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[2012] ZALCCT 10
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EOH Mthombo (Pty) Ltd v Bheekie-Odhav (C177/12) [2012] ZALCCT 10 (22 March 2012)
REPUBLIC OF SOUTH AFRICA
Reportable
Of
interest to other judges
THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
case
no: C 177/12
In the matter between:
EOH MTHOMBO (PTY) LTD
Applicant
and
PRELENE BHEEKIE-ODHAV
Respondent
Heard
:
16 March 2012
Delivered
:
22 March 2012
Summary:
Restraint of trade
judgment
STEENKAMP J
Introduction
This is an urgent application to enforce a restraint of trade
agreement between the applicant and the respondent, its former
employee.
Relief sought
Like the shifting sands of the Kalahari, the relief sought by the
applicant shifted remarkably from the time the application
was
launched on 8 March until oral argument was heard on 16 March 2012.
The relief sought in the notice of motion was phrased as follows
(apart from an order that the matter is urgent):
“
That
the respondent be restrained for a period of a year after the
termination of her employment with the applicant until 1 March
2013
1
from:
3.1 for whatever reason, being
directly or indirectly interested, engaged, concerned, associated
with, be a member of, a shareholder
in, a trustee of, a director,
agent, consultant, financier, partner or employed by any client of
the applicant with which the respondent
had engaged whilst in the
employ of the applicant;
3.2 in any manner whatsoever,
either personally or through or on behalf of any third party
persuading, inducing, encouraging or
procuring any employee or
contractor, sub-contracted and/or assigned by the applicant group
from becoming directly or indirectly
employed by or interested in any
business that is carried on by the applicant;
3.3 whilst conducting a
competitive activity and/or directly or indirectly interested or
engaged, employed or interested in any
capacity (including but not
limited to advisor, agent, consultant, director, employee, financier,
manager, member of a close corporation,
member of a voluntary
association, partner, proprietor, shareholder or trustee) with any
competitor of the applicant causing any
client of the applicant to
terminate its association with the applicant to transfer its business
to or accept the rendering of
any services, including prospective
services from the respondent or any competitor of the applicant with
whom the respondent is
directly or indirectly associated, engaged or
concerned in any capacity whatsoever.”
The language in which the notice of motion is couched is far from
clear. It appears to have been culled from the language of
the
restraint of trade clause in the contract of employment between the
parties. That contract is not a model of grammatical
clarity either.
The relevant clauses read as follows:
2
“
7.2
You hereby undertake that, during your employment and for a period of
12 months calculated from the termination date of this
Agreement with
the Company and/or Group for whatever reason, you will not be
directly or indirectly interested, engaged, concerned,
associated
with, be a member of, shareholder in, a trustee of, a director,
agent, consultant, financier, partner or employed by
any Client with
which you have engaged whilst in the employ of the Company, without
written consent of the Company first being
obtained, which consent
cannot be unreasonably withheld.
7.3 You undertake that, during
your employment and for a period of 12 months calculated from the
date of termination of your agreement
with the Company and/or Group,
you shall not, in any manner whatsoever, either personally or through
or on behalf of any third
party persuade, induce, encourage or
procure any employee or contractor subcontracted and/or assigned by
the Company and/or Group
to become directly or indirectly employed by
or interested in any business to that carried on by a Client and/or
the Company/Group
itself or to terminate your contract with the
Company and/or Group.
7.4 You hereby undertake that,
during your employment and for a period of 12 months calculated from
the termination date of this
contract with the Company and/or Group
for whatever reason, whilst conducting a competitive activity and/or
directly or indirectly
interested or engaged, employed or interested
in any capacity (including but not limited to advisor, agent,
consultant, director,
employee, financier, manager, member of a close
corporation, member of a voluntary association, partner, proprietor,
shareholder
or trustee) with any competitor of the Company and/or
Group, shall not attempt to entice, solicit or induce any of the
Company
and/or Group’s Clients or customers, whether for the
Client’s or customer’s benefit or otherwise to terminate
its association with the Company and/or Group or to transfer its
business to or accept the rendering of any services, including
prospective services from you and/or any competitor with whom you are
directly or indirectly associated, engaged or concerned in
any
capacity whatsoever."
In short, the applicant sought to prevent the respondent from doing
any of the following for a period of twelve months:
being employed by a client (or customer) of the applicant;
soliciting any of the applicant’s employees;
causing an existing client or customer of the applicant to take its
work to the respondent or her new employer.
There is no geographical limitation to the restraint of trade
clause.
As will appear from the background facts, it is common cause that
the respondent has taken up employment with a competitor (but
not an
existing client) of the applicant. There is no evidence that she has
attempted to solicit any of its employees to join
her, nor that she
has caused any of the applicant’s existing customers to take
their work elsewhere.
At the end of oral argument, Mr
Ferreira
restricted the
relief sought by the applicant to the following:
“
The
Respondent be restrained for a period of one year after the
termination of her employment with the Applicant from 1 March
2012
to 28 February 2013 from:
For whatever reason, being
directly or indirectly interested, engaged, concerned, associated
with, be a member of, a shareholder
in, a trustee of, a director,
agent, consultant, financier and/or partner employed by or placed
at the City of Cape Town, directly
or indirectly, through any third
party.
In any manner whatsoever,
either personally or through or on behalf of any third party
persuading, inducing, encouraging or
procuring any employee or
contractor, sub-contracted and/or assigned by the Applicant Group
from becoming directly or indirectly
employed by or interested in
any business to that carried on by the Applicant.
Whilst conducting a
competitive activity and/or directly or indirectly interested or
engaged, employed or interested in any
capacity (including but not
limited to advisor, agent, consultant, director, employee,
financier, manager, member of a close
corporation, member of a
voluntary association, partner, proprietor, shareholder or trustee)
with any competitor of the Applicant
causing any client of the
Applicant to terminate its association with the Applicant or to
transfer its business to or accept
the rendering of any services,
including prospective services from the Respondent or any
competitor of the Applicant with whom
the Respondent is directly or
indirectly associated, engaged or concerned in any capacity
whatsoever.”
Background facts
The respondent was initially employed by an entity known as Hetu
Consulting cc as a “senior consultant”. Hetu was
sub-contracted to a contractor known as City Services Management
(Pty) Ltd. Through this contract, Hetu deployed the respondent
to
the City of Cape Town on a project that was conducted for the City’s
Department of Strategic Development and Geographic
Information
Systems.
The applicant bought the business of Hetu Consulting as a going
concern in May 2009. Although the respondent’s contract
of
employment was transferred to the applicant in terms of s 197 of the
Labour Relations Act
3
,
she was asked to – and did – sign a new contract of
employment. That contract contained the restraint of trade clause
quoted above.
On 1 February 2012 the respondent resigned on one month’s
notice. She took up employment with Melon Consulting (Pty) Ltd
on 1
March 2012. Although the applicant attempted to cast some doubt on
her evidence, I must accept on the basis of the affidavits
before me
and the rule in
Plascon-Evans (Pty) Ltd v Van Riebeeck Paints
Ltd
4
that the respondent approached Melon and sent her CV to them only in
January 2012; i.e. that they had had no prior discussions
about her
joining Melon and that she approached Melon, and not the other way
round.
It is common cause that Melon also provides services to the City of
Cape Town. On the evidence before me, Melon was given the
work after
having engaged in an open tender before the respondent joined Melon.
After having employed her, Melon deployed the
respondent to the
City’s Corporate Business Improvement Unit.
The respondent was employed as a “senior consultant” by
the applicant. The applicant did not provide any further
detail in
its founding affidavit of the exact work that the respondent did for
it, other than to say that she had been deployed
to the City and
that the applicant “renders specific project related services
to its clients”.
In her answering affidavit, the respondent says that she has a B.A.
degree in political science and public administration, as
well as a
postgraduate diploma in human resource management. Before joining
Hetu, she worked as project manager, academic head
and training
manager for various other employers. Melon has now deployed her to
the City’s Corporate Business Improvement
Unit; she points out
that this is one of some 53 departments of the City and she says
that it has entirely different decision-makers
and officials to the
department to which she had been deployed by the applicant.
The applicant seeks to enforce the restraint of trade clause on the
basis that the respondent is doing work for the City, albeit
through
Melon as her employer; that she has intimate knowledge of the
applicant’s pricing and its contacts with the City;
and that
she can cause the applicant harm by using that information to its
detriment.
Urgency
There is no doubt that the application is urgent, and Mr
de Kock
conceded as much. The applicant brought this application as soon as
it became aware of the fact that the respondent had taken
up
employment with Melon and had been deployed to the City. She did not
respond to the applicant’s initial request for
an undertaking
along the lines of the relief sought in the notice of motion. The
application was therefore dealt with on an urgent
basis.
The applicable legal principles
I recently summarised the position with regard to restraints of
trade in our law, having considered the position before and after
the Constitutional dispensation, in
Esquire System Technology
(Pty) Ltd t/a Esquire Technologies v Cronjé and Another
5
and in
Continuous Oxygen Suppliers (Pty) Ltd t/a Vital Aire v
Meintjes & another.
6
I do not intend to repeat that extensive discussion. In summary,
though, the position appears to me to be the following:
“
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
pacta sunt servanda;
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.”
7
A clear right?
The applicant is seeking relief in the form of a final interdict.
Therefore, it has to show a clear right; the absence of an
alternative remedy; and that, if the interdict should not be
granted, it will suffer irreparable harm.
In order to establish a clear right, the court has to consider
whether there is an interest deserving of protection; if so, whether
the employee is in a position to threaten those interests; and if
so, that must be weighed up against the interest of the employee
not
to be economically inactive and unproductive. The court must also
consider whether any other facet of public policy plays
a role.
8
Protectable interests?
What are the interests that the applicant seeks to protect, and are
they indeed worthy of protection?
Mr
Ferreira
blithely stated in his heads of argument that the
applicant has “trade secrets” worthy of protection, and
that these
secrets meet the three general requirements for a trade
secret, i.e.:
it relates to and is capable of application in the trade or
industry;
it is secret or confidential – it is only available and thus
known to a restricted number of people or to a close circle,
it is
not in the public domain;
objectively viewed it is of economic or business value to the
applicant.
When pressed in oral argument, though, he could point me to no clear
evidence backing up these confident assertions. At best,
there is a
vague reference to “pricing”, raised for the first time
in the applicant’s replying affidavit. The
applicant says in
argument that the respondent “continues to interact with
various contacts that she has made whilst in
the applicant’s
employ” at the City of Cape Town; but she denies this in her
answering affidavit and the applicant
provides no evidence for the
allegation other than stating so in vague terms. But in any event,
the respondent is not employed
by the City, but by Melon. Mr
Ferreira
conceded in oral argument that the restraint does
not prevent her from taking up employment with a competitor, but
only with
a client of the applicant. Melon is not such a client (or
customer). Therefore, she is not in breach of the first part of the
restraint (paragraph 1 of the notice of motion).
The second part of the notice of motion would prevent the respondent
from soliciting any of the applicant’s employees from
joining
Melon (or any other competitor). There is no evidence that the
respondent has attempted or will attempt to do so. Quite
simply, the
applicant has not made out a case for the relief sought in this
respect.
The same applies with regard to the third part of the relief sought.
There is no evidence that the respondent has solicited any
of the
applicant’s existing clients or customers to take their
business elsewhere. The only evidence is that the City of
Cape Town
has put a component of the many services it procures, out on open
tender; that Melon tendered for and was awarded that
work; and that
it happened before the respondent was employed by or even approached
Melon for employment. The applicant has not
shown a clear right to
enforce this part of the restraint agreement either.
In short, with regard to the second question posed in
Basson v
Chilwan
9
:
even if the applicant had shown that it had interests worthy of
protection, there is no evidence that they are being threatened
by
the respondent.
In any event, I consider the restraint so broad as to be
unreasonable. The applicant has implicitly conceded this by
attempting
to whittle down the relief it seeks. As it stands, the
restraint clause would prevent its former employee from being
employed
by any of the applicant’s customers anywhere in the
world in any capacity for a period of 12 months. Whilst the period
may not be unreasonable, the area and the breadth of the subject
matter are so wide as to be contrary to public policy and thus
unenforceable. This is one of those occasions where the restraint
clause is so broadly worded that it militates against the right
of
the employee to choose her occupation freely, enshrined in s 22 of
the Constitution.
The applicant’s response to this difficulty is to point out
that the respondent could have sought its consent which would
not be
“unreasonably withheld”. But these very proceedings make
it obvious that the applicant is not willing to grant
the respondent
consent to be employed by Melon and to be deployed to a different
department in the City. Had the applicant granted
that consent in
these proceedings, it could have sought an appropriate costs order.
Conclusion
The applicant has not made out a clear right for the broad restraint
it seeks to enforce. Insofar as it has belatedly offered
to temper
the breadth of the relief sought, our courts have remarked that it
is undesirable to cut and trim an overbroad restraint
at the behest
of the party who drafted it.
10
In this case, the restraint is so broad as to be unenforceable; and
in any event, the applicant has not established that the
respondent
is in breach of it. I am not satisfied that this is a case where a
lesser restraint should be imposed on the respondent.
Costs
There is no reason in law or fairness why costs should not follow
the result. The applicant sought to cast aspersions on the
conduct
of the respondent, in that she did not seek its consent to take up
employment with Melon; but, as I have pointed out,
the applicant has
not been willing to grant its consent, hence this application. The
applicant has also asked me to take into
account that the respondent
had resigned earlier on and then withdrawn her resignation; but
there is nothing on the evidence
before me to suggest that she had
sinister motives in doing so.
Order
The application is dismissed with costs.
_______________________
Steenkamp J
APPEARANCES
APPLICANT:
A Ferreira
Instructed by Botoulas
Krause Inc, Johannesburg.
RESPONDENT:
C de Kock
Instructed by VGV Inc,
Bellville.
1
The
notice of motion in fact referred to “1 March 2012.” Mr
Ferreira
, for the applicant, sought leave to amend this date
from the bar. As it is common cause that the restraint sought to be
enforced
would run for a period of one year from 1 March 2012, Mr
de
Kock
, for the respondent, had no objection and I granted the
amendment.
2
Capitalisation
as in original. Whereas some of the capitalised words are defined –
e.g. ‘Company’ as ‘EOH
Mthombo (Pty) Ltd’ –
others, e.g. ‘Group’, are not.
3
Act
66 of 1998 (“the LRA”).
4
[1984] ZASCA 51
;
1984
(3) SA 623
(A).
5
(2011)
32 ILJ 601 (LC).
6
Case
no J 2073/11 (unreported, Labour Court Johannesburg, 17 October
2011).
7
Esquire
System Technology (supra)
at para [37].
8
These
questions were formulated in
Basson v Chilwan and Others
1993
(3) SA 742 (A) 767 G-H.
9
Supra
at 767G-H.
10
Henred
Freuehauf (Pty) Ltd v Davel and others
(2011) 32
ILJ
618
(LC) para [22];
Sasfin (Pty) Ltd v Beukes
1989 (1) SA 1
(A)
16H-I;
Advtech Resourcing (Pty) Ltd t/a Communicate Personnel
Group v Kuhn and another
2008 (2) SA 375
(C) paras [40] –
[44];
Esquire Technology (supra)
para [47].