About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Johannesburg Labour Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: Johannesburg Labour Court, Johannesburg
>>
2012
>>
[2012] ZALCJHB 127
|
|
Steiner Hygiene (Pty) Ltd v Brown Margaret Sterikleen (Pty) Ltd and Others (J 2494/2012) [2012] ZALCJHB 127 (25 October 2012)
REPUBLIC
OF SOUTH AFRICA
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: J 2494/2012
In the matter between:
STEINER HYGIENE (PTY)
LTD
...........................................................................
Applicant
and
BROWN MARGARET
STERIKLEEN (PTY) LTD
..................................
First
Respondent
VAN DER MERWE SUZZETE
...........................................................
Second
Respondent
STERKLEEN (PTY) LTD
.......................................................................
Third
Respondent
Heard: 04 October 2012
Delivered: 25 October
2012
Summary: Enforcement
of in restraint of trade agreement - dispute of facts- Applicant of
PlasconEvans in restraint of trade
JUDGMENT
MOLAHLEHI J
Introduction
[1] The applicant in this
matter seeks an urgent relief to enforce the restraint of trade
clauses in terms of the agreements it
has with the first and second
respondents interchangeably referred to hereinafter as the two
“respondents”. The essence
of the order sought by the
applicant is to interdict the two respondents from engaging in any
form of competition, soliciting or
accepting business from its
existing or potential customers or clients for a period of 12 months
from termination of the employment
relation between the parties. The
respondents are also to be interdicted from being employed with any
business or entity or person
which conducts business which is similar
to or competing with that of the applicant for a period of 12 months.
The respondents
are in particular to be interdicted from continuing
their employment with the third respondent.
Background facts
[2] It is common cause
that the applicant is the market leader in the provision of hygiene,
deep clean and pest control solutions
which it sells to customers
across South Africa. The products which the applicant provides are
listed in the founding affidavit.
[3] It is further common
cause that the third respondent provides similar products and
services to those of the applicant and is
a direct competitor of the
applicant. The third respondent also conducts business across the
entire South Africa, with offices
located in Johannesburg,
Bloemfontein, Cape Town and Durban.
[4] The first respondent
was employed by the applicant as a hygiene consultant with effect
from 1 February 2010 and was based in
the Sandton branch of the
applicant. From 1 August 2004, the first respondent was employed as a
sales consultant of hygiene and
pest control services at Specialized
Property Solutions (Pty) limited, a sister company to the applicant.
That company was later
incorporated into the applicant.
[5] The second respondent
was employed by the applicant as a hygiene consultant with effect
from 2 March 2009 and was based at the
Aeroport branch (Kempton Park)
of the applicant.
[6] There is also no
dispute about the fact that the two respondents signed therestrained
of trade agreement including theconfidentiality
agreement with the
applicant. Both respondents were after terminating their employment
with the applicant employed by the third
respondent.
[7] The second respondent
informed the applicant at the time of her resignation that she
intended taking employment with the third
respondent during September
2012.On 6 August 2012 the applicant sent a letter to the second
respondent, reminding her of the restraint
of trade and warning her
that it would be enforced.
[8] The applicant came to
know about the employment relationship between the second respondent
and the third respondent during August
2012.
[9] On 31 August 2012 the
applicant sent a letter to the first respondent, reminding her of the
restraint and calling on her to
give an undertaking by 12:00 on 4
September 2012 that she would terminate her services with the third
respondent. The same was
done with the second respondent on 3
September 2012calling on her to give an undertaking by 17:00 on 5
September 2012 that she
would terminate her service with third
respondent.
[10] On 5 September 2012,
the third respondent sent a letter to the applicant, recording that
it did not intend to violate any of
applicant’s intellectual
property rights and undertaking to abide by the undertaking which the
respondents had made to the
applicant.
[11] In responding to the
ultimatum given to them by the applicant regarding their relationship
with the third respondent, the respondents
contacted the applicant
and requested an extension until the 10 September 2012, to make final
decision regarding the applicant’s
letters of demand.
Thereafter and on 10 September 2012, the first and second respondents
indicated to the applicant that they stood
by what the third
respondent conveyed in its letter of 5 September 2012.
[12] The parties were not
able to reach any consensus on the matter and that is the reason for
the current proceedings.
[13] The applicant has
raised two points
in limine
. The first point related to lack
of authority to institute these proceedings. That point was abandoned
at the hearing of this matter
when the applicant produced that
resolution to institute the proceedings.
[14] The second point
concerns the issue of urgency. As concerning this point the
respondents argued that the applicant failed to
give reasons why it
required urgent relief and it could not obtain adequate protection in
the normal course of litigation. The
respondents further contend that
the applicant does not in its founding affidavit show that it will
suffer prejudice if the relief
was not granted on an urgent basis. In
support of their contention the respondents rely on the judgment in
Jiba v
Minister: Department of Justice and Constitutional Developmentand
Others
1
where the court held that
Rule 8 of the rules of the Labour Court requires a party seeking
urgent relief to set out the reasons
for urgency, and why urgent
relief is necessary.
[15] The applicant deals
with the issue of urgency in about six paragraphs most of which are
related to the chronology of events
from the time each of the
respondents resigned to the time it placed all the respondents on
terms regardingrequiring them to comply
with the provisions of the
restraint of trade agreement.The applicant deals also with the
request by the first and second respondents
for time to consider its
demand that they should comply with the restraint of trade agreement.
[16] I agree with the
respondents that except for explaining the steps it took since
becoming aware of the alleged breach of the
provisions of the
restraint of trade, it does not provide reasons as to why it requires
urgent relief and also why it could not
obtain adequate protection in
ordinary course of litigation. It is however, apparent from the
reading of the applicant’s
papers in their totality that
despite the failure to deal expressly with these two questions, the
matter is indeed urgent and is
accordingly dealt with in that manner.
I do not belief that it would be fair to say that urgency is
self-created because the applicant
took about 8 days after it became
clear as to the stand of the two respondents.
The legal principles
[17] It is trite that
agreements in restraint of trade are valid and enforceable in our law
unless, they amongst other things impose
an unreasonable restriction
on a person’s freedom to trade, in which case that will
probably be held to be against public
policy and therefore illegal
and unenforceable. The restrained of trade agreements are enforceable
on the bases of the sanctity
of contracts:
pactasuntservanda.
In
Magna
Alloys and Research (SA) (Pty) v Ellis,
2
the court in dealing with
the issue of in restraint of trade held amongst others:
’
Since the
sanctity of contracts had greater precedence in our law, agreements
in restraint of trade were prima facie valid and enforceable
unless
the party seeking to avoid its obligations in terms of the agreements
could show that the restraint was against the interest
of the public
under the circumstances’.
[18] In upholding and or
enforcing in restraint of trade agreement the court has to strike a
balance between the interests of both
the employer and the employee.
The balancing act which the court has to undertake in considering the
enforceability or otherwise
of the in restraint of trade is that of
having to weigh between avoidance of stifling healthy competition
which is the fundamental
principle of a capitalist free market
society like South Africa and the sanctity of contracts.
The general approach to
be adopted when dealing with in restraint of trade is summarised by
Steenkamp J in two judgments,
Esquire System Technology (Pty) Ltd
t/a Esquire Technologies v Cronje and Another
(2011) 32 ILJ 601
(LC) and soon to be published,
Continuous Oxygen Suppliers (Pty)
Ltd v Elizabeth MeintjiesEcomed (Pty) Ltd
(case number J2073/11,
as follows:
‘
1
Covenants
in restraint of trade are generally enforceable and 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, i.e. one which unreasonably restricts the covenantor’s
freedom to trade or to work.
2 Insofar as it has that effect, the
covenant will not be enforced. Whether it is indeed unreasonable must
be determined with reference
to the circumstances of the case.
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.
4. Where the onus lies in a particular
case is a consequence of substantive law on the issue.
5 What that calls for is a value
judgement, rather than a determination of what facts have been
proved, and the incidence of the
onus accordingly plays no role.
6 A court must make a value judgement
with two principal policy considerations in mind in determining the
reasonableness of a restraint:
6.1 the first is that the public
interest requires that parties should comply with their contractual
obligations, a notion expressed
by the maxim
pactasuntservanda;
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.’
[19] In order to succeed
in seeking the enforcement of restraint covenant, the party seeking
such enforcement has to show that there
is a proprietary interest
that justifies protection. As stated in Continuous Oxygen Suppliers
those interests are usually in the
form of trade secrets, knowledge,
pricing or customer connection. An employer would succeed in
enforcing restraint of trade if
he or she can show that he or she has
a protectable interest. An employer would for instance succeed if he
or she was to show that
the employee who has taken employment with a
competitor has acquired confidential information relating to
customers whom he or
she may use to the advantage of the competitor
and to the detriment of his or her previous employer.
In
Den
Braven S.A. (Pty) Limited v Pillay and Another,
3
the court in dealing with
the issue protectable interest in the context of customer connection
observed:
‘
In
considering the facts of a particular case it must always be borne in
mind that a protectable interest in the form of customer
connections
does not come into being simply because the former employee had
contact with the employer’s customers in the
course of their
work. The connection between the former employee and the customer
must be such that it will probably enable the
former employee to
induce the customer to follow him or her to a new business.’
[20] In the present
instance the applicant’s case is based largely on the
contention that the two respondents have built a
close relationship
with its clients.
In
this respect the applicant contends that the two respondents acquired
knowledge and information regarding the names and the contact
persons
of its customers including the products they ordered, its pricing of
the products and the prices quoted to the customers.
The applicant
has placed all these in dispute and thus a dispute of fact has
arisen.
[21]
It is trite that the onus to show that the restraint is unreasonable
and should therefore not be enforced rests with the employees.The
applicant’s duty as concerning the enforcement of the in
restraint of trade is to show the existence of the contract and
that
there has been a breach thereof.
4
[22] In the present
instance the existence of in restraint of trade agreement is common
cause. However, there are disputes of facts
relating to the extent of
the knowledge the respondents acquired in relation to the
confidential information regarding the contact
persons of the
applicant’s customers, the product that ordered, the pricing by
the applicant, the prices quoted to the customers
and the services
provided to the customers. The respondents dispute having had access
to all this information as alleged by the
applicant and in the manner
alleged to warrant protection.
[23]
Mr Snyman for the applicant argued that the approach when dealing
with dispute of facts in cases of this nature is (because
the
incidence of onus) is different to that which applies in the general
motions proceedings. The applicable test to apply in the
event of
dispute of facts is that which is set out in
Plascon
Evans
.
Mr Snyman argued that because of the dispute of facts
5
the
version set out in the applicant’s papers ought to prevail.
Indeed if this court was to determine the matter on the basis
of the
papers before it then of cause the matter would have to be determined
on the basis of the applicant’s papers.
[24] In my view however
it would not on the basis of the facts and circumstances of this case
do justice to determine the matter
on the papers. The issue of the
extent of the knowledge and information which the respondents are
alleged to have acquired whilst
in the employment of the applicant
which they could use is, in my view, fundamental to the question of
the proprietary interest
of the applicant and can at best be
determined by oral evidence. It is for this reason that I belief that
the matter ought to be
referred to trial to determine the
enforceability of the restraint of trade agreement between the
parties. I do not however belief
that acost order should in the
circumstances of this case be made to follow the results.
Order
[25] In the premises the
matter is referred to hearing of oral evidence and accordingly the
Registrar is directed to enrol the matter
for trial for consideration
of the following issues:
1. Whether the applicant
has a protectable interest that might legitimately be part of the
restraint of trade agreement of the parties.
2. Whether the employment
of the first and second respondents by the third respondent poses a
risk of harm to any of the protected
interest as was envisaged in the
restraint of trade agreement of the parties.
3. The papers filed in
the motion proceedings shall serve as the trial pleadings
4. The costs are
reserved.
_______________
Molahlehi J
Judge of the labour court
of south africa
Appearances:
FOR THE APPLICANT: Mr
Snyman of Snyman Attorneys
FOR THE RESPONDENT: Mr R
Venter of Bornman&MostertInc
1
(2010)
31 ILJ 112(LC).
2
[1984] ZASCA 116
;
1984
(4) SA 874
(A).
3
2008
(6) SA 229
(D);
[2008] 3 All SA 518
(D) at para 6.
4
Magna
Alloys and Research (SA) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at
891B-Cand
Basson v Chilwan and Others
1993 (3) SA 742 (AD).
5
Plascon-Evans
Paints Ltd v Van Riebeeck Paints
(Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A).