title and assig,
David
Mark Treherne
:
FULL
NAME OF AUTHORISED AGENT
irrevocably and
unconditionally undertakes in favour of the Company that he shall not
–
a.
During the period of this agency agreement or any extensions thereof
and for a period of
thirty-six months calculated from the termination
of this agreement for whatever reason whatsoever;
b.
anywhere in the Agent's Territory;
c.
whether as a proprietor, principal, member, agent, partner, trustee,
representative,
shareholder, director, manager, executive, employee,
consultant, adviser, financier, administrator and/or In any other
like capacity,
and whether for reward or otherwise be directly or
indirectly associated and/or concerned with, Interested and/or
engaged In and/or
Interest himself In any sole proprietorship, firm,
partnership, business, company, trust, close corporation or other
association
or entity which directly or Indirectly carries
on
a business which Is competing
with
the businesses
conducted
by the Company as at the signature date.”
[9]
The restraint continues to stipulate that Treherne, as the
AUTHORISED
AGENT,
acknowledges and agrees that the
restraints imposed upon him in terms of this agreement are reasonable
as to the subject matter,
area and duration, and are reasonably
necessary to protect the proprietary interests of the Company and its
successors-in-title
and assigns.
[10]
On 18 November 2022, 14 Twenty-One gave written notice of its
intention to terminate the Agency Agreement,
which became effective
on 31 May 2023. In a letter dated 13 March 2023 to Treherne and 14
Twenty-One, Bearings International stated
that it was prepared to
release 14 Twenty-One but that the restraints imposed against
Treherne in terms of the restraint, would
endure for the full term of
thirty-six months. At the same time 14 Twenty-One changed its name
from Easy Hire Events and Tents
(Pty) Ltd. Following its release from
the restraints, 14 Twenty-One has been carrying on business as a
competitor of Bearings International
in the territory. Treherne
resigned as a director of 14 Twenty-One.
[11]
Subsequently, Treherne, however, took up employment and continued to
be associated with and interested in
14 Twenty-One. Treherne is
lobbying business in the territory from companies that he worked with
while in the employ of 14 Twenty-One,
when it was thought to be held
by the restraints. Bearings International claims that the consequence
of Treherne’s engagement
in 14 Twenty-One, while it is in
direct competition with it, has caused its business to nose-dive to
unprecedented levels. It is
against the aforesaid context that
Bearings International, following Treherne’s persistent refusal
to accept that he is in
violation of the restraints, that it launched
this application seeking a final interdict.
ASSERTIONS
[12]
Bearings International contends that an interpretation of the agency
agreement and restraint that seeks to
ascribe the meaning that the
restraint binds 14 Twenty-One only, is absurd and not businesslike.
Accordingly, this Court should
reject it as contrived. It further
asserts that it has made a proper case for the Court to uphold its
case for a final interdict
against Treherne in the event that it
overcomes the hurdle.
[13]
Conversely, Treherne is adamant that he signed both the agency
agreement and restraint in his representative
capacity of 14
Twenty-One. As such, both the agency agreement and restraint do not
affect him especially in circumstances where
14 Twenty-One has been
released. This, he maintains, accords with the rules of
interpretations of agreements, documents and statutes,
which this
Court is obliged to observe.
LEGAL FRAMEWORK
[14]
While this matter concerns a restraint of trade agreement, it is very
clear that the parties are at variance
on whether Treherne signed in
his representative or personal capacity. I consider this issue to be
dispositive of this whole matter.
For that reason, I choose to
traverse it first. The answer to this issue depends on the
interpretation that this Court will ascribe
to the agency agreement
and restraint. Paragraphs 25 and 26 of
Capitec
Bank Holdings Limited and Another v Coral Lagoon Investments 194
(Pty)
Ltd
and
Others
,
[1]
should
set the tone with which this Court will approach the issue whether
Treherne was intended to be a party to the restraint.
I proceed to
cite the paragraphs below:
“
[25]
Our analysis must commence with the provisions of the subscription
agreement that have relevance for deciding whether
Capitec Holdings’
consent was indeed required. The much-cited passages from
Natal
Joint Municipal Pension Fund v Endumeni Municipality (Endumeni)
offer guidance as to how to approach the
interpretation of the words used in a document. It is the language
used, understood in
the context in which it is used, and having
regard to the purpose of the provision that constitutes the unitary
exercise of interpretation.
I would only add that the triad of text,
context and purpose should not be used in a mechanical fashion. It is
the relationship
between the words used, the concepts expressed by
those words and the place of the contested provision within the
scheme of the
agreement (or instrument) as a whole that constitutes
the enterprise by recourse to which a coherent and salient
interpretation
is determined. As
Endumeni
emphasised, citing well-known cases, ‘[t]he
inevitable point of departure is the language of the provision
itself.
[26]
None of this would require repetition but for the fact that the
judgment of the high court failed to make
its point of departure the
relevant provisions of the subscription agreement.
Endumeni
is not a charter for judicial constructs
premised upon what a contract should be taken to mean from a vantage
point that is not
located in the text of what the parties in fact
agreed. Nor does
Endumeni
license judicial interpretation that imports
meanings into a contract so as to make it a better contract, or one
that is ethically
preferable.”
[15]
The relevant clauses in both the agency agreement and restraint are
2.1, 12.8 and 12.9. Additionally, the
parties’ signatures are
an important consideration when seeking to assign proper meaning to
the agreement. Against that backdrop,
Clause 2.1 defines the word
“agent” as Easy Hire Events and Tents (Pty) Ltd. As
stated earlier, this company changed
its name to the present 14
Twenty-One. Clause 12.8 read:
“
The
agent, or any member/shareholder of the agent, and in particular Easy
Hire Events and Tents (Pty) Ltd (FULL NAME OF AUTHORISED
AGENT), are
prohibited from trading, directly or indirectly, in any products of
similar type or function to those which could be
supplied by the
Company, except where such trading is done in terms of this
agreement. In the event that the agent, or any member/shareholder
of
the agent breaches this undertaking, the Company has the right but is
not obliged to immediately terminate this agreement and
recover
damages from the agent or Easy Hire Events and Tents (Pty) Ltd (FULL
NAME OF AUTHORISED AGENT).”
[16]
Clause 12.9 provides as follows:
“
The
Agent and Easy Hire Events and Tents (Pty) Ltd (FULL NAME OF
AUTHORISED AGENT) undertake to enter into a restraint of trade
agreement of the Company, for the duration of this agreement and any
extension thereof and for a period of three (3) years after
termination of this agreement, howsoever such termination occurs
(Annexure E).”
ANALYSIS
[17]
The definition of “agent” in the agreement is significant
to arrive at a proper understanding
of what the parties sought to
achieve by concluding this agency agreement and the restraint. There
is no other meaning that this
Court can attach to the definition
other than what the parties themselves intended it to mean, and that
is that it means Easy Hire
Events and Tents (Pty) Ltd, the current 14
Twenty-One. The attempt of Bearing International to have this Court
believe that “agent”
is similar to 14 Twenty-One must be
rejected. Such a change of the meaning of the word cannot be
accomplished without showing that
both parties laboured under the
impression that it meant 14 Twenty-One. Accordingly, there exists no
issue of rectification and
the parties did not choose that route
anyway. If the first step in the interpretation of a provision in an
agreement is the language
used, then surely, the fact that “agent”
is defined as aforesaid does not permit any meaning than that which
the parties
gave to it.
[18]
To interfere with the ordinary meaning of the word “agent”,
would be to do the opposite of what
the Supreme Court of Appeal in
the
Capitec Holdings
case
supra
cautions us about – “
Endumeni
is not a charter for judicial constructs premised
upon what a contract should be taken to mean from a vantage point
that is not
located in the text of what the parties in fact agreed.
Nor does
Endumeni
license
judicial interpretation that imports meanings into a contract so as
to make it a better contract, or one that is ethically
preferable.”
[19]
Bearing International has pointed out that it would be absurd and
unbusinesslike to interpret the first sentence
of Clause 12.8 of the
agency agreement, which reads that “The agent, or any
member/shareholder of the agent, and in particular
Easy Hire Events
and Tents (Pty) Ltd (FULL NAME OF AUTHORISED AGENT), are prohibited
…”. What is conspicuous about
the clause is the
repetition of the name of the agent. In other words, there was no
need to repeat the name of the agent because
the parties have already
defined what an agent is. Insofar as this Court is concerned, this is
the upshot of a party who completed
the proforma agreement without
paying attention to detail and meaning. A proper manner of dealing
with such a mistake would have
been to allege and show common error.
In the absence of rectification, this Court cannot assign any other
meaning to the word “agent”,
other than to state that it
is tautologous.
[20]
The intention of Bearing International might have been to release 14
Twenty-One and to hold Treherne to the
restraint but the effect of
what they did had other ramifications. There is nothing
unbusinesslike or absurd about the parties
wanting to restrain 14
Twenty-One alone. Bearing International simply made the mistake of
releasing 14 Twenty-One in circumstances
where it would have been
prudent to first verify that Treherne would be bound by the
restraint. Treherne, not being a member or
shareholder, as the agency
agreement and restraint require, is not bound by the restraint, the
mistake in the completion of the
proforma agreement of agency and
restraint notwithstanding. It is so that the grammar in both Clauses
12.8 and 12.9 suggests that
the intention was to bind Treherne and 14
Twenty-One. However, that interpretation cannot be countenanced to
trump the definition
of “agent” described in the agency
agreement.
[21]
Clause 12.9 is not different from 12.8 insofar as the tautology of
the word, agent, is concerned. Perhaps
it is worth accentuating that
on examination of the agency agreement and restraint, Treherne
consistently signed both documents
in his representative capacity as
the approved signatory of the agent. If Treherne meant to sign the
documents in his personal
capacity, it is difficult to fathom the
necessity to add that his signature was authorised because he would
have known that he
is permitted to do so on his own behalf.
Treherne’s signature in his representative capacity plus the
definition of the word,
agent, constitute cogent indication that from
the onset he was not intended to be party to either agreement.
Bearings International
only realised afterwards that Treherne should
have been part of the restraint and began desperately seeking to hold
him liable.
[22]
The conclusion that Treherne was never intended to be a party to both
agreements other than in his representative
capacity renders that it
unproductive to consider the restraint at all. It follows as a matter
of course that he cannot be bound
by the restraint if the agreements
never contemplated him as a party. It is against a consideration of
the aforegoing that I make
the following order:
The application is
dismissed with costs, including those of two Counsel where so
applicable.
B A MASHILE
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA
MPUMALANGA DIVISION,
MBOMBELA
APPEARANCES
Counsel
for the Applicant:
Adv
D Sive
Instructed
by:
Coetzee
Attorneys
C/O
Stegmans Inc
Counsel
for the Respondent:
Adv
CC Bester
Instructed
by:
G.B.
Liebmann, Behrmann & Co
C/O
Christo Smith Attorneys Inc
Date
of Judgment:
09
September 2024
[1]
[2021]
ZASCA 99
;
[2021] 3 All SA 647
(SCA);
2022 (1) SA 100
(SCA).