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[2010] ZALCJHB 14
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Global Network Systems (Pty) Ltd v Mack (JR1514/09) [2010] ZALCJHB 14 (28 June 2010)
IN THE LABOUR COURT OF
SOUTH AFRICA
(HELD AT JOHANNESBURG)
CASE NO: JR 1514/09
In the matter between:
GLOBAL NETWORK SYSTEMS
(PTY) LTD
Applicant
and
MACK,
THOMAS ROBER JAMES
Respondent
JUDGMENT
LAGRANGE,
J
Introduction
1.
On 17 July 2009, the applicant launched an urgent application seeking
interdictory relief against the applicant in the form of
the
enforcement of a restraint of trade agreement, which formed part of
the respondent’s contract of employment with the
applicant.
2.
The applicant is an information technology service provider. The
application followed the termination of the respondent’s
employment with the applicant on 7 July 2009 in which capacity he had
been employed as a 2
nd
line support filed service
engineer.
3.
On 24 July 2009, a rule nisi was issued by this court,
returnable on 24 November 2009. For various reasons, which
are
not important for present purposes the matter was postponed until 26
January 2010.
4.
The rule nisi interdicted the respondent from directly or indirectly
4.1.
revealing or disclosing or in any way utilizing, whether for his or
purposes or that of any third party, any of
the applicant’s
confidential information, technical knowhow, systems, methods,
processes, clients lists, marketing or financial
information;
4.2.
soliciting or accepting business or custom from, or dealing with, or
supplying services to any existing or potential
clients for a period
of 12 months from 7 July 2009, and
4.3. from
competing unlawfully with the applicant in breach of his restraint of
trade.
5.
By the time the matter came before the court on that date, the
question of urgency was no longer an issue. At the hearing, the
applicant also expressly abandoned a contempt application brought
against the respondent in an effort to compel compliance with
the
interim order. The applicant’s primary object in pursuing the
application was to obtain an order confirming the rule
with a view to
pursuing a potential damages claim against the respondent.
6.
The essence of the applicant’s complaint is that the respondent
had commenced employment with a client of the applicant,
Civcon,
after leaving the applicant’s employment and that he was
providing the same services to Civcon that he provided on
behalf of
the applicant to the client.
7.
The applicant had a service level agreement with Civcon for the
provision of IT services, including acting as a internet service
provider, providing electronic mailing facilities and on site
assistance with its servers and IT infrastructure. Civcon paid the
applicant a basic fee of R 4788-00 for the provision of IT support,
up to 14 hours, and R 9576-45 for the hosting of ISP and web
related
services. The additional IT support before the applicant was employed
by Civcon yielded fees for the applicant of approximately
R 10,000-00
per month over and above the basic fee.
8.
Since the respondent’s employment by Civcon in August 2009, the
hours of IT support rendered by the applicant have dwindled
to
insignificant amounts, at least as far as can be ascertained by the
undisputed figures provided by the applicant for the period
ending 17
September 2009, in response to the respondent’s claim that by
accepting employment with Civcon, he had no intention
of soliciting
the custom of Civcon at the applicant’s expense or of
harming the applicant’s interests in the
service level
agreement with Civcon.
9.
The restraint of trade provision in the respondent’s employment
contract with the applicant read:
“
16 Restraint of
trade
16.1
The employee may not for a period of twelve (12) months from the date
of termination of this contract, whether on his/her own behalf or on
the behalf of any other person, close corporation, partnership
or
company
solicit custom from
,
deal with
or
supply
any person, close corporation or company with whom the employer dealt
at any time during his/her employment.
16.2
Paragraph 16.1 also applies to potential clients in which the
employer
has shown an interest or with whom the employer was
negotiating at the time of the employee’s employment in the
company.
16.3
This limitation of trade is restricted to the nature of the
employer’s
business, products and services.”
(emphasis added)
10.
Another provision in the contract dealt with trade secrets and
confidentiality binding the respondent
inter alia
not to
disclose “trade secrets” or “information
confidential to the employer’s business”. Although
interim relief enforcing this provision was granted, the thrust of
the applicant’s argument on the return day focused on
clause
16.1. Even so, on the averments of the respondent in his
answering affidavit, taken together with those of the applicant,
even
if I also consider those in the replying affidavit, do not, in my
view, make out a case supporting the applicant’s contention
that the applicant is revealing confidential information of the
applicant to Civcon.
11.
On the facts as they emerge on the papers, it seems clear that on his
employment with Civcon, the respondent effectively
rendered IT
services as part of his employment obligations, which he had
previously rendered to it as part of the services provided
by the
applicant under its IT support contract with Civcon. On the face of
it, the drop in hours of IT support provided by the
applicant to
Civcon was seems to correlate with the respondent’s employment.
12.
However, the figures supporting the contention of a loss of income
were only contained in the applicant’s replying
affidavit which
was filed late and the respondent submits that even if the late
filing of the reply was condoned, I should disregard
it to the extent
that the applicant makes out a case in reply. Even if the replying
affidavit is ignored, it is still not really
in dispute that the
respondent now performs services for Civcon, which include those he
previously rendered on behalf of the applicant.
In argument, the
respondent’s representative, Mr Kuhn, conceded that what the
respondent does for Civcon was ‘to a
degree the same’ as
what he did for it when he worked for the applicant.
13.
The respondent argued that as the IT service contract between the
applicant and Civcon was still intact there was no prejudice
to the
respondent occasioned by his employment by Civcon and points out that
the applicant was saving the cost of the applicant’s
salary
since his employment by Civcon, being an amount of R 17000-00 per
month. The respondent rejects this contention because
it assumes the
respondent will not have to replace the applicant, whose work
consisted of more than just servicing the IT contract
with Civcon. In
any event, the question of prejudice suffered is secondary to
determining the primary question, namely whether
or not the
respondent did breach the restraint provisions of his contract.
14.
The respondent argues further that clause 16.1 cannot be construed as
preventing him from taking up employment with a
former customer of
the applicant. The operative words used to describe the prohibition
on the respondent’s activities refer
to soliciting custom
from, dealing with, or supplying customers the applicant dealt with
when the respondent was in its employment.
I understand these
activities to be intended primarily to characterize the activity of a
person who sets themselves up as an alternative
provider of the
services provided by the applicant, or alternatively assists a
competitor of the applicant by the same means. The
key issue is
whether or not they also include the respondent’s activities as
an employee of Civcon. The respondent contends
that on an ordinary
interpretation of clause 16.1 these activities cannot be construed to
include employment by a customer to service
the same needs that the
applicant previously provided to the customer.
15.
In
response, Mr Snyman to this, referred me to two cases namely
Sibex
Engineering Services (Pty) Ltd v Van Wyk & Another
1991 (2) SA 482
(T)
and
Cinema
City (Pty) Ltd v Morgenstern Family Estates (Pty) Ltd & Others
1980 (1) SA 796
(A)
.
However, apart from the fact that the
Sibex
case
decided that the protectable interest the restraint sought to protect
in that case was the former employer’s confidential
information
and not its trade interests,
[1]
the restraint clause under consideration there specifically
prohibited the former employee from engaging in direct or indirect
competition with the activities of the company ‘”…whether
as principal, agent,
or
employee…”
(emphasis added).
[2]
Accordingly
there was no doubt that the prohibition was intended to include
indirect competition by the covenantee as an employee
of a third
party. Moreover, in
Sibex
the
former employee had gone to work for a competitor and not a former
customer, as in this instance.
16.
The
allusion to the judgment in
Cinema
City
was clearly a reference to those situations in which surrounding
circumstances may be considered by a court in determining the
meaning
of terms of a contract. The Supreme Court of Appeal, has more
recently in
KPMG
Chartered Accountants (SA) v Securefin Ltd & Another
2009 (4) SA
399
(SCA)
abandoned the tenuous distinction between surrounding and background
circumstances as classifications for determining the admissibility
of
extrinsic evidence to interpret a contract, but nevertheless
reaffirmed the importance of adhering to the parole evidence rule.
Harms DP, writing for the court, restated the principle thus: “(T)o
the extent that evidence may be admissible to contextualise
the
document (since 'context is everything') to establish its factual
matrix or purpose or for purposes of identification, 'one
must use it
as conservatively as possible' (Delmas Milling Co Ltd v Du Plessis
1955 (3) SA 447
(A) at 455B - C)”.
[3]
17.
The applicant notes that the respondent concedes he should not
compete with the applicant, but contends his employment
is enhancing
rather than conflicting with the IT service agreement which the
applicant has with Civcon. It submits that the fact
is that the work
the applicant performs as an employee of Civcon is in competition
with the services provided by the applicant.
Competition is
what clause 16.1 was designed to prevent, and as an employee the
applicant is ‘acting on his own behalf’.
The only
ambiguous portion of the clause is whether the terms ‘solicit’,
‘supply’ or ‘deal with’
extend to the
applicant’s employment by Civcon, in terms of which part of
what he does includes the services he formerly
provided to it on
behalf of the applicant.
18.
The respondent argues that to interpret clause 16.1 of the
respondent’s contract as including his employment by
a customer
is not possible on the wording of the clause as its stands, and the
applicant can effectively only succeed if it could
make out a case
for rectifying the contract.
19.
On the evidence of the founding and replying affidavit and on the
wording of clause 16.1 I do not think the clause was
intended to
cover a situation in which the respondent takes up employment with a
former customer in terms of which he renders some
services in-house
which he previously provided as an agent of the applicant. I accept
that his activity is in competition with
the applicant’s IT
service agreement even if that contract had not been cancelled by
Civcon, in the sense that work he performs
which would previously
have been part of the applicant’s service to Civcon will
necessarily reduce the hours that the applicant
will be required to
render the service to Civcon. However, the applicant has failed to
establish on an ordinary interpretation
of clause 16.1 that the
restraint was clearly intended by both parties to cover his
employment by Civcon, because it would unduly
strain the meaning of
the clause to include an employment relationship with a former
customer of the applicant.
20.
Accordingly, the respondent is not in breach of the restraint clause,
even if regard is had to the replying affidavit,
if I exclude those
parts of it which amount to making out a case in reply.
Order
21.
In the light of the above, the following order is made:
21.1. the rule issued on
23 July 2009 and subsequently extended until 26 January 2010 is
discharged, and
21.2. the applicant is
ordered to pay the respondent’s costs of opposing the
application and of opposing the contempt application.
ROBERT
LAGRANGE
JUDGE
OF THE LABOUR COURT
Date
of hearing: 26 January 2010
Date
of Judgment: 28 June 2010
Appearances:
For
the Applicant:
Mr
S Snyman of Snyman Attorneys
For
the Respondent
Mr
R Kuhn, Attorney
[1]
At 488B-D of the judgment
[2]
At 485B-C of the judgment
[3]
At 410, par [39] of the judgment