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[2012] ZALCJHB 24
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KBC Health and Safety and Security (Pty) Limited v Van Zyl (J282/12) [2012] ZALCJHB 24 (7 March 2012)
REPUBLIC OF SOUTH AFRICA
Reportable
Of interest to other judges
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
case no: j 282/12
In the matter between:
KBC
HEALTH AND SAFETY AND SECURITY (PTY)
LIMITED
….......................................................................................................
Applicant
and
VAN
ZYL, MARIA ALETTA
….....................................................................
Respondent
Heard
:
17 February 2012
Delivered
:
07 March 2012
Summary: Application in restraint of trade. Interdicting an
employee from breaching the restraint undertaking.
JUDGMENT
MOLAHLEHI J
Introduction
The applicant in this matter seeks an interdictory order and an
enforcement of a restraint of trade undertaking made by the
respondent in terms of a written contract of employment. This matter
came before this court on an urgent basis. The respondent
did not
challenge the issue of urgency. The matter is accordingly treated as
urgent.
Background facts
The respondent Ms Van Zyl (respondent) is a former employee of the
applicant, and was at the time of her dismissal employed as
business
development director of the applicant. Following her dismissal, the
respondent secured employment with Height Safety
Gear (Pty) Ltd
(Safety Gear), a company which the applicant contends is its
competitor.
According to the applicant, during the course of her employment, the
respondent served the applicant in various capacities and
performed
several duties and functions at a high level, most of which exposed
her to critical strategic business information,
ranging from for
instance liaising with clients, developing, designing learning
materials and training facilitators through the
training programs
developed by the applicant. At some stage and for a period of eight
months, the respondent was responsible
for managing the applicant’s
operations and later was given the responsibility of business
development and growing customer
list, and customer relationship.
The applicant, KBC Health and Safety (Pty Limited is a company
registered in terms of the laws of this country. The core business
of the applicant is to provide consulting and training in the area
of development, safety health and environmental issues in
the
petrochemical, construction, food and beverages areas. The training
modules which the applicant provides to his clients are
targeted at
three levels mainly senior management and supervisors and employees.
The training modules which the applicant provides to its clients are
designed in consultation with clients and after needs analysis
have
been conducted.
In seeking to provide its client with comprehensive training
solutions, the applicant has entered into a working relationship
with Height Safety Training Academy (Height Safety) and Action
Training Academy.
In terms of the service provider agreement (service agreement) with
Height Safety, the applicant is recognised as an exclusive
service
provider of basic health and safety induction training. In terms of
that agreement, the applicant makes its products
and a service as a
“one stop shop stop” in other words the applicant
advertises its services and those of Height
Safety as its own. When
approached by a client for height training, which is the service
rendered by the Height Safety, the applicant
accepts the request and
in a sense outsources the service to Height Safety once an agreement
is concluded with the client. The
client will however be invoiced by
the applicant.
The issue between parties arose after the employment of the
respondent by Safety Gear which together with Safety Heights are
subsidiaries of Height Safety Holdings (Pty) Ltd Safety Holdings.
The applicant contends that it is in competition with Safety Gear
and therefore the respondent is in conflict with the restraint
undertaking provided for in her contract of employment. And because
the respondent had full access to the applicant’s proprietary
information and used to apply such information in the execution of
her day to day duties and responsibilities, her taking employment
with Safety Gear exposed and created a risk that its clients would
follow her.
The essential terms of the contract of employment dealing with the
restraint of trade provides as follows:
‘
12.5.1
Through extensive research and development initiative such as the
development of training and other techniques, procedures,
software
products and process,
KBC
is
at the forefront of providing consulting and training services
relating to all aspects of occupational health and safety to
companies and organisations in South Africa.
12.5.2 During the course of her
employment with KBC, she will acquire knowledge of the trade secrets,
registered and unregistered
trademarks, design and patents, secret
process, confidential information, technical information and know-how
of KBC;
12.5.3 She will become
acquainted with and development strong relationships with suppliers,
customers and principals of
KBC
,
and with prospective suppliers, customers and principals and will
gain knowledge of such customers’ requirements and have
influence over such customers and supplies;
12.5.4 She will not for a period
of 12 months from the date of termination of her employment (i.e.
until 12 October 2012) directly
and/ or indirectly anywhere in each
country in South Africa where KBC carries on business: (1) setup in
business of form part of
or be concerned, engaged, employed, interest
in or otherwise to, in any capacity whatsoever, any business, firm or
undertaking,
which carries on any business that is similar to or
competes with the business of KBC; or (2) solicit or otherwise
approach any
employee or consultant of KBC with a view to encourage
her/him to become employed or interested in any manner whatsoever in
any
thirds party, whether natural or juristic or any undertaking or
concern which competes with the KBC, and/or to terminate her/his
employment with KBC; or (3) employ or retrain as an independent
contractor, consultant, agent or in any other capacity whatsoever
any
current or former employee, consultant, director or officer of KBC,
unless such person has been separated from any relationship
with the
applicant for a period of at least 12(twelve) months
.’
The applicant in its contention that the respondent was in breach of
the restraint of trade undertaking says that it came to
its
attention that the respondent contacted Wilson Bailing Homes OVCAN
limited (WBHO) through an email to arrange a meeting in
order to
solicit business. WBHO is one of the applicant’s clients. The
email which the respondent send to Mr Klein Smit
of WBHO dated 23
January 2012 reads as follows:
‘
George
Hope you are well. Is it
possible to become and see you we specialise in Working at Heights
training, Rescue at Heights training
and Rope access Training. We
also sell the equipment that is needed to work at heights. Would like
to come and see you. We also
have teams that work at heights all
training is accredited and we do all the uploads of learners. I will
phone you tomorrow if
that is okay with you, send my love to Carla oh
I left
KBC
.’
The legal principles
The law has since the decision in
Magna Alloys & Research
(Pty) Ltd v Ellis
,
1
been settled that a restraint of trade agreement is enforceable
unless it can be shown that it is against the public interest
to do
so. However, the courts have as a general principle refused to
enforce restraints of trade which are regarded as being
unreasonable
because that would go against public interest. In this regard, the
court in
Sunshine Records (Pty) Ltd v Frohling and Others,
2
per Grosskopf JA summarised the approach to be adopted as follows:
'In determining whether a
restriction on the freedom to trade and to practise a profession is
enforceable, a court should have regard
to 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. The second consideration is that
all persons in the interests of society,
be permitted as far as
possible to engage in commerce or professions or, expressing this
differently, that it is detrimental to
society if an unreasonable
fetter is placed on a person's freedom of trade or to pursue a
profession. In applying these two main
considerations, a court will
obviously have regard to the circumstances of the case before it
.'
The
onus
of proof in cases such as the present was set out in
Basson v Chilwa
n
and Others
,
3
by Botha JA as follows:
‘
The
incidence of the
onus
in
a case concerning the enforceability of a contractual provision in
restraint of trade does not appear to me in principle to entail
any
greater or more significant consequences than in any other civil case
in general. The effect of it in practical terms is this:
the
covenantee seeking to enforce the restraint need do no more than to
invoke the provisions of the contract and prove the breach;
the
covenantor seeking to avert enforcement is required to prove on a
preponderance of probability that in all the circumstances
of the
particular case it will be unreasonable to enforce the restraint; if
the Court is unable to make up its mind on the point,
the restraint
will be enforced. The covenantor is burdened with the
onus
because
public policy requires that people should be bound by their
contractual undertakings. The covenantor is not so bound, however,
if
the restraint is unreasonable, because public policy discountenances
unreasonable restrictions on people's freedom of trade.
In regard to
these two opposing considerations of public policy, it seems to me
that the operation of the former is exhausted by
the placing of the
onus
on
the covenantor; it has no further role to play thereafter, when the
reasonableness or otherwise of the restraint is being enquired
into.’
In dealing with the issue of whether the restraint of trade should
be enforced Nienaber JA in
Basson
matter held that the
following questions which have been translated from Afrikaans to
English in the footnote of that case should
be answered. The
questions are:
4
‘
(a)
Does the one party have an interest that deserves protection after
the termination of the agreement?
(b) If so, is that interest
threatened by the other party?
(c) If there is a protectable
interest which is threatened, how does that interest weigh
qualitatively and quantitatively against
the interest of the other
party not to be economically inactive and unproductive?
(d) Is there any aspect or
public policy having nothing to do with the relationship between the
parties that requires the restraint
to be upheld or not?’
The general answer to the question of whether an employer has an
interest to protect was answered in
Automotive
Tooling Systems v Wilkens
,
5
where the court held that:
‘
At
issue in this case therefore is whether the appellant does have a
proprietary interest worthy of protection. An agreement in
restraint
of trade is enforceable unless it is unreasonable.
It
is generally accepted that a restraint will be considered to be
unreasonable, and thus contrary to public policy, and therefore
unenforceable, if it does not protect some legally recognisable
interest of the e
mployer
but merely seeks to exclude or eliminate competition.’
[Footnote
omitted]
The
court further held that
:
6
‘
Precisely
what the parameters of such an interest are need not now be decided.
What is clear, however, is that the interest must
be one that might
properly be described as belonging to the employer, rather than to
the employee, and in that sense “proprietary
to the employer”.
The question in the present case is whether the interest that is
relied upon – the skill, expertise
and “know how”
that the employees undoubtedly acquired in the techniques for
manufacturing these machines – was
one that accrued to the
employer or to the employees themselves.’
The
policy consideration for the above approach is set out in
Aranda
Textile Mills (Pty) Ltd v L D Hurn and Another
7
as
follows:
‘
A
man’s skills and abilities are a part of himself and he cannot
ordinarily be precluded from making use of them by a contract
in
restraint of trade. An employer who has been to the trouble and
expense of training a workman in an established field of work,
and
who has thereby provided the workman with knowledge and skills in the
public domain
,
which the workman might not otherwise have gained, has an obvious
interest in retaining the services of the workman. In the eye
of the
law, however, such an interest is not in the nature of property in
the hands of the employer. It affords the employer no
proprietary
interest in the workman, his know-how or skills. Such know-how and
skills
in
the public domain
become attributes of the workman himself, do not belong in any way to
the employer and the use thereof cannot be subjected to restriction
by way of a restraint of trade provision. Such a restriction,
impinging as it would on the workman’s ability to compete
freely and fairly in the market place, is unreasonable and contrary
to public policy.’
In
Automotive Tooling
Systems
the Supreme Court of Appeal noted the
difficulty in practice of drawing a line between
the
‘use by an employee of his/ (her) own skill, knowledge and
experience which he/ (she) cannot be restrained from using,
and the
use of his/ (her) employer’s trade secrets or confidential
information or other interest which he may not disclose
if bound by
a restraint, is notoriously difficult to define.’
8
Evaluation
There is no dispute between the parties as to the existence of the
provisions of the restraint clauses in their employment contract.
There is also no dispute as to the reasonableness of the geographic
extent of the application of the contract including the 12
months
period limitation provided for in the contract.
Similar to the
Basson
matter, the issue that remains for
termination is whether the applicant has a proprietary interest
whose protection is required
consequent to the respondent taking
employment with Safety Gear. The duties and functions of the
respondent as described by the
applicant in its founding affidavit
are also broadly speaking not disputed.
The applicant contends that it has a protectable interest that needs
protection in terms of the existing provisions provided
for in the
contract. The interest that it seeks to protect, the applicant
submitted, takes the form of information relating to
customers and
the learning modules in the different fields with specific emphasis
on health and safety sector. The applicant
further contends that the
respondent has during the course of her employment with it acquired
skills and knowledge relating to
the development and design of the
training modules.
According to the applicant, the training modules are designed and
developed to meet the specific needs and requirements of each
client. And that a specific process is used in designing and
developing the modules which entails amongst others consulting with
clients and learners. The courses are according the applicant unique
and custom made for a specific client and further that computer
software is used in the design and development of the modules.
The concern the applicant has regarding its interests is that the
respondent's functions and duties in her different roles whilst
in
its employment made her privy to sensitive proprietary information.
The other concern which the applicant has with the respondent
taking
employment with Safety Gear is that during the period of her
employment she established customer connection with its clients
and
therefore there exists the likelihood that they (clients) may follow
her and take their business away from the applicant.
It is common cause that the respondent was subsequent to her
dismissal employed by Safety Gear as a sales consultant. It would
appear from the papers that Safety Gear is not involved in the
training programs but rather in the sale of height equipments.
It
therefore means that Safety Gear is not involved in carrying its
business in competition with the applicant.
The applicant introduces the issue of competition between itself and
Safety Gear through the company group relationship. Safety
Gear and
Safety Heights are subsidiaries of Safety Holdings. The managing
director of the three companies is the same person.
The two companies, Height Safety and Safety Gear are in law, as I
understand it two separate entities with their own independent
status, irrespective of the fact that the managing director is the
same person. In the absence of evidence that the two companies
are a
sham operated in a manner that disguises the true nature of their
operations and existence, they have to be treated as
separate and
independent entities. It is therefore my view that Safety Gear based
on the nature of its business is not in competition
with the
applicant and therefore the interest which the applicant seeks to
protect through the restraint of trade provisions
is not
enforceable.
The risk of the applicant losing business because of the respondent
taking employment with Safety Gear is unsustainable even
if the
contention that the competition arises because the two companies
fall under the same holding company was to be accepted.
This is so
because in the circumstances of this case where the interest of the
applicant is already protected by means of the
outsourcing contract
between itself and Height Safety, it goes against public interest to
deny the respondent the opportunity
to secure employment with Safety
Gear on the basis of the restraint clause.
I accordingly find that Safety Gear is not a competitor of the
applicant and therefore there is no basis to enforce the restraint
of trade clause because of the respondent having secured employment
with Safety Gear.
As concerning the email of Mr Du Toit which was sent to the managing
of Safety Gear, there is nothing to suggest that the applicant
will
as result thereof becomes a competitor of Safety Gear. Accepting
that Safety Heights is involved in height training and
also
accepting that there is a relationship between Safety Heights and
the Safety Gear, the applicant is seeking to restrain
the respondent
from securing employment in circumstances where it (the applicant)
has already secured its interest through the
outsourcing agreement
with Height Safety. The further undertaking made by the respondent
is noted.
In light of the above, I am of the view that the applicant's
application stands to fail. In the circumstances of this case, I
see
no reason why in law and fairness the costs should not follow the
results.
In the premises, the applicant's application is dismissed with
costs.
__________________
Molahlehi J
Judge of the Labour Court of South Africa
APPEARANCES:
FOR THE APPLICANT: Adv L Malan Bowman Gilfillan Inc.
FOR THE RESPONDENTS: Adv Van As instructed by: Van Zyl, Maria Aletta
Attorneys.
1
[1984] ZASCA 116
;
1984
(4) SA 874
(A).
2
[1990]
1 ALL SA 8
(A) at 41 and 42.
3
[1993] ZASCA 61
;
1993
(3) SA 742
(AD) at 776 H-777 B.
4
See
also
Henred Freuhauf (Pty) Ltd v Davel and Another
(2011) 32
ILJ 618 (LC).
5
[2007]
4 ALL SA 1073
(SCA) at para 8.
6
Towards
the end of paragraph [8] of that judgment.
7
[2000]
4 All SA 183
(E) at para 33.
8
Automotive
Tooling Systems
at
para 10.