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[2010] ZALCJHB 351
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Esquire System Technology (Pty) Ltd t/a Esquire Technologies v Cronje and Another (J2442/10) [2010] ZALCJHB 351 (17 December 2010)
Reportable
Of
interest to other judges
in
the labour court of South Africa
held
at JOHANNESBURG
C
ase
no: j 2442/10
In
the matter between:
ESQUIRE
SYSTEM TECHNOLOGY (PTY) LTD
T/A
ESQUIRE
TECHNOLOGIES
Applicant
and
ILSE
CRONJÉ
First respondent
MIRO
DISTRIBUTION
Second respondent
JUDGMENT
STEENKAMP
J:
Introduction
[1]
This is an urgent application to enforce a
restraint of trade agreement.
[2]
The
applicant seeks to interdict the first respondent, Ilse Cronjé,
from entering into any work agreement with direct competitors
of the
applicant within the provinces of Gauteng, Mpumalanga, KwaZulu-Natal,
Western Cape and Eastern Cape for a period of three
months
[1]
from the date of her resignation on 30 November 2010.
Background facts
[3]
The applicant, Esquire Technologies,
employed the first respondent (the employee) as a "sales
executive" at its Samrand
branch in Midrand. She started working
for the company on 9 July 2010. She left its employ on 30 November
2010.
[4]
Although the company described the employee
as a "sales executive" in its founding affidavit, she is
perhaps more appropriately
described as a "sales assistant",
as she is indeed titled in her contract of employment. As she points
out in her answering
affidavit, the title "sales executive"
is misleading. She did not hold an executive position. Nor was she
involved in
management. The position was more akin to that of a
junior assistant and she earned a gross monthly salary of R 4500 –
hardly
the remuneration associated with an executive position in the
South African companies of today. The nomenclature of "sales
executive" is certainly not commensurate with her position. It
appears, rather, to be part of the unfortunate but seemingly
ineluctable trend to award employees with grand-sounding titles
instead of actual positions of authority.
[5]
The employee's duties are set out in the
most general terms. It is expected of her to "satisfactorily
carry out all the tasks
and duties normally associated with the
position"; and to "obey all reasonable and lawful orders
and instructions which
may be given by any person employed by the
employer who is in a managerial or supervisory position." This
latter clause, in
itself, suggests that the employee was not employed
"in a managerial or supervisory position."
[6]
Yet the employee’s contract of
employment contains a rambling restraint of trade clause comprising
some 32 clauses and subclauses
over three closely typed pages of what
looks like an 8pt font in single spacing. Some of it is nonsensical.
For example, clause
16.3 reads thus:
"16.3 Without
derogating from the EMPLOYEE’S [
sic
] obligations in
terms of the confidentiality undertakings provided in This Agreement
[
sic
], the EMPLOYEE shall not for the restraint period
of
6 (six)
months from date of termination of his/her
employment, whether as proprietor, partner, director, shareholder,
member, executive,
consultant, contractor, financier, agent,
representative, sales assistant, trustee or beneficiary of a trust or
otherwise and whether
for reward or not, directly or indirectly:
16.3.1
carry on; or Employer [
sic
]
16.3.2
be interested or engaged in or concerned with or employed by any
Competing Business of the Employer
in any of the Prescribed Areas;
provided that the EMPLOYEE shall not be deemed to have reached these
restraint undertakings by
reason of: "
and that is where it
ends. The reader waits in suspense to see what the dangling colon at
the end of that clause, like an offensive
intestine, might relate to;
but there is nothing to follow.
[7]
The
restraint clause is liberally spattered with references to the
“Prescribed Goods” and “Prescribed Services”.
The former is defined as "any Computer Hardware, Software,
Computer Accessories and/or Digita [
sic
]
Lifestyle products and all related products, accessories and other
goods which I dealt with or in by the COMPANY (or Group) in
the
ordinary course of business."
[2]
The latter is defined as "any services rendered by the COMPANY
(or Group) in the ordinary course of business, including, but
not
limited to the sale and/or rental and/or hire, and/or importation
and/or exportation and/or licensing and/or distribution
of the
Prescribed Goods and/or any other services rendered in respect of the
Business." The concepts of "the Business"
and "the
Group" are not defined. Nowhere in the founding papers is any
reference to “Digita Lifestyle products”
to be found. One
does not know whether the employee did, indeed, that any Internet
knowledge of such lifestyle products. The company
blandly says in the
founding affidavit deposed to by the managing director that the
employee "in essence required detailed
knowledge of all services
and products of the applicant, its pricing and margins and services
to be provided to [
sic
]
customers. First respondent also has intimate and direct knowledge of
all essential and critical issues relating to all aspects
of the
applicant's operations. "
[8]
Clause 16.7 of the restraint of trade
covenant states that:
“
The
EMPLOYEE undertakes not to accept or seek employment from any concern
falling within the definition of Competing Business (
any
business howsoever conducted which manufactures, imports, sells
and/or distributes Competing Goods and/or renders Competing
Services
)
within the restraint period, or during his/her employment period
without the knowledge and consent of Management first being obtained
in writing.”
Yet “competing
goods” and “competing services” are not defined.
[9]
The applicant also states in its founding
affidavit that the restraint would apply in the provinces Gauteng,
Mpumalanga, KwaZulu-Natal,
Western Cape and Eastern Cape. Yet the
restraint clause itself makes no mention of the Western Cape. There
is no basis on which
the applicant may seek to extend the operation
of the order it seeks to the Western Cape. It remains to decide
whether it is entitled
to the rest of the relief it seeks.
[10]
The employee gave notice of her resignation
on 28 October 2010, with her last day of employment with Esquire
intended to be 30 November
2010. Immediately after she left its
employ, she took up employment with a neighbouring company, Miro
Distribution (the second
respondent).
[11]
The applicant contends that Miro is its
direct competitor. Miro has not entered the fray and abides the
decision of this court.
The employee disputes that Miro is in direct
competition with the applicant. She contends that the applicant’s
main business
entails the sale of computers, computer hardware and
related products. These comprise, amongst others:
11.1
PC components;
11.2
Digital Lifestyle and consumer electronics;
11.3
Gaming components such as graphics cards,
interactive gaming consoles and accessories for Sony Playstations,
Nintendo Wii and PC’s;
11.4
Official licensed products;
11.5
Notebook computers; and
11.6
Accessories and peripherals.
[12]
Miro’s
business, she says, is different. Its “core focus” is
providing network solutions for customers’
communication
requirements. It distributes wireless, networking, VOIP
[3]
and IP video products. Its core business is not the sale and
distribution of computer related products but rather the creation
of
network solutions for its customers.
[13]
In reply, the applicant has pointed out
that the two companies do sell some of the same products, such as
desktop switches, USB
adapters, modems and routers.
The
law PERTAINING TO restraints of trade
[14]
With
regard to the legal principles generally applicable to restraints of
trade, the leading case on restraints in South Africa
remains
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[4]
.
The following principles were adopted by the Appellate Division (as
it then was) in the
Magna
Alloys
case:
14.1
Prima facie
every
restraint agreement signed by a restrainee is enforceable. Where a
restrainee wishes to be released from his restraint obligations,
the
onus lies on the restrainee to show that the restraint is not only
unreasonable, but
contra
bonos mores
,
that is, contrary to public policy.
14.2
In determining whether a restraint is
contra bonos mores
,
a court will look at the facts and circumstances at the time that the
restrainor is attempting to enforce the agreement against
the
restrainee and weigh up two main considerations. The first is
that the public interest requires, in general, that parties
should
comply with their contractual obligations even if these are
unreasonable or unfair [
pacta sunt
servanda
]. The second
consideration is that all persons should, in the interests of
society, be permitted as far as possible to engage
in commerce or the
professions freely. Expressing this differently, it is
detrimental to society if an unreasonable fetter
is placed on a
person's freedom of trade or a person's freedom to pursue a
profession.
14.3
In determining whether a restraint is
contra bonos mores
,
a court will consider, among others, the following factors:
14.3.1
the duration of the restraint;
14.3.2
the area in which the restraint applies;
14.3.3
whether a restraint payment was paid to the
restrainee;
14.3.4
whether the restrainee still has the
ability to earn a living;
14.3.5
the “proprietary interest” or
capital asset that the restrainor seeks to protect.
[15]
The
four questions which a court would typically pose in assessing the
reasonableness of a restraint were formulated thus in
Basson
v Chilwan
[5]
:
“
Vier
vrae moet in dié verband gestel word:
(a)
Is daar ‘n belang van die een party
wat na afloop van die ooreenkoms beskerming verdien?
(b)
Word so ‘n belang deur
die ander party in gedrang gebring?
(c)
Indien wel, weeg sodanige
belang kwalitatief en kwantitatief op teen die belang van die ander
party dat hy ekonomies nie onaktief
en onproduktief moet wees nie?
(d)
Is daar ‘n ander faset
van openbare belang wat met die verhouding tussen die partye niks te
make het nie maar wat verg dat
die beperking gehandhaaf moet word, al
dan nie?
Vir sover die belang in
(c) die belang in (a) oortref, is die beperking in die reël
onredelik en gevolglik onafdwingbaar. Dit
is ‘n kwessie van
beoordeling wat van geval tot geval kan wissel.”
The law in the light
of the Constitution
[16]
The
principles set out above have come under attack in the light of the
provisions of the Bill of Rights contained in the Constitution.
In
Fidelity
Guards Holdings (Pty) Ltd t/a Fidelity Guards v Pearmain
[6]
the
High Court was asked to hold that restraint of trade agreements are
unconstitutional by virtue of section 22 of the Constitution,
which
provides:
“
Every
citizen has the right to choose their trade, occupation or profession
freely. The practice of a trade, occupation or profession
may be
regulated by law.”
16.1
The
court referred to a number of earlier cases decided under the
corresponding section of the Interim Constitution (section 26),
where
it was held that notwithstanding the provisions of the Constitution
the position set out above, i.e. that restraints of trade
agreements
are
prima
facie
enforceable and that the onus rests on the person seeking to be
released from the restraint on the basis that it is unreasonable,
was
still good law. The court cited with approval what was stated in
Knox
D’Arcy Ltd v Shaw
[7]
,
namely:
“
The
Constitution does not take such a meddlesome interest in the private
affairs of individuals that it would seek, as a matter
of policy, to
protect them against their own foolhardy or rash decisions. As long
as there is no overriding principle of public
policy which is
isolated thereby, the freedom of the individual comprehends the
freedom to pursue, as he chooses, his benefit or
his disadvantage.
It is generally
regarded as immoral and dishonourable for a promissory to breach his
trust and, even if he does so to escape the
consequences of a poorly
considered bargain, there is no principle that inheres in an open and
democratic society, based upon freedom
and equality, which would
justify his repudiation of his obligations. On the other hand the
enforcement of a bargain (even one
which was ill-considered) gives
recognition to the important constitutional principle of the autonomy
of the individual.”
16.2
The court held that insofar as a restraint
of trade agreement is a limitation of the right contained in section
22 of the Constitution,
the common law (of
pacta
sunt servanda
) complies with the
provisions of the limitations provision of the Constitution (section
36). In terms of this provision,
a right in the Bill of Rights
may only be limited in terms of a law of general application (which
the common law is) to the extent
that the limitation is reasonable
and justifiable in an open and democratic society based on human
dignity, equality and freedom
.
16.3
The court held that provided that the
requirements of ensuring that the restraint sought to be enforced are
met, namely that it
is reasonable and not contrary to the public
interest, such a restraint will comply with the provisions of section
36 of the Constitution.
16.4
Without deciding the point, the court
observed that the effect of the Constitution on restraint of trade
agreements might be that
the onus should shift from the person
seeking to be released from the restraint (to show that the restraint
is unreasonable) to
the person seeking to enforce the restraint (to
show that it is reasonable and complies with the provisions of the
Constitution).
[17]
However,
in a number of subsequent cases the courts held that the onus remains
on the party seeking to be released from the restraint
to show that
it is unreasonable and contrary to the public interest. (
Townsend
Productions (Pty) Ltd v Leech and Others
[8]
;
Walter
McNaughtan (Pty) Ltd v Schwartz and Others
[9]
.)
[18]
As
far as I could ascertain, the only case in which a court has held
that the onus has shifted to the party wishing to enforce the
restraint to show that it is reasonable, was Davis J in
Advtech
Resources t/a Communicate Personnel Group v Kuhn
[10]
.
[19]
The
Advtech
decision was roundly criticised in the subsequent case of
Den
Braven SA (Pty) Ltd v Pillay
[11]
.
In
that case, Wallis AJ
[12]
summarised the approach of the Constitutional Court to be that
contractual obligations are enforceable unless they are contrary
to
public policy, which is to be discerned from the values embodied in
the Constitution and in particular the Bill of Rights. “Where
the enforcement of a contractual provision would be unreasonable and
unfair in the light of those fundamental values it will be
contrary
to public policy to enforce the contract or the contractual term in
question. This does not, however, mean that compliance
with
contractual obligations freely and voluntarily undertaken is
irrelevant to the inquiry into public policy.”
[13]
[20]
In
Den
Braven
[14]
,
the
court referred to Ngcobo J’s judgment in
Barkhuizen
v Napier:
“
On
one hand public policy, as informed by the Constitution, requires in
general that parties should comply with contractual obligations
that
have been freely and voluntarily undertaken. This consideration is
expressed in the maxim
pacta sunt
servanda,
which, as the Supreme Court
of Appeal has repeatedly noted, gives effect to the central
constitutional values of freedom and dignity.
Self autonomy or the
ability to regulate one’s own affairs, even to one’s own
detriment, is the very essence of freedom
and a vital part of
dignity. The extent to which the contract was freely and voluntarily
concluded is clearly a vital factor as
it will determine the weight
that should be afforded to the values of freedom and dignity.”
[21]
Wallis AJ in
Den
Braven
then criticised Davis
J’s judgment in
Advtech
and said:
“
To
the extent that the learned judge was suggesting that contractual
autonomy is not in appropriate circumstances reflective of
freedom
and gives effect to the central constitutional values of freedom and
dignity, that approach is contrary to the views of
both the
Constitutional Court and the Supreme Court of Appeal.”
[15]
[22]
The
current state of the law with regard to restraints of trade is
interpreted and summarised by the court in
Den
Braven
as follows:
[16]
“
The
importance of the decision in
Magna
Alloys
is that it removed restraint of
trade agreements from being a special and isolated type of contract
looked upon with particular
approbation by courts and placed them
squarely within the mainstream of the law of contract as agreements
concluded and enforceable
in the ordinary course, but unenforceable
where their enforcement would be in conflict with public policy.
Bearing in mind the
range of circumstances which may give rise to the
conclusion of a restraint of trade agreement, spanning the spectrum
from the
hugely successfully businessperson who sells the business
that he or she has built up for massive amounts of money and is
required
to sign a restraint of trade agreement in order that the
purchaser may protect its investment, to relatively humble employees
who
may be required to sign such an agreement as a matter of rote and
possibly
in terrorrem
to deter them from seeking a more advantageous position, it is more
appropriate that, like other types of contract, their enforceability
should depend, not on an arbitrary classification as a type of
contract not favoured by the law, but on the flexible yardstick
which
public policy provides. Secondly, there seems to me to be no
legitimate basis for treating restraint of trade agreements
as
warranting a particularly jaundiced approach by the courts. We have a
developed jurisprudence designed to ensure fairness in
the
competitive arena of trade and business. Thus our law prohibits
passing-off and other forms of unfair competition such as the
misappropriation of another’s designs; the appropriation of
information gathered from the public domain by another for commercial
purposes; the use of a get-up misappropriated before it could be
placed in the public domain; misrepresentations regarding one’s
own or a competitor’s business; and the use by a competitor of
confidential information. The person who sells a business
and then
seeks to make use of the trade connections that he sold will be
interdicted from doing so even in the absence of a restraint
of trade
agreement. The employee who seeks to turn their employer’s
confidential information, trade secrets or trade or customer
connections to their own account for the benefit of themselves or a
competitor of their employer acts in a no less reprehensible
fashion
and I can think of no good reason why our law should not afford a
remedy to a business that seeks protection against this
type of
unfair competition. Where the business has sought to protect itself
by securing a restraint of trade undertaking from the
employee there
is no reason for the courts or the law to view this with disfavour.
It is only where the bounds of public policy
are overstepped that the
court will withhold its assistance.”
[23]
But,
as Davis J retorted in
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff & another
[17]
:
“
The
challenge of our Constitution is ... not to reproduce uncritically
the shibboleths of the past, but to transform (as opposed
to abolish
or ignore) legal concepts in the image of the Constitution. Contract
law cannot be reduced to a museum of past jurisprudence.
Expressed
differently, the methodology mandated by s 39(2) of the Constitution
needs to be implemented whenever a dispute such
as the present is
placed before a court. This permits a far less deferential approach
to the formal contractual provisions than
if the case of
Den
Braven
is followed.”
[24]
I find myself in respectful agreement with
the sentiments of Davis J. But I am bound by the authority of the
higher courts and I
will try to apply the principles as outlined by
those courts – unsettled as they may be – as best I can.
[25]
As discussed above, then, restraints are
generally enforceable unless they are shown to be contrary to public
policy. As long
as there is no overriding principle of public
policy at play in the particular case, the freedom of the individual
comprehends
the freedom to pursue, as he chooses, his benefit or his
disadvantage. The enforcement of a bargain (even one which was
ill-considered)
is said to give recognition to the important
constitutional principle of the autonomy of the individual.
Proprietary
interest
[26]
A restraint is valid if there is a
proprietary interest which justifies protection. Those interests are
usually in the nature of
trade secrets, know-how, pricing or customer
connections. Therefore, a restraint would be an enforceable
restriction on the
activities of an employee who (for example) had
access to the company’s customers and could use his/her
relations with the
company’s customers to the advantage of a
competitor and to the detriment of the company.
[27]
The protectable interests which
traditionally underpin a restraint of trade are confidential
information and the existence of a
relationship between the
restrainee and the customers or suppliers of the restrainor.
[28]
It
was pointed out in
Meter
Systems Holdings Ltd v Venter
[18]
that,
while there is no
numerus
clausus
as
to the type of information which could permissibly be regarded as
confidential, our case law has frequently recognised certain
categories of information as confidential. These include:
·
Information received by an employee about
business opportunities available to an employer, even if such
information could be obtained
from another source. The potential or
actual usefulness of the information to a rival is an important
consideration in determining
whether it is confidential or not.
·
Information relating to proposals or,
inter
alia,
the marketing of a new product.
·
Information relating to the price at which
one person has tendered competitively to do work for another is
confidential in the hands
of those who stand in a fiduciary
relationship to the tenderer.
[29]
Information is confidential if it meets the
following requirements:
·
It must be capable of application in a
trade or industry;
·
It must not be public knowledge or public
property (in other words, it must be known only to a restricted
number or closed circle
of people); and
·
It must, objectively, be of economic value
to the person seeking to protect it.
[See
Aranda
Textile Mills (Pty) Ltd v Hurn
[19]
]
[30]
A
protectable customer or supplier relationship exists where an
employee has personal knowledge of, and influence over, the customers
(or suppliers) of his employer so as to enable him, if the
competition were allowed, to take advantage of his former employer’s
trade connections (
Rawlins
& Another v Caravantruck (Pty) Ltd
[20]
).
[31]
A
customer connection exists where a customer belongs to the employer
and the employee obtains influence over the customer by virtue
of his
employment.
[21]
[32]
The following remarks may be relevant to
the position of sales executives in particular cases:
“
The
need of an employer to protect his trade connections arises where the
employee has access to customers and is in a position
to build up a
particular relationship with the customers so that when he leaves the
employer’s service he could easily induce
the customers to
follow him to a new business.”
[22]
[33]
In
BHT
Water Treatment (Pty) Ltd v Leslie and Another
[23]
the
court remarked as follows:
“
In
my view, all that the applicant can do is to show that there is
secret information to which the employee had access, and which
in
theory the employee could transmit to the second respondent should he
desire to do so. The very purpose of the restraint agreement
was that
the applicant did not wish to have to rely on the bona fides or lack
of retained knowledge on the part of the employee...
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 employee would act honourably or abide by the undertakings that
he has given.”
[34]
In
Reddy
v Siemens Telecommunications (Pty) Ltd
[24]
,
a recent decision of the Supreme Court of Appeal, the SCA upheld a 12
month restraint against an employee who had joined a competitor
(Ericsson). Malan AJA stated that it was not necessary for the court
to find that the employee
would
use his previous employer’s trade secrets and confidential
information in his new employment but that it was sufficient if
he
could
do so:
“
Reddy
is in possession of confidential information in respect of which the
risk of disclosure by his employment with a competitor,
assessed
objectively, is obvious. Reddy will be employed by Ericsson, a
‘concern which carries on the same business
as [Siemens]’
in a position similar to the one he occupied with Siemens. His
loyalty will be to his new employers and the
opportunity to disclose
confidential information at his disposal, whether deliberately or
not, will exist. The restraint
was intended to relieve Siemens
precisely of this risk of disclosure. In these circumstances the
restraint is neither unreasonable
nor contrary to public policy.”
[35]
The court restated the following principles
in the
Reddy
case:
35.1
A court must make a value judgment with two
principal policy considerations in mind in determining the
reasonableness of a restraint.
The first is that the public interest
requires that parties should comply with their contractual
obligations, a notion expressed
by the maxim
pacta
servanda sunt
. The second is that all
persons should in the interests of society be productive and be
permitted to engage in trade and commerce
or the professions. Both
considerations reflect not only common-law but also constitutional
values. Contractual autonomy is part
of freedom in forming the
constitutional value of dignity, and it is by entering into contracts
that an individual takes part in
economic life.
35.2
In applying these two principal
considerations, the particular interest must be examined. A restraint
would be unenforceable if
it prevents a party after termination of
his or her employment from partaking in trade or commerce without a
corresponding interest
of the other party deserving of protection.
Such a restraint is not in the public interest. Moreover, a restraint
which is reasonable
as between the parties may for some other reason
be contrary to the public interest. The court accepted that the four
questions
posed in
Basson v Chilwan
by Nienaber JA is still good law.
35.3
The common-law approach in balancing or
reconciling the concurring interests in this manner, the court held,
gives effect to the
limitation clause in s 36(1) of the Constitution.
[36]
In
the recent case of
Arrow
Altech Distribution (Pty) Ltd v Byrne
[25]
Nicholson J referred to
Reddy
v Siemens
and usefully set out the present position of the law including the
application of the Constitution. This case and the cases quoted
by
the court may be summarized in the following manner. Part of what is
set out is a verbatim quote from the various cases and
part is a
summary thereof.
36.1
Covenants in restraint of trade are valid.
Like all other contractual stipulations, however, they are
unenforceable when, and to
the extent that, their enforcement would
be contrary to public policy. It is against public policy to enforce
a covenant which
is unreasonable, one which unreasonably restricts
the covenantor’s freedom to trade or to work.
36.2
Insofar as it has that effect, the covenant
will not therefore be enforced. Whether it is indeed unreasonable
must be determined
with reference to the circumstances of the case.
36.3
Such circumstances are not limited to those
that existed when the parties entered into the covenant. Account must
also be taken
of what has happened since then and, in particular, of
the situation prevailing at the time the enforcement is sought.
36.4
Where the onus lies in a particular case is
a consequence of the substantive law on the issue.
36.5
What that calls for is a value judgment,
rather than a determination of what facts have been proved, and the
incidence of the onus
accordingly plays no role.
36.6
A court must make a value judgment with two
principal policy considerations in mind in determining the
reasonableness of a restraint.
36.6.1
The first is that the public interest
required that parties should comply with their contractual
obligations, a notion expressed
by the maxim
pacta
servanda sunt.
36.6.2
The second is that all persons should in
the interests of society be productive and be permitted to engage in
trade and commerce
or the professions. Both considerations reflect
not only common-law but also constitutional values. Contractual
autonomy is part
of freedom informing the constitutional value of
dignity, and it is by entering into contracts that an individual
takes part in
economic life. In this sense, freedom to contract is an
integral part of the fundamental right referred to in s 22.
The law applied to the
facts
[37]
The applicant seeks final relief. It
therefore has to establish that it has a clear right to the relief
sought. If it does, it would,
in my view, succeed in the light of the
other requirements for a final interdict. It would therefore be more
convenient to deal
with those aspects first.
Irreparable harm
[38]
Should the restraint be enforceable and
should the applicant have interests worth protecting, it would suffer
irreparable harm if
it is not enforced. The harm caused by an
employee who divulges trade secrets to a competitor cannot be easily
remedied by a damages
claim in due course. The question remains
whether the applicant does have such interests worthy of protection –
a question
I will deal with under the heading of a clear right.
Alternative remedy
[39]
This criterion overlaps to a great extent
with that of irreparable harm in restraint of trade cases. As I have
stated above, the
alternative remedy of a damages claim is cold
comfort to an applicant that seeks to enforce a legitimate restraint
of trade covenant.
By the time a damages claim is heard, the horse
had bolted and the harm is done. That harm is very difficult to
repair. I am satisfied
that, where a restraint of trade is
enforceable, the alternative remedy of a damages claim in due course
is more apparent than
real.
Clear right
[40]
That brings me, then, to the question of a
clear right. The onus is on the applicant to establish that it has a
clear right; but
in considering whether it has done so, I accept
that, in the light of the weight of authority outlined above, the
employee still
bears the onus to show that the restraint is not
enforceable. In deciding whether it is enforceable – and thus,
whether the
applicant has established a clear right – I will
apply the test as set out in
Basson v
Chilwan
and developed in
Reddy
v Siemens
and
Arrow
Altech Distribution.
Protectable interest
[41]
What is, according to the applicant, the
interest deserving of protection?
[42]
The applicant’s legal representative
glibly states in his heads of argument that it “clearly had an
interest worthy
of protection”. He goes on to say that the
employee had access “to all the applicant’s trade
secrets, customer
particulars, pricing and all other confidential
operational information”.
[43]
But
is this borne out by the facts? In order to establish that, I have to
consider the facts as set out in the pleadings in accordance
with the
well-known principles set out in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd.
[26]
[44]
The employee says that, employed as she was
in the relatively junior position of sales assistant, she does not
have knowledge of
the applicant’s trade secrets and
confidential information. She has, in the five months that she has
worked for the applicant,
acquired some general skills in sales and
marketing. Although she has knowledge of the applicant’s
products and services,
these are generally available on the open
market and can hardly be described as trade secrets. In her new
employment, she will
not compete with the applicant or deal with its
customer base. She has no documentation setting out the applicant’s
sales
margins or pricing of products.
[45]
Based on this evidence of the employee, it
does not appear to me that the applicant has an interest worthy of
protection that is
threatened by the employee.
Protectable interest
prejudiced by employee?
[46]
Even if the applicant had established
interests worthy of protection, it does not appear from the evidence
before me that the employee
is in a position to prejudice those
interests. She has shown that she does not possess any trade secrets
or exclusive customer
connections. The information to which she is
privy is readily accessible on the open market; and the nature of the
second respondent’s
business is not in direct completion to
that of the applicant, with the result that they do not in any event
target the same customers.
Interest of the
employee
[47]
Even
if the applicant had passed the two threshold tests set out above, I
must still weigh that up against the interest of the employee
to be
gainfully employed – in the words of
Basson
v Chilwan
,
“dat sy ekonomies nie onaktief en onproduktief moet wees nie”;
or, in the words of the Constitution, “to choose
her trade or
occupation freely”.
[27]
[48]
On the facts of this case, it appears to me
that the generic restraint of trade clause inserted into the contract
of employment
is aimed at little more than stifling competition. The
clause is not directed specifically at an employee such as Ms Cronjé.
I also take into account that she received no consideration to
compensate her for the period of unemployment that enforcement of
the
restraint would almost inevitably lead to. If it were to be enforced,
she would be restrained from working in any sales environment
dealing
with computers and computer equipment in most of the economically
active provinces in South Africa. It seems to be me to
be so broad,
when weighed up against her interests, as to be unenforceable.
The public interest
[49]
It is not in the public interest –
interpreted in the light of the Constitution – to enforce a
restraint of trade clause
as broad as this one on an employee in the
position of Ms Cronjé. As I have stated above, it would serve
merely to stifle
competition and not to protect any real interests
worthy of protection. It would, instead, be in the public interest to
allow the
employee to exercise her constitutional right to exercise
her occupation freely. Even though the applicant only seeks to
enforce
it for the relatively short period of three months, that does
not detract from the principle.
Conclusion
[50]
The applicant has not established a clear
right for the relief it seeks. There is no relationship between the
parties any longer
and the first respondent, an individual employee
who earned the princely sum of R4 500 per month, has had to incur
significant
legal costs to oppose this application on an urgent
basis. I can see no reason in law or fairness why costs should not
follow the
result.
[51]
The application is dismissed with costs.
_______________________
ANTON
STEENKAMP
JUDGE
OF THE LABOUR COURT
Date
of hearing:
9 December 2010
Date
of judgment:
17 December 2010
For
the applicants:
Attorney JF du Toit
Kloppers
Theron Inc
For
the respondent:
Adv
PH Kirstein
Instructed
by:
VFV Mseleku attorneys
[1]
The restraint of trade clause specified a restraint period of six
months. The applicant offered in the course of this application
to
shorten the restraint period to three months.
[2]
The unnecessary and distracting use of capitalization is as in the
original.
[3]
Voice Over Internet Protocol
[4]
1984
(4) SA 874 (A)
[5]
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 767
[6]
2001
(2) SA 853 (SE)
[7]
1996
(2) SA 651 (W)
[8]
2001
(4) SA 33
(C)
[9]
2004
(3) SA 381 (C)
[10]
2008 (2) SA 375 (C)
[11]
2008 (6) SA 229 (D)
[12]
as he then was
[13]
Den
Braven
at para [32]
[14]
Para [32]
[15]
Den
Braven
at para [33]
[16]
at para [35]
[17]
(2009) 30
ILJ
1750
(C)
[18]
1993
(1) SA 409 (W)
[19]
[2000]
4 All SA 183 (E)
[20]
[1992] ZASCA 204
;
1993
(1) SA 537
(A) at 541 E; 543 C – G
[21]
Den
Braven SA (Pty) Ltd v Pillay
2008
(6) SA 229
(D) para [6];
Lifeguards
Africa (Pty) Ltd v Raubenheimer
2006
(5) SA 364
(D) paras 40-41;
Walter
McNaughtan v Schwartz
2004
(3) SA 381
(C) 386-7, 390-392;
Nampesca
(SA) Products (Pty) Ltd v Zaderer
1999
(1) SA 886
(C) 899-900;
Dickinson
Holdings v Du Plessis
2008
(4) SA 214
(N) para [30] ff.
[22]
Rawlins
v Caravantruck (Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A) 541 D-H, cited with approval in
Den
Braven
para [6].
[23]
1993
(1) SA 47
(W); See also
Fidelity
Guards v Pearmain
2001 (2) SA 853 (SE) 859 D-I
[24]
2007
(2) SA 486 (SCA)
[25]
(2008)
29
ILJ
1391 (D)
[26]
1984 (3) SA 623 (A)
[27]
Constitution s 22.