SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No.: 17997/24
In the matter between:
COOLAG (PTY) LTD
(Registration Number: 2019/626722/07) Applicant
and
JACOBUS JOHANNES PIENAAR STEENKAMP First Respondent
(Identity Number: 7[…])
SMTI PROJECTS (PTY) LTD Second Respondent
(Registration Number: 2024/267881/07)
Date of hearing: 17 September 2024
JUDGMENT DELIVERED ON 19 SEPTEMBER 2024
GORDON-TURNER, AJ:
Introduction
1. The applicant in this matter applied to the Court for certain interdictory relief
against the respondents predicated upon an agreement of employment between the
applicant and the first respondent, its former employee.
2. On 27 August 2024, the ap plication was struck off the roll for lack of urgency .
It was re-enrolled for hearing on the date allocated by t he registrar. Counsel for the
applicant and for the first respondent agreed during argument that an order should
be granted as soon as possibl e with reason s to follow later. I consider it more
convenient to provide reasons simultaneously with the Order.
Issues for determination
3. During the course of the hearing, both counsel for the applicant and the first
respondent fairly and wisely made concessions which have had the effect of
narrowing the issues. There was no appearance for the second respondent, despite
the attorney for the first respondent also being on record for the second respondent.
4. The issues to be determined were:
4.1. Whether there was a misjoinder of the entity SMTI Services (Pty) Ltd
as the second respondent, and a non-joinder of the first respondent’s trading
entity called SMTI Projects (Pty) Ltd;
4.2. Whether the applicant had discharged the onus upon it of proving that
there is a valid and binding covenant in restraint of trade and that there had
been a breach thereof by the first respondent;
4.3. Whether the agreement of employment between the applicant and the
first respondent (the agreement) can be interpreted as including a covenant
in restraint of trade;
4.4. Whether an ellips is in the contractual provision purport ing to create
the covenant in restraint of trade can be rectified by way of a belated
application brought by the applicant, out of caution, in its replying affidavit;
and
4.5. If it is held that a restraint of trade covenant came into existence
between the applicant and the first respondent , whether it is enforceable, in
respect of which the first respondent bears the onus.1
Points in limine on alleged misjoinder and non-joinder
5. Points in limine had been raised in the first respondent’s answering affidavit
and written submissions concerning the alleged misjoinder of SMTI Services (Pty)
Ltd (which turns out to be a non -existent entity) and the alleged non-joinder of SMTI
Projects (Pty) Ltd.
6. The se cond respondent has been misdescribed in the notice of motion as
SMTI Services (Pty) Ltd whereas its correct name is SMTI Projects (Pty) Ltd. The
applicant had, however, correctly identified it in the Notice of Motion and founding
affidavit by its registr ation number at the Companies and Intellectual Property
Commission (CIPC).
7. It is common cause that no entity by the name of SMTI Services (Pty) Ltd is
registered with CIPC. The first respondent had occasioned confusion by issuing
quotations under that name which came to the attention of the applicant , hence the
error in citation. Correcting the applicant’s citation error would not create the peril of
substituting one legal entity for another, nor would it occasion any prejudice to any
party. It would serve only to emend a misnomer. 2 Counsel for the first respondent
conceded as much during argument.
1 Magna Alloys and Research SA (Pty) Ltd v Ellis 1984 (4) SA 874 (A) at 891B-C, 893C - G and 897H
- 898Din which it was held that agreements in restraint of trade were valid and enforceable unless
they are unreasonable and thus contrary to public policy, which necessarily as a consequence of their
common-law validity has the effect that a party who challenges the enforceability of the agreement
bears the burden of alleging and proving that it is unreasonable.
2 See in this regard Anglo Dutch Meats (Exports) (Pty) Ltd v Blaauwberg Meat Wholesalers CC 2002
JDR 0520 (CC) (full bench) at paragraphs [42], and [45] to [47].
8. Accordingly, I granted an amendment moved from the Bar by the applicant’s
counsel to change the citation of the second respondent by the deletion of the w ord
“Services”, and substitution with the word “ Projects” wherever the former word
occurred, in order to reflect the second respondent’s citation and any reference
thereto as that of SMTI Projects (Pty) Ltd.
9. This amendment disposed of the points of misjoinder and non-joinder.
The ambit of the restraint of trade covenant (if any)
10. Counsel for the applicant abandoned one of the interdicts sought in the notice
of motion , and instead pursued alternative relief framed on a narrower basis . He
motivated this decision as the applicant’s means to meet the first respondent’s
criticism that the purported restraint of trade provision had unlimited geographical
scope. The prayer that was jettisoned, to my mind, went far beyond the enforcement
of the contractual provisions, as if the applicant enjoyed the right to claim relief on
the alternative delictual ground of unlawful competition, which was not the case
made out. I revert to this aspect in considering the question of costs.
11. Nonetheless, by foregoing that particular interdict, the applicant facilitated
limiting of the argument regarding the reasonableness of the alleged restraint of
trade, in the event that the Court holds that the first respondent was so bound in
terms of his contract of employment.
The factual matrix
12. The applicant commenced trading as a close corporation in 2002, and was
incorporated as a private company in 2019. It specialises in hot and cold thermal
insulation application (specifically to mechanical systems), as well as sheet metal
work, and the fabrication and installation of chill water and hot water piping for HVAC
systems. It also undertakes duct manufacture and erection. The deponent to the
founding affidavit attested that the business of the applicant was built up at
considerable expense and effort over many years (which was not disputed) . The
applicant contends that the market in which it operates is highly competitive (which
the first respondent disputes, yet contends to be irrelevant) . The applicant further
contends that its trade connections are a key facet of its business, which is ultimately
dependent on its continued client satisfaction.
13. The first respondent undertook but did not complete his tertiary education in
mechanical engineering at the Cape Peninsula Un iversity of Technology . The
subjects that he studied (including fluid mechanics, strength of materials,
thermodynamics, mechanical design and computer aided drawing) created a
foundation for his subsequent employment by various enterprises (including his own
earlier company called HVAC Solutions) that undertook air conditioning installations,
HVAC, thermal insultation and sheet metal work. His curriculum vitae, attached to his
answering affidavit, showed his experience as a project manager in these various
enterprises dating back to March 2008.
14. On 13 November 2015, the applicant and the first respondent executed a
written contract of employm ent. The copy attached to the founding affidavit refers to
“part A and part B ” and to an appendix with job specification / description , but these
were not attached. However, the parties agreed that nothing turns on th ese
omissions. It is common cause that the first respondent was employed by the
applicant as a project manager . He held a senior management position which
required him to report to the managing director of the applicant.
15. The first respondent’s role when so employed as project manage r entailed
organising labour, procuring materials, adhering to their clients’ timeframes, ensuring
quality control for the applicant’s procured contracts, providing quotations to the
applicant’s clients, and overseeing and coordinating all aspects of vario us
maintenance and construction projects for the applicant. He was responsible for
developing and managing project plans, budgets and schedules, for ensuring
effective resource allocation and adherence to quality standards, for maintaining
client communication, for addressing risk management and compliance issues, and
for managing contracts with subcontractors and suppliers. He had to ensure
compliance with safety regulations. He was tasked with building and sustaining
relationships with clients in his ‘ portfolio’. He was the point of call between the
applicant and its clients, and was involved in every aspect of the applicant’s
business.
16. The description above of the first respondent’s role was provided by the
applicant, and was admitted by the first res pondent. To my mind, it is manifest that
his duties and responsibilities would have exposed the first respondent to the
applicant’s trade connections . His attempts to suggest that the applicant d oes not
enjoy trade connections , and, somewhat contradictorily, to deny that he has made
inroads into or actively solicited those trade connections, are unconvincing.
17. The applicant contends, and it was not disputed, that during his period of
employment as project manager the first respondent would have been privy to
applicant’s confidential information, including detailed project financials such as
budgets, cost estimates and expenditure reports, and confidential contractual terms
with clients, subcontractors and suppliers. He had access to compliance data related
to regulatory adherence and internal operational processes, as well as pricing and
performance evaluations regarding subcontractors and suppliers. The first
respondent’s counsel conceded that the first respondent’s exposure to sensitive
client information including business operations and proprietary data enabled the first
respondent to attain a firm grasp upon the applicant’s trade connections.
18. To my mind, the applicant satisfactorily demonstrated that it has proprietary
interests susceptible of protectio n by a restraint of trade covenant, should such be
found to exist.
19. It transpires that on 10 May 2024, eight days after submitting his letter of
resignation to the applicant, the first respondent had incorporated the second
respondent. He is its sole director. The second respondent, according to its
letterhead, specialises in HVAC piping fabrication, thermal insulation, and sheet
metal contracting. These are similar services to those provided by the applicant. As
such, the second respondent is a direct competitor of the applicant.
The applicant’s discovery of alleged breaches of the agreement
20. On or about 2 May 2024, the first respondent tendered his resignation to the
applicant, which was immediately accepted. Although he gave a month’s notice as
required in terms of his contract of employment, the applicant did not require him to
work out the notice period, and paid him in lieu thereof. This was decided upon, so
the applicant contends, to avoid misconduct by the first respondent being
perpetrated as witnessed on 24 April 2024, while he was still employed by the
applicant.
20.1. At that time, he had commenced the solicitation of at least one existing
client of the applicant, presumably in preparation for his resignation, by
rendering a quotation to the SFI Group (Pty) Ltd ( SFI), but he did so on behalf
of the second respondent rather than the applica nt. The first respondent
endeavoured to justify this conduct on the basis that his employment
relationship with the applicant had deteriorated, that he was approached by SFI,
that he had not yet resigned, that he had agreed with SFI that any work to be
conducted would be done only after his resignation from the applicant’s employ,
that the quoted work was never done, and that although the rendering of the
quotation “ may be considered to have been a breach of clause 17.1 of the
agreement”,3 it is not conti nuous breach as he is no longer employed by the
applicant. To my mind, this self -serving rationalisation is entirely inconsistent
with the good faith required of contracting parties. It is also not an answer to the
purported prohibition against obtaining the custom of an existing client of the
applicant.
20.2. On 24 April 2024 the first respondent also rendered a quotation to a
prospective client of the applicant, Van Loveren Cellars, after requesting and
obtaining requisite measurements for that quotation from the applicant’s
foreman. Once again, in his answering affidavit he sought to rationalise his
conduct on the basis that he was “ expressly requested ” by Van Loveren to
render a quotation. Even if it is accepted that the initiative as that of Van
3 Quoted below.
Loveren, this does not explain why he , the first respondent , provided a
quotation in the name of the second respondent rather than that of his then
employer, the applicant, in breach of clause 17.1 of the agreement.
21. It transpires that on 10 May 2024, eight days after submitting his letter of
resignation, the first respondent had incorporated the second respondent. He is its
sole director. The second respondent, according to its letterhead, specialises in
HVAC piping fabrication, thermal insulation, and sh eet metal contracting. These are
similar services to those provided by the applicant. As such, the second respondent
is a direct competitor of the applicant.
22. After obtaining the assistance of a professional computer technician who
inspected the laptop th at had been issued to the first respondent, the applicant
discovered that the first respondent had misused its confidential information and
intellectual property by, among other things, copying and pasting the contents of the
applicant’s quotes and inserti ng them under the name of the second respondent, in
order, so it seems, to intercept work from the applicant and obtain the work for the
benefit of the second respondent.
23. The inspection performed by the computer technician revealed that the first
respondent had used the applicant’s email server to send emails to his new entity to
be incorporated (the second respondent).
24. The applicant discovered, only after the first respondent’s resignation, that he
had encroached upon the client relations of the applicant to promote the commercial
interests of the second respondent by utilising the applicant’s trade connections, and
he had wilfully diverted the resources of the applicant for his own benefit and for the
benefit of the second respondent. This, so the applica nt contends, amounted to a
breach of the restraint obligations and undertakings quoted below.
The agreement
25. The agreement contains conventional provisions to be expected in a contract
of employment, including date of appointment , job title, remuneration, h ours of work
and leave from work, and termination.
26. The salient portions of the agreement for purposes of this application are
clauses 16 and 17 which provide as follows:
“16. CONFIDENTIALITY
16.1 All information of a confidential nature acquired by the EMPLOYEE
during the course of his employment with the EMPLOYER shall not be
disclosed to any person during his employment with the EMPLOYER or after
termination of such employment.
16.2 For purposes of this agreement ‘confidential information’ shall be
deemed to include but shall not be limited to:
16.2.1 the EMPLOYER’S trade secrets, products, new
developments, business methods and techniques;
16.2.2 the identity of the EMPLOYER’S clients and/or customers.
17. RESTRAINTS
17.1 The EMPLOYEE acknowledges that he is employed for the benefit
of the EMPLOYER and further undertakes during his employment to
preserve the interests of the EMPLOYER at all times and not to involve
himself directly or indirectly in any other position offering the same services.
17.2 The EMPLOYEE will for a period of 1 (one) year from the date of
termination of Employment, either on his own behalf or on behalf of any
person, firm or company competing or endeavouring to compete with the
EMPLOYER, directly or indirectly solicit or endeavour to solicit or obtain the
custom of any person, firm or company presently a client or supporter
(whether financial or otherwise) of the EMPLOYER or which at any time
during the 1 (one) year preceding the date of such termination has been a
client of the EMPLOYER, or use his personal knowledge of or influence over
any such client or person, firm or company known to him as contracting with
or having dealings with the EMPLOYER , to or for his own benefit or that of
any other person, firm or company in competition with the EMPLOYER.”
Events subsequent to the first respondent’s resignation
27. On 16 May 2024, the applicant’s attorneys addressed a letter to the first
respondent referring to the events of 24 April 2024 and the results of the
investigation by the computer technician referred to above, advising that he had
breached his contract of employment, and demanding that he immediately refrain
from acting in a manner that was prejudicial to the proprietary interests of the
applicant. He was required to provide the applicant with a written undertaking to:
27.1. Immediately desist all business operations conducted under the
second respondent’s name, and that of any other entity which is in
competition with the applicant;
27.2. Immediately return the applicant’s confidential information;
27.3. Immediately desist from using any of the applicant’s resources for the
purposes of promoting the interests of the second respondent, or any other
related entity in competition with the applicant;
27.4. Refrain from utilising a ny and all intellectual property of the applicant;
and
27.5. Refrain from making contact with any of the applicant’s clients or
prospective clients.
28. The first respondent replied to that letter by email the same evening. His letter
canvasses the circumstances un der which he resigned and the applicant’s reaction
thereto. He described a discussion on 3 May 2024 with the managing director and
another employee of the applicant as follows:
“... Keith bevestig het dat beide hy en Ilan weet waarheen ek gaan wanneer
ek klaarmaak by Coolag / Spear Contractors, Keith het ook dit baie duidelik
gemaak in sy stelling dat hy geen slegte gevoel ens teenoor my koester nie
and dat hy my nie sal weerhou om enige besigheid te doen soos wat ek die
voorige 9½ jaar by Coolag / Spear Contractors gedoen het nie omdat hy
weet dit is my ‘brood en botter’ en dat ek ‘n familie and gesin het om voor te
sorg.”
29. The first respondent referred to this discussion in support of his assertion that
he had been released from contractual restr aints arising from his contract of
employment. The applicant submits that the first respondent’s very reliance on
alleged discussions exposes the fallacy that he was never under any restraint ,
because in such circumstances there would then be nothing from which he needed
to be released.
30. The quoted passage, and indeed the letter as a whole, does not expressly
refer to the agreement. It does not assist the first respondent’s contentions regarding
the agreement which are summarised above. To my mind it neit her supports nor
undermines the applicant’s position either.
31. At best for the first respondent , the quoted passage (if assumed for the first
respondent’s benefit to be a faithful recordal of what happe ned during the 3 May
2024 meeting) records the applicant’s recognition that the first respondent was and
is entitled to ply his trade in order to support himself, just as he did before his period
of employment by the applicant. However, the applicant did not thereby afford him
licence to do so in conflict with the restraint undertakings in favour of the applicant.
32. On 20 May 2024, the applicant’s attorneys sent a further letter of d emand to
the first respondent denying the contents of the first respondent’s letter of 16 May
2024, and afford ing him an opportunity until 22 May 2024 to furnish certain
undertakings, failing which an urgent application would be launched. The first
respondent did not comply with this demand for undertakings.
33. Prompted by further information from an existing (unnamed) client of the
applicant about an alleged breach of the purported restraint of trade, t he applicant’s
attorneys addressed a further letter to the first respondent on 27 May 2024 advising
that preparation had commenced for an urgent application “to enforce the restraint of
trade and the provisions of [the agreement]” (the underlining is mine ). In a final
attempt to avoid the incurrence of further legal costs, the applicant requested
undertakings to be furnished by 28 May 2024:
33.1. That the first respondent would not, for a period of 1 (one) year from
the date of termination of his employment, directly or indirectly solicit or
endeavour to solicit or obtain the custome r of any person, form or company
presently (or has been (sic) in the preceding 1 year) a client of the applicant ,
or use his knowledge of or influence over such client for the first
respondent’s own benefit or the benefit of STMI Services (Pty) Ltd;
33.2. That he would immediately return the ap plicant’s confidential
information;
33.3. That he would immediately desist from using any of the applicant’s
resources for purposes of promoting the interests of STMI Services (Pty) Ltd,
or any other related entity in competition with the applicant; and
33.4. That he provide the applicant with an undertaking that h e would
refrain from utilising the applicant’s intellectual property.
34. The applicant’s attorney’s letter of 20 May 2024 , and that of 16 May 2024,
were answered by the first respondent’s attorneys on 28 May 202 4. The following
undertakings were provided:
34.1. That the first respondent would immediately cease4 conducting
business under the name of STMI Services (Pty) Ltd (my underlining);
4 The word ‘seize’ used in the letter in place of the word ‘cease’ is patently a typographical error.
34.2. That the first respondent would not use any of the applicant’s
resources to promote his own interests;
34.3. That the first respondent would not utilise the applicant's intellectual
property;
34.4. That the first respondent would not actively solicit the applicant's
customers “that was known (sic) to him at the time of his resignation. ” (my
underlining)
35. The first respondent’s attorn eys recorded that he was not in possession of
any of the applicant’s confidential information.
36. Notably, while the letter canvassed other is sues such as alleged debts owed
by each of the parties to the other, the first respondent does not refute therein that
he was under a restraint of trade as referred to by the applicant’s attorneys.
37. A number of other features stand out from this letter from the attorney for the
first respondent:
37.1. First, he did not reveal that the entity in which the first respondent had
commenced trading is called STMI Projects (Pty) Ltd, and that there is no
such entity as STMI Services (Pty) Ltd. The undertaking to desist from
conducting business under the name of STMI Services was meaningless,
and the respondent knew this to be so.5 He kept his powder dry until delivery
of his answering affidavit.
37.2. Second, his undertaking not to solicit the applicant’s customers was
qualified:
5 A Lexis Windeed search report on CIPC records attached to the founding affidavit records that SMTI
Projects (Pty) Ltd was in business from 10 May 2024. The first respondent attested that ‘ during May
2024’ CIPC advised him that this company name was available and accordingly he dec ided to
incorporate his company as SMTI projects (Pty) Ltd instead of SMTI Services (Pty) Ltd . It follows from
his version that he knew the pertinent facts before his attorney addressed the 28 May 2024 letter.
37.2.1.by the word “actively”:6 this adumbrated the rationalisations
advanced in his answering affidavit for engaging with the applicant’s
clients, to which reference is made above;
37.2.2.by limiting the class of clients he would refrain from soliciting
to those that were known to him at the time of his resignation : this
served to narrow the restrictions of the restraint of trade provisions
as set out i n the correspond ence addressed on behalf of the
applicant.
38. The undertakings provided by the first respondent fall short of those that were
requested. Nonetheless, the undertakings appear to have lulled the applicant into
complacency, as the urgent application then being prepared was not launched until
two months later. This enabled the first respondent to successfully argue that
urgency was self-created, so that the application was struck off at the first hearing.
39. In the interim, on 5 and 19 June 2024, Mr Dominic Schlosz, an employee of
the appl icant, encountered the first respondent on site at one of the applicant’s
clients. Later it became apparent that the first respondent had directly supplied
materials such as sheet metal drip-trays to that client.
40. On 29 July 2024 , the applicant received co rrespondence from an existing
client, Mr Tom Zwar (Zwar) of Thomo Therm, in a chain of emails commencing with
an enquiry from Zwar to the applicant about work Thomo Therm wanted done. Zwar
stated “[The first respondent] phoned me and says that he will do insulation much
better on his own . What is your comment on that.” Evidently an approach had been
made by the first respondent to Zwar, seeking to exclude the applicant from doing
business with him. Zwar is one of the applicant’s ‘anchor clients’ with whom the
applicant has done business for approximately twenty years. The first respondent
denied that he had advised Zwar that he would provide a better service to Thovo
Therm than the applicant, and brushed o ff this evidence as hearsay. However, he
6 Counsel f or the first respondent correctly conceded that if a restraint indeed existed, “passive”
custom would not operate as a defence. If approached by one of the first respondent’s customers in
existence for the year preceding the termination of his employment, the first respondent would have
had to turn away the enquiry by reason of his being bound by the restraint of trade.
did not dispute that he had approached Zwar, nor that Zwar is a longstanding client
of the applicant to whom the first respondent was introduced by virtue of his
employment by the applicant , i.e., one of the applic ant’s trade connections. The first
respondent defiantly asserted that “nothing precludes me in any event from providing
services to the customers of the applicant.”
41. The communication from Zwar moved the applicant to proceed with this
application.
The first respondent’s grounds of opposition
42. The first respondent contended in his answering affidavit, and it was so
submitted in argument, that clause 17.2 of the agreement does not preclude him or
any person or entity he is involved with from being involved in any competing entity
including the second respondent. He asserts that, in fact, clause 17.2 places a
positive obligation upon him instead of a negative obligation, as is required under
restraint of trade clauses. He avers that it does not contain any restraint covenants.
43. The basis for the first respondent’s contention is that the word “ not” does not
appear after the first three words in clause 17.2, namely, “ The EMPLOYEE will”. He
submitted that this could not be ‘read into’ clause 17.2, as this woul d amount to the
Court impermissibly making a new contract7 for the parties.
44. The first respondent further insisted in his answering affidavit that there was
no mistake in the drafting of the agreement, and that the applicant would not be
entitled to rectification of the agreement, if sought.
45. He contends that there is simply no restraint of trade covenant or undertaking
to be enforced, and therefore the application is doomed to failure. He further
contends that, even if clause 17.2 is prohibitory in substan ce and effect, the restraint
undertakings are not limited in the area of application. This, he submits, is
unjustifiable, unreasonable and against public policy, and therefore the undertakings
7 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 594 (A) at paragraph [18].
are unenforceable as far as area is concerned and the applicat ion should be
dismissed with punitive costs.8
46. The first respondent further contends that because the applicant seeks final
relief, the test in Plascon-Evans as summarised in National Director of Public
Prosecutions v J G Zuma 9 applies: where in motion proceedings disputes of fact
arise on the affidavits, a final order can be granted only if the facts averred in the
applicant’s affidavits, which have been admitted by the respondent, together with the
facts alleged by the latter, justify such order. This is qualified by the following:
“It may be different if the respondent’s version consists of bald or
uncreditworthy denials, raises fictitious disputes of fact, is palpably
implausible, far-fetched or so untenable that the court is justified in rejecting
them merely on the papers.”
47. As there is a “clear dispute of fact as to the interpretation of the agreement ”,
so the first respondent contends - that there was no mistake common to the parties
and no oral variation of the agreement – his version must be accepted.
48. In regard to rectification, he asserted that the applicant bears the onus to
prove rectification and/or an oral variation b y way of action proceedings under
circumstances where it should have foreseen a dispute of facts.
Is there a restraint of trade covenant?
49. Counsel for the first respondent , Mr Le Roux , urged me to find that th e
applicant had not discharged the onus of proving the existence of a restraint of trade
covenant, and submitted that I could not interpret the agreem ent so as to make a
contrary finding.
50. These submissions confuse issues of evidence with those of interpretation.
8 This was moderated in argument to a claim for party and party costs.
9 2009 (2) SA 277 (SCA) at paragraph [26].
51. It is common cause that the applicant and the first respondent executed the
agreement. The agreement includes a clause that the applicant relies upon as a
restraint of trade covenant, and which the first respondent contends has a different
import mandating him to divert the applicant’s business from it. That is the evidence
of the parties.
52. It is for the Court to determine the meaning of the agreement that has been
proven to exist. Interpretation is a matter of law and not of fact.10
53. The interpretation of the text of clause 17.2 is not confounded by disputes of
fact, as contended by the firs t respondent. That he disputes that there is a common
mistake – to which I give attention below - affects a claim for rectification; it does not
impede the Court from interpreting the words of the agreement with due regard to
the well -established principl es where the words of the document are the starting
point, as well as the ordinary rules of grammar and syntax, the context of the
provision, its apparent purpose , the circumstance in which it came into being, and
the parties’ subsequent conduct.11
53.1. Clause 17.2 appears in the agreement under the heading
“Restraints”.
53.2. It follows after:
53.2.1.a prohibition against dis closing the applicant’s confidential
information both during the first respondent’s period of employment
by the applicant and after termination thereof; and
53.2.2.an imperative, during his period of employment, to preserve
the interests of the applicant, and a prohibition against involving
himself directly and indirectly in any other position offering the same
services. This is reasonably understood as a prohibition against
10 KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) at
paragraph [39].
11 Natal Joint Municipal Pension Fund v Endumeni Municipality supra at paragraphs [18] to [22].
diverting trade from the applicant.
53.3. The clause comprises a series of phrases describing actions , all
qualified by the words ‘ directly or indirectly’ and separated from each other
by the conjunction ‘or’: the use of that particular conjunction is consistent
with prohibitory rather than mandatory language.
54. These are the actions which the first respondent contends the agreement
required him to do for a period of one year from date of termination of his
employment by the applicant:
54.1. ‘solicit any person, firm or company presently a client or supporter
(whether financial or otherwise) of the [applicant]’;
54.2. ‘endeavour to solicit any person, firm or company presently a client
or supporter (whether financial or otherwise) of the [applicant]’;
54.3. ‘obtain the custom of any person, firm or company presently a client
or supporter (whether financial or otherwise) of the [applicant]’;
54.4. ‘obtain the custom of any person, firm or company which at any time
during the 1 (one) year preceding the date of such termination has been a
client of the [applicant];
54.5. ‘use his personal knowledge of ... any such client or person, firm or
company known to him as contracting with or having dealings with the
[applicant], to or for his own benefit or that of any other person, firm or
company in competition with the [applicant]’;
54.6. ‘use his influence over any such client or person, firm or company
known to him as contracting with or having dealings with the [applicant], to or
for his own benefit or that of any other person, firm or company in
competition with the [applicant].
55. Positioned as it is under a heading “Restraints” and after two contractual
provisions (clause 16.1 and clause 17.1 ) directed at protecting the applicant’s
proprietary interests during the period of empl oyment, it is improbable that the
parties intended that clause 17.2 create a permissive regime mandating the first
respondent after termination of his empl oyment to actively compete and/or assist
other persons to compete with the applicant by deploying the very proprietary
interests the first respondent was enjoined to protect while still employed.
56. Attributing such a meaning leads to an absurd and unbusinesslike outcome,
which is to be eschewed.12 It requires one to believe that the underlying oral
agreement between the employer and employee was the very converse of a restraint
of trade. It is inco nceivable that an employer would employ a person on the basis
that, after termination of his employment, he has express licence to use the (former)
employer’s proprietary interests to compete with and to the detriment of the
employer.
57. Such a meaning , in any event, is not supported by the conduct of the parties
subsequent to the termination of the first respondent’s period of employment : the
applicant sought undertakings congruent with its sensible interpretation of clause
17.2 as a restraint of tra de covenant, and the first respondent furnished
undertakings, albeit somewhat diluted from the extent predicated in clause 17.2. This
conduct is not congruent with the permissive and mandatory regimen directed at
diverting the appli cant’s business, as contended by the first respondent. This
regimen, which he contends was agreed, is implausible, far-fetched and so
untenable as to warrant its rejection.
58. For these reasons, I do not consider a so -called ‘reading in ’ of the word ‘ not’
as the fourth word of clause 17.2 to be creating a new agreement for the parties. To
do so renders the clause sensible, businesslike and consistent with the remainder of
the agreement.
59. However, if my view is incorrect, the issue of rectification affor ds another path
12 Ibid: “A sensible meaning is to be preferred to one that leads to an insensible or unbusinesslike
results …”.
to a similar result viz, to establish a restraint of trade covenant in clause 17.2.
60. To meet the first respondent’s contentions that it was too late for the applicant
to seek rectification, that this has to be pursued by way of action and th at there are
disputes of fact about any alleged common mistake, counsel for the applican t, Mr
Aggenbach referred to the full bench decision of this division in Kidrogen RF (Pty)
Ltd v Nordien and others 2023 JDR 0260 (WCC).13 That judgment is on all fours with
the facts of this case.
60.1. The lessees under a lease agreement sought to non -suit the
applicant, applying for their eviction on the basis that the lease mistakenly
omitted the name of the applicant (property owner) and listed the applicant’s
directors as landlord, which so it was argued, deprived that applicant of locus
standi. In this matter, the first respondent relies on the omission of the word
‘not’ from the agreement to non -suit the applicant from enforcing what would
otherwise plainly be a restraint of trade covenant.
60.2. The respondents in Kidrogen did not raise the alleged absence of
locus standi initially. At the time when the main application was launched
they had never even hinted that the lease was not o ne between the parties.
At all material times up to the delivery of the answering affidavit they clearly
considered the applicant / appellant to be the lessor, despite the obvious
mistaken reference in the written version of the lease to its directors in their
personal capacities as lessors. Likewise, in this matter, the first respondent
remained silent abou t the omission in clause 17.2 and the allegedly absent
restraint of trade; as stated above, by his conduct, including the furnishing of
diluted undertakings, he acknowledged the existence of a restraint of trade.
60.3. Although the applicant in Kidrogen (as in the present matter) was
obliged to make out a case for rectification in its founding papers, it only
applied for rectification shortly before the hearing by way of notice and after
13 2023 JDR 0260 (WCC).
all affidavits had been filed .14 The applicant in this matter has done
somewhat better, as notice of the application for rectification of clause 17.2
was given in the replying affidavit , as being brought out of caution . The first
respondent, had he so wished, could have applied for leave (which would
have been granted) to file an affidavit in opposition thereto to set out any
prejudice occasioned by the belated application. He did not do so. There
were no submissions made that prejudice would be occasioned by the
applicant’s attempt to rectify clause 17.2. There is no such prejudice.
60.4. In Kidrogen, until delivery of the answering affidavit the first
respondent neither seriously nor unambiguously took issue with the written
recordal of the lease by contending that it did not in fact reflect the parties'
true intention. Nor did he even positively assert in the answering affidavit that
he had in fact concluded a lease with the directors in their personal
capacities.15 Similarly, in the present matter, until he filed his answering
affidavit the first respondent did not contend that clause 17.2 does not reflect
the parties’ true intention . For reasons already set out, his version is far -
fetched and untenable, and is rejected.
61. Just as the appeal court found in Kidrogen,16 I find that the applicant cannot
fairly be criticised for failing to specifically advance a case for rectification in the
founding papers. The appeal court continued as follows (the underlining is mine):
“[27] However, should I be wrong, it is my view that assistance for the
appellant may also be found in Shoprite Checkers17 and Van der Merwe NO.
In Shoprite Checkers the Court stated:
'… the crisp question turns on the nature of that which was agreed between
the parties. An examination of the content of the consensus prompts a
consideration of the concept of bona fides which underpins contractual
relationships. The concept of bona fides has proved to be somewhat elusive
14 At paragraph [23].
15 At paragraph [24].
16 At paragraph [26].
17 Shoprite Checkers (Pty) Ltd v Bumpers Schwarmas CC and Others 2002(6) SA 202 (C).
with regard to its definition and scope. Whatever the uncertainty, the
principle of good faith must require that the parties act honestl y in their
commercial dealings. Where one party promotes its own interests at the
expense of another in so unreasonable a manner as to destroy the very
basis of consensus between the two parties, the principle of good faith can
be employed to trump the public interest inherent in the principle of the
enforcement of a contract.
This concept of good faith is congruent with the underlying v ision of our
Constitution. To rely on the strict written words of a contract and to ignore an
underlying oral agreement which not only shaped the written agreement but
which forms part of the essential consensus would be to enforce the very
antithesis of integrity and good faith in contractual arrangements.
[28] In Van der Merwe NO it was stated:
‘[9] As far as is known, no trust by the name of the Clarke Bosman Trust
existed. In context it is obvious that Clarke and Bosman were intending to
represent the Hydraberg Property Trust. After all, it was only in that capacity
that they must have expected to take transfer of the fixed property from the
registered owners and thus be pl aced in a position to fulfil the obligation
under the contract to give transfer of the property to the option
grantee/purchaser. There is no other sensible explanation for their action in
playing the role they did in the execution of the deed of contract.
[10] In the applicants' replying affidavit it was averred in response that
rectification was not required, but that “a notice of intention to amend the
notice of motion [would] nevertheless, insofar and if this [might] be
necessary, be filed in due course to provide for the rectification of the name
of the seller trust ”. A notice of intention to amend was not filed. Instead,
application was made from the bar at the commencement of the hearing to
amend the notice of motion by introducing a prayer for the a ppropriate
rectification of the deed.
[11] The respondents' counsel was somewhat equivocal in his attitude to
the application to amend the notice of motion. He certainly did not consent to
it. In my view there was no cogent basis to oppose the amendment sought. It
was foreshadowed in the papers and, as mentioned, the mistake regarding
the description of the Trust is essentially conceded in the respondents'
answering papers. The application for the amendment of the notice of motion
will accordingly be granted.’”
62. I find that this is similarly a proper case for rectification, and that the first
respondent was bound by the restraint of trade covenant in clause 17.2 as rec tified
by the insertion of the word “not” as the fourth word thereof.
63. Regarding the enforceability of the restraint, the first respondent’s critique of
the unlimited area of restraint has been met in my view by the applicant’s pursuit of
the alternative relief set out in prayer 2.2 of the notice of motion which confines the
restraint to a list on annexure “A” to the notice of motion, comprised of fifteen
customers, of which all but three are in the Western Cape. The restraint of trade
does not preclude the first respondent from using his skills, knowledge and
experience in a similar industry or even as a project manager in a different industry ,
and, limited as proposed it is reasonable.18
64. Mr Aggenbach urged me to order that the one year period of the restraint
operate from the date of the order rather than from the date of the first respondent . I
am not inclined to do so . This request appears to be directed at compensating the
applicant for the loss of several months of operation of the restraint between the date
of the first respondent’s resignation on 2 May 2024 and the date of the Order.
However, it would have the effect of undermining this Court’s earlier finding that the
applicant did not make out a case for urgency, which I cannot do . I am however
satisfied that the applicant has proved that it enjoys a clear right, that actual injury
18 As was held in BHT Water Treatment (Pty) Ltd and Another 1993 (1) SA 47 (W) at 58A: “ The very
purpose of the restraint agreement is that the applicant did not wish to have to rely upon the bona
fides or lack of retained knowledge on the part of the first respondent . In my view, it cannot be
unreasonable for the applicant in these circumstances to enforce the bargain it has exacted to protect
itself. Indeed, the very ratio underlying the bargain was that the applicant should not have to content
itself with crossing its fingers and hoping that the first responde nt would act honourably or abide by
the undertakings he has given.”
has been committed and is reasonably apprehended, and there is no other
satisfactory remedy.19
65. The second respondent was not party to the agreement. The interdicts sought
in prayers 2.2 to 2.4 of the notice of motion were included in a draft order prepared
by the applicant’s counsel, but they seek to include the second respondent . The
cause of action for the interdicts was contractual, and must per definition be limited
to the contracting party. The applicant’s protection against the second respondent
lies in the fact that the first respondent is prohibited both “ directly and indirectly”, so
to the extent that the second respondent may again be used as a vehicle to divert
the applicant’s custom , the first respondent would be in breach of the interdict , for
which the applicant enjoys remedies including recourse to contempt of court
proceedings. Accordingly, I have omitted the reference to the second respon dent
from the wording of the interdicts.
66. Counsel for both parties agreed that costs should follow the result , with
counsel’s fees to be awarded on scale B due to the complexity of the issues and
matters of law . The applicant has been substantially success ful and is entitled to its
costs.
67. The applicant seeks an award of attorney and client costs. By reason of
special considerations arising either from the circumstances which gave rise to the
proceedings or from the conduct of the losing party, the Court in a particular case
may consider it just, by means of such Order to ensure more effectually than it can
do by means of a judgment for party and party costs that a successful party will not
be out of pocket in respect of the expense caused by the litigation. 20 No exhaustive
list exists. 21 An award of attorney and client costs will not be granted lightly. The
Court’s discretion to order the payment of attorney and client costs includes all cases
in which special circumstances or considerations justify the granting of such an
order.
19 Setlogelo v Setlogelo 1914 AD 221 at 227.
20 Nel v Waterberg Landbouwers Ko-Operatieve Vereeniging 1946 AD 597 at 607.
21 Rautenbach v Symington 1995 (4) SA 583 (O) at 588A-B.
68. I have considered the factors which might favour such a punitive award: the
first respondent’s decei tful conduct to which I alluded above, his breach of his own
undertakings, his calculated plans to divert business to his entity even while
employed by the applicant, and the effort that had to be directed by the applicant and
the Court at dealing with unworthy technical defences at odds with what the first
respondent knew to be the truth regarding his employment agreement and his
trading entity; against this, I weighed up that the applicant was to some extent the
author of its own misfortune – the omission from clause 17.2 was the result of its
own drafting – that the applicant attempted, unsuccessfully to extend the ambit of the
relief contemplated in the agreement, and that the applicant has already borne the
consequences of its dilatory launching of this application from the time it perceived
that the first respondent had breached the undertakings given in late May 2024.
69. The most compelling factor, to my mind, was the lack of good faith shown by
the first respondent – both by breaching the restraint of trade, and by devising the
defences he mounted to justify such breaches, protesting to the end that no restraint
existed. I can put it no better than Van Zyl J in the Anglo-Dutch Meats judgment:22
“Peace-loving and justice -seeking members of the community do not take
kindly to wha t they perceive as ‘technical’ defences that allow debtors to
escape liability and accountability.”
70. An award of attorney and client costs is merited.
71. The following order is granted:
71.1. The second respondent’s citation is amended by deletion of the word
“Services”, and substitution thereof with the word “ Projects”, wherever the
former occurs, in order to reflect the second respondent’s citation and any
reference thereto as that of SMTI Projects (Pty) Ltd.
71.2. The written employment agreement, annexure “KS2” to the founding
22 Supra at paragraph [47].
affidavit, is rectified by insertion of the word “ not” in clause 17.2 between the
words “The EMPLOYEE will” and the words “for a period of 1 (one) year”.
71.3. The first respondent is interdicted and restrained for a period of one
year dated from 3 May 2024, either on his own behalf or on behalf of any
person, firm or company competing or endeavouring to compete with the
applicant, from:
71.3.1.directly or indirectly soliciting or endeavouring to solicit or
obtaining custom from any person, firm or company which is presently
a client or supporter (whether financial or otherwise) of the applicant, or
who has been a client of the applicant within the one year period
preceding 3 May 2024, specifically including the persons and entities
listed on the annexure to the notice of motion marked “A”;
71.3.2.using the first respondent’s personal knowledge of or influence over
any such client, or person, firm or company as defined in the preceding
paragraph 70.3.1; and
71.3.3.directly or indirectly using, revealing, disclosing or in any way utilising
any of the applicant’s confidential information.
71.4. The first respondent is directed to pay the applicant’s costs of this
application jointly and severally, on a scale as between attorney and client ,
counsel’s fees to be on Scale B.
________________________
F J GORDON-TURNER
ACTING JUSTICE OF THE HIGH COURT
Appearances
Counsel for the Applicant Adv Mornè Aggenbach
Instructed by Mr James Galloway
C & A Friedlander Attorneys
Counsel for the First Respondent Adv J H F Le Roux
Instructed by Mr Pieter Strydom
P J S Inc. Attorneys